Vedior’s strategic focus is on increasing profit rather than gaining market share as evidenced by the significant improvements we have achieved in operating income in 2006 across each of our regions.

Operating income increased by 17% to €289 million. The operating margin (operating income as a percentage of sales) was 3.8%, up from 3.4% in 2005. All growth percentages exclude profits from the disposal of investments and are calculated on an organic basis.

For the second consecutive year, we achieved organic growth across all major geographies. The strongest growth came from the US, Netherlands, Rest of World and Rest of Europe regions. In Belgium, Spain, Australia, Portugal, Germany and Switzerland, we achieved double digit sales growth. One of the aspects of Vedior’s growth in 2006 was the outstanding performance of our operating companies in emerging markets. The relative immaturity of these markets combined with a positive economic environment has led to sales growth of 59% in India and 27% in Latin America. In addition to organic growth, sales of €234 million were added as a result of companies acquired in 2006, principally CNC Global, Blomfield and Talisman.

Currency effects decreased operating income by 1%, but had no significant impact on 2006 annual sales. Looking at our business by industry sector, the strongest improvements in operating income came from the accounting/finance, traditional, engineering/technical and education sectors. In terms of operating leverage, the best performance came from traditional staffing in continental Europe.

In line with our longer term objective, we saw continued growth in permanent placement across all our regions. With a 30% increase in fees to €238 million, permanent placement now represents 16.7% of Group gross profit compared to 13.3% of gross profit in 2005. In France, permanent placement fees more than tripled to €14 million.

In France, operating income increased by 19%. Gross profit increased by 9% reflecting an improved business mix and our focus on permanent placement.

In the Netherlands, also as a result of our improved business mix, operating income increased by 49% and gross profit by 16%. This significant improvement in performance has been achieved while at the same time making substantial investments to improve future performance.

Our focus on operational efficiencies resulted in an increase in our conversion ratio for the year (operating income divided by gross profit), from 18.9% to 20.3%.

Operating costs increased by 10% including increased investment in the business to benefit long-term growth. Investments were made in new start-up initiatives and the development of existing brands worldwide including further expansion into the Middle East, new office openings, continued roll-out of permanent placement activities in France and other markets including Japan, upgrade and expansion of our infrastructure (particularly in continental Europe), enhanced eBusiness functionality, and improved managed service capability.

Excluding the profit from the disposal of investments, the tax rate decreased to 29.3% in 2006 from 31.0% in 2005. The decrease in tax rate is mainly due to the inclusion of a deferred tax asset of €6 million in 2006 relating to operating loss carry forwards in the Netherlands.

Cash flow from operating activities increased to €206 million in 2006 from €113 million in 2005 following higher operating income and lower additional working capital requirements to finance sales growth.

Debtor days at the end of the year were one day lower at 63 (2005: 64).

Organic sales trend by geography Year on year increase or decrease

 

Organic sales trend by sector Year on year increase or decrease

MAT stands for Moving Annual Total which expresses the average value for the preceding four quarters at any point in the graph, thereby normalising any seasonal effects felt during the annual period. These graphs are index based with 4Q 2003=100.