In 2005, we achieved organic growth across all of Vedior’s major geographies with the strongest performances coming from the Netherlands, US and Rest of World regions. The French market continued its gradual recovery while the UK market, after several years of strong growth, weakened during the course of the year. Sales and profitability improved in all of Vedior’s major sectors of operation with the exception of healthcare and education. The most notable improvements came from the accounting, IT and engineering sectors. This pattern represents a reversal of the situation four years ago, reflecting changes in each of these sectors. Our diverse business mix across different geographies and different recruitment sectors continues to prove an asset in a cyclical industry. Vedior’s sales increased organically by 7% to €6,851 million in 2005 from €6,475 million in 2004. Organic growth is calculated by excluding currency fluctuations, the impact of acquisitions/disposals and adjusting for an extra week in 2004. The main drivers of Vedior’s growth in 2005 were a pick up in demand in the Netherlands and other parts of continental Europe, including Spain, Portugal and Switzerland, continuing strong growth in the US, Australian and Latin American markets, combined with rapid expansion in newer markets such as India and Eastern Europe. Sales and operating profit in Australia were robust throughout the year in both the traditional and professional/executive sectors making it our 5th largest market in terms of profitability. Vedior’s operating companies in emerging markets had an exceptional year with organic sales growth of 69% in India, 26% in Latin America and 95% in Central/Eastern Europe, Our presence in these developing economies provide the Group with access to fast-growing markets as well as the potential to capitalise on offshoring opportunities. Demand for permanent placement continued to grow in most markets resulting in a 19% organic increase in placement fees. Permanent placement now represents 2.4% of Group sales compared to 2.0% of sales in 2004. Gross profit was €1,227 million in 2005 compared to €1,141 million in 2004. Throughout 2005, Vedior experienced pricing pressure in a number of markets though this was more than compensated for by changes in business mix and increased permanent placement fees. The Group’s gross margin was 17.9% compared to 17.6% in 2004. The gross margin earned from the supply of temporary workers remained stable at 15.7%. We continued to strive for greater operational efficiencies. As a result, our conversion ratio for the year (operating income excluding special items divided by gross profit) increased from 18.7% to 18.9%. Development of managed service offerings during 2005 has afforded greater commercial synergies among our brands particularly in the US, UK, Netherlands and Australia. These managed service initiatives take advantage of Vedior’s high performance culture to provide more efficient co-ordination and co-operation for the benefit of clients who wish to utilise services across more than one brand. As a percentage of sales, costs increased to 14.5% in 2005 compared to 14.3% in 2004 reflecting increases in personnel costs driven by sales growth and investment in new business start-ups.
Cost increases were offset to some degree by a number of efficiency initiatives including back-office consolidation and ongoing procurement initiatives. Operating income increased to €232 million. On an organic basis, operating income excluding special items increased by 11%. The operating margin (operating income excluding special items as a percentage of sales) was 3.4%, up from 3.3% in 2004. Vedior has maintained profitability in markets and industry sectors representing 99% of total Group sales for two successive years. In the US, where we capitalised on healthy economic conditions, our operating margin increased from 4.3% to 6.2%, closer to the local operating margin target of between 7.0% to 8.0%. We also achieved a strong improvement in operating margins in the Netherlands. Cash flow from operating activities decreased to €113 million in 2005 from €114 million in 2004. Higher operating income was offset by additional working capital required to finance sales growth. Debtor days at the end of the year were 64 (2004: 63). Vedior continues to invest in markets and sectors promising above average long-term growth. Over the past 12 months, we have completed a total of eight acquisitions to enhance our portfolio and improve the geographic balance of our business. Our expansion is targeted primarily at the professional/executive recruitment market. Organic sales trend by geography Year on year increase or decrease
 Organic sales trend by sector Year on year increase or decrease
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PROFESSIONAL / EXECUTIVE
IT | Vedior’s IT consultants support clients at all stages of the IT product lifecycle, developing, installing or maintaining hardware and software. Expert technical personnel are provided in a full range of disciplines including software engineers, programmers, systems analysts, architects, testers, systems administrators and telecommunications professionals. IT is Vedior’s largest professional/executive niche responsible for 9% of total Group sales. IT recruitment sales increased organically by 14% with positive growth achieved in all major markets. The US is Vedior’s largest market for IT recruitment which it provides mostly through the national Sapphire brand. Sapphire continued to benefit from a positive operating environment and high demand for technology professionals in 2005. The company is a preferred vendor for both large accounts and local clients providing qualified technology professionals at the highest level. Sapphire achieved particular growth among banking and finance clients as well as government contract and solutions integrators. In the UK, Vedior operates two IT brands, Abraxas and MVM, both of which achieved high growth and excellent returns during the year. Abraxas exited from some lower-margin contracts during the year but successfully renewed its largest contract, in the public sector, in December. Increased focus was placed on the development of permanent placement activity as well as the development of SME business. Abraxas and MVM have very high conversion ratios and are among the most efficient companies within the Group. IT staffing sales developed well in Europe (mostly under the Expectra brand in France, Spain and Switzerland and Sapphire in the Benelux) and also in Australia and India.
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PROFESSIONAL / EXECUTIVE
Accounting | Vedior provides both qualified and part-qualified accountants as well as all categories of financial personnel to accounting, finance, banking, consulting and other corporate clients. Accounting recruitment sales increased by 16% on an organic basis. In the US, the Group has four accounting brands; Accountants Inc., Acsys, AccountPros and a recent acquisition, Becker Executive, providing Vedior with national coverage. All four companies achieved very good sales growth and improved profitability in a buoyant market led by a robust financial services sector. In our other important accounting markets, Rekenmeesters, in the Netherlands, and Link, in Australia also benefited from improving sentiment in the financial sector and recorded strong growth in sales
and profitability. Our new accounting brand in the UK, Andrew Farr Associates, successfully established a small provincial network which it continues to develop. Joslin Rowe (part of the Blomfield Group, one of the largest financial recruitment specialists in the UK, in which Vedior currently has an 18% interest with an option to increase its holding) recorded a strong increase in profitability. Elsewhere, our developing accounting recruitment businesses in Spain, Belgium, Latin America and Luxembourg continue to make encouraging progress.
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