Segment reporting

The segment reporting is based on geographical and business segments. An analysis by geography, which is Vedior’s primary format, and by business segment is the best reflection of Vedior’s management structure and reporting lines. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Vedior evaluates performance based on geographical and business segment contributions, which is defined as the amount of segment profit or loss before intercompany charges, finance costs and income tax expense. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly cash, interest-bearing loans and corporate expenses. Segment capital expenditure is the cost incurred by the segment during the period to acquire assets that are expected to be used for more than one year. All segments are continuing operations.

Geographical segments
Vedior’s primary segment is determined by geography. The segments identified are France, United Kingdom, United States, Netherlands, Rest of Europe and Rest of World. The Rest of Europe segment consist of the European countries not reported separately, including Belgium, Spain, Italy, Portugal, Germany, Switzerland, Eastern Europe and Scandinavia. Rest of World includes non European countries and regions not reported separately including Australia, Asia, Canada and Latin America. Segment assets are based on the geographical location of the assets.

2006	Sales	Operating income	Capital expenditure/ acquisitions	Depreciation and amortisation	Average number of full time equivalents	Total assets	Total liabilities
France	3,137	110	20	-12	3,894	983	-708
UK	977	57	88	-7	2,007	689	-121
USA	686	44	6	-2	1,478	411	-72
Netherlands	588	20	17	-4	1,571	108	-147
Rest of Europe	1,536	51	18	-7	2,611	590	-233
Rest of World	736	36	73	-4	2,805	391	-99
		318
Corporate expenses		-29
Unallocated assets/liabilities						33	-666
Total	7,660	289	222	-36	14,366	3,205	-2,046
Reconciliation to profit for the period
Gain on disposal subsidiary		5
Finance cost		-32
Share of profit of associates (after tax)		-1
Income tax expense		-75
Profit for the period		186

2005	Sales	Operating income	Capital expenditure/ acquisitions	Depreciation, amortisation  and impairment losses	Average number of full time equivalents	Total assets	Total liabilities
France	2,991	96	12	-20	3,702	957	-661
UK	874	52	21	-7	1,752	549	-79
USA	579	35	36	-3	1,307	425	-51
Netherlands	518	14	4	-3	1,446	158	-117
Rest of Europe	1,368	37	12	-6	2,458	454	-236
Rest of World	521	24	9	-3	2,114	267	-69
		258
Corporate expenses		-26
Unallocated assets/liabilities						39	-606
Total	6,851	232	94	-42	12,779	2,849	-1,819
Reconciliation to profit for the period
Finance cost		-26
Share of profit of associates (after tax)		16
Income tax expense		-64
Profit for the period		158

Business segments
Vedior provides both professional/executive as well as traditional recruitment services. Professional/executive recruitment services include the provision of personnel within the Information technology, Engineering/Technical, Healthcare, Accounting/Finance, Education and Other sectors.

	Sales		Segment assets		Capital expenditure/ Acquisitions
	2006	2005	2006	2005	2006	2005
Information technology	768	621	190	154	5	4
Engineering/Technical	463	410	126	104	3	3
Healthcare	437	424	118	113	3	3
Accounting/Finance	376	287	95	75	2	1
Education	126	111	31	26	1	1
Other sectors	543	408	143	103	4	3
Professional/executive	2,713	2,261	703	575	18	15
Traditional	4,947	4,590	1,387	1,295	35	23
Goodwill			1,082	940	169	56
Other unallocated assets			33	39
Total	7,660	6,851	3,205	2,849	222	94

 Operating expenses

	2006	2005
Employee benefit costs	749	637
Depreciation, amortisation and impairment (2005)	36	42
Other operating expenses	355	316
	1,140	995

Employee benefit costs	2006	2005
Salaries and wages	598	502
Compulsory social security contributions	92	83
Contributions to defined contribution plans	7	5
Cost of defined benefit plans	3	3
Cost of share based payments plans	7	6
Other employee benefits	42	38
	749	637

Depreciation, amortisation and impairment	2006	2005
Depreciation of property and equipment	27	27
Amortisation of software	9	10
Impairment loss software		5
	36	42

The impairment loss software in 2005 comprises the write down of a software system in France which was discontinued in that year.

 Finance costs

	2006	2005
Interest income	2	2
Interest expense	-34	-28
	-32	-26

Share of profit of associates (after tax)

	2006	2005
Share in associates’ profit for the period	-1	1
Gain on disposal of TriNet		15
	-1	16

In June 2005 the investment in TriNet was disposed of realising a net profit of €15 million after tax.

 Income tax expense

Recognised in the income statement	2006	2005
Current tax	72	67
Deferred tax (note 17)	3	-3
Income tax expense for the year	75	64

Vedior’s operations are subject to income taxes in various foreign jurisdictions with a weighted average statutory income tax rate of 30.8% (2005: 30.0%).

Reconciliation of effective tax rate
The reconciliation between the effective tax rate and the weighted average statutory income tax rate is as follows:

	2006 €	2006 %	2005 €	2005 %
Profit before tax	261		222
Share of profit of associates (after tax)	1		-16
	262		206
Weighted average income tax rate	81	30.8%	62	30.0%
Non-deductible expenses	4	1.6%	5	2.6%
Benefit from tax facilities	-5	-1.9%	-3	-1.7%
Loss carry forwards	-5	-1.9%
Revaluation deferred tax	1	0.3%
Over provided in previous years			-1	-0.5%
Other	-1	-0.2%	1	0.6%
Effective tax rate	75	28.7%	64	31.0%

Deferred tax recognised directly in equity	2006	2005
Relating to share based payments	2

 Earnings per share

For the effects on earnings per share caused by the accounting policy change in 2006, please refer to the paragraph ‘change of accounting policy’.
The calculation of the basic and diluted earnings per share attributable to ordinary shares is based on the following data:

Earnings Profit attributable to holders of ordinary shares		2005
	2006
Profit for the period	186	158
Dividend on preference shares		-2
Profit attributable to holders of ordinary shares	186	156
Special items (net of tax)	-5	-15
Profit excluding special items, attributable to holders of ordinary shares	181	141

Special items include the gains on the disposal of ISU in 2006 and in 2005 the disposal of TriNet.

Number of shares Weighted average number of ordinary shares  in thousands		2005
	2006
Weighted average number of ordinary shares for the purposes of basic earnings per share	170,694	167,893
Effect of dilutive potential ordinary shares from share based payment plans	2,283	2,380
Weighted average number of ordinary shares for the purposes of diluted earnings per share	172,977	170,273