Strategy

Strong business model

Vedior has the right strategy and market presence to capitalise on current and future industry trends.

By strengthening our leading market position in professional/executive recruitment, Vedior has the opportunity to benefit from higher growth rates, better margins, longer-term contracts and increasing penetration rates. We expect the recruitment of higher skilled personnel to become an increasing proportion of our business portfolio.

At the same time, Vedior will continue to develop its presence in both administrative/secretarial and light industrial recruitment. These ‘traditional’ sectors are still the largest part of the recruitment industry in most markets providing Vedior with an essential platform for growth and the capability to provide clients with a full range of recruitment services.

Vedior can achieve above average growth rates through a combination of organic expansion and the acquisition of small and medium-sized recruitment companies. We have a proven acquisition model targeting fast-growing businesses where the management teams wish to stay in place. We acquire companies operating in complementary niche sectors to diversify our business by industry sector or in new markets to diversify our business geographically. Once acquired, these companies are assisted in their organic expansion plans leading to accelerated growth.

Vedior is a decentralised and entrepreneurial organisation. We provide management with local equity incentives to better align their interests with all our stakeholders. This decentralised management structure and the empowerment it gives to local management teams results in a more entrepreneurial culture valuing self-determination and providing a sense of impact, a sense of competence as well as a sense of enjoyment.

Our flat management structure provides efficient communication, effective corporate governance and minimum bureaucracy. At the same time, Vedior runs a very tight ship in the back office and the operating efficiency of our global operations is among the very best of the major international staffing companies. We do take the opportunity to leverage the Group’s scale and international presence through effective use of telecommunications, procurement initiatives and flexible IT solutions.

Improving our market position requires that we recruit high quality employees, provide stimulating career opportunities and invest in their future growth. With an objective to become the employer of choice in the recruitment industry, we must ensure that the same high standards apply throughout our organisation.

We strongly believe our multi-brand formula is a winning recruitment strategy. By tailoring brands to specific markets and specific business sectors, Vedior is better able to attract the right candidates and deliver focused quality services to employers (‘global presence, local focus’).
By having a disciplined niche focus, our consultants better understand the business drivers, the trends, skills, qualifications and the relevant industry jargon. They are also more likely to have the social and business networks that will inspire trust from a jobseeker in their field of expertise. We are rightly regarded as experts in multiple industry sectors and therefore, well positioned to source scarce candidates and provide a better quality of service to clients. Further information on multibranding can be found in the YES LOGO section.

We continue to believe that labour markets around the world are affected and driven by local, regional and national trends, and not so much by globalisation or the procurement requirements of large multinational companies. Given the structure of the market, our primary client focus remains on local and regional businesses. However, within this environment, we also commit additional resources to more proactively target valuable high-contribution large accounts. We also improve co-operation among brands within national markets to take better advantage of cross-selling opportunities. In this way, we can provide clients with the option of a single point of contact when dealing with multiple Vedior brands and provide Vedior with an increased share of existing clients’ business. Vedior is better placed than any other recruitment company to provide services to employers requiring staff across a multiple range of disciplines.

One of the strengths of our business model is in its recognition of recruitment as our core discipline. While we are prepared to provide clients with complementary HR services in a number of markets where they add value to our temporary and permanent recruitment services, the development of such complementary services are only undertaken where risk and financial exposure are low.

Sound financial structure

Our strong business model is underpinned by a sound financial structure. Vedior’s objective is to have a solid investment grade balance sheet over the cycle, with the following financial ratios:

	Net debt should be within a range of 25% to 50% of accounts receivable. The level of borrowing we need depends on our working capital requirement which, in turn depends on sales growth. We believe that, for a recruitment company, some financial leverage is both appropriate and prudent. At the end of 2005, net debt was €536 million or 37% of accounts receivable – well within our target range.
	Interest cover higher than 6 (EBITDA: net interest). In 2005, the interest cover was 11.2.
	Leverage lower than 2.5 (net debt: EBITDA). At year end 2005, Vedior’s leverage is 1.9.

Following the arrangement of a new credit facility at the end of 2004, Vedior has credit facilities of over €1 billion, which is comfortably in excess of our existing requirements. Included within this amount are committed credit facilities of €650 million with an initial maturity in 2009 which can be extended to 2011 and €150 million with an initial maturity in 2007 which can be extended to 2009. All facilities are at floating interest rates linked to Euribor and Libor.