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 2011 amounted to EUR 10,081. Compared to the same period last year, revenues increased by 17%. Acquisitions added 2% to revenues. In the first six months of 2011, permanent placement revenues totalled EUR 175, an increase of 27% (acquisitions added 4%), and outplacement revenues amounted to EUR 95, a decrease of 22%, both in constant currency.

Gross margin was 17.2%, down 70 basis points (“bps”) compared to the first six months of 2010. This decrease was mainly due to the declining contribution from the temporary staffing business (50 bps) and the lower contribution on gross margin from the outplacement business (30 bps). The temporary gross margin was negatively impacted by the cut in payroll tax subsidies in France (20 bps), effective as of January 1, 2011. The permanent placement business positively impacted the gross margin by 10 bps.

Selling, general, and administrative expenses (“SG&A”) increased by 8% or 7% in constant currency. SG&A as a percentage of revenues decreased by 110 bps to 13.5% in the first six months of 2011. The branch network grew by 1% and full-time equivalent (“FTE”) employees increased by 1,500 or 6%. As of the end of June 2011, 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 2011, unchanged from the same period in 2010.

Operating income. In the first six months of 2011, the operating income amounted to EUR 344 compared to EUR 254 in the same period of 2010. The operating income margin was 3.4% for the first six months of 2011 and 3.0% for the first six months of 2010. Operating income increased by 35% or by 37% in constant currency and the operating income margin increased by 40 bps.

Interest expense was EUR 32 compared to EUR 31 in the first six months of 2010. Other income/(expenses), net, amounted to an expense of EUR 11 mainly due to the EUR 11 loss recognised in connection with the bond tender completed in April 2011 (for further details refer to Note 2). This compared to income of EUR 1 in the same period last year.

In the first six months of 2011, the Company recorded an income tax expense of EUR 59 compared to EUR 70 in the same period of 2010. The effective tax rate in the first six months of 2011 was 20% compared to 31% in the same period of 2010. The income tax rate in the first six months of 2011 and in the first six months of 2010 includes the positive impact of EUR 32 and EUR 10, respectively from the successful resolution of prior years’ audits and the expiration of the statute of limitations in several jurisdictions.

Net income attributable to Adecco shareholders amounted to EUR 241 in the first six months of 2011, compared to EUR 154 in the same period of 2010. Basic earnings per share (“EPS”) was EUR 1.26 in the first six months of 2011 compared to EUR 0.80 in the first six months of 2010.