Adecco Group AG

Karin Selfors – Head, IR Patrick De Maeseneire – CEO Dominik de Daniel – CFO

Jaime Brandwood – UBS Tom Sykes – Deutsche Bank Konrad Zomer – CA Cheuvreux Andrew Grobler – Credit Suisse Teun Teeuwisse – ABN Amro Bank David Hancock – Morgan Stanley Kean Marden – RBS Toby Reeks – Bank of America/Merrill Lynch

Good morning ladies and gentlemen, I’m pleased to welcome you to Adecco’s second quarter 2010 results conference call. Today Patrick De Maeseneire, group CEO; and Dominik de Daniel, group CFO will lead you through the presentation, followed by a Q&A session.

Please now have a brief look at the forward-looking statement in this presentation. Let me give you a quick overview of today’s agenda, Patrick will present the operational highlights of the second quarter to you.

Then Dominik will review the financial performance, Patrick will then reiterate our strategic priorities and give you an outlook on our business, before we open the lines for questions. With that Patrick to floor is yours.

Thank you Karin. Good morning ladies and gentlemen.

Welcome to our Q2 conference call. Let me start with the highlights of the second quarter.

Business conditions in the second quarter of 2010 improved significantly, and we delivered strong growth in the majority of the markets we operate in. We achieved 13% organic revenue growth, driven by your main markets France and North America, but also Germany, Italy, Nordics, and the emerging markets delivered strong double-digit revenue growth.

Demand was particularly strong in the industrial segment, but also our professional staffing business returned to growth in the second quarter. Our gross margin in Q2 was 17.8%.

We continue to focus on disciplined pricing, and also benefited from the increased exposure to professional staffing. Our measure to reduce the cost base in the downturn, coupled with strict pricing and top line growth, led to a strong double-digit increase of our EBITDA in Q2.

Before integration costs, the EBITDA was up 46% on an adjusted and organic basis, and our margin was 3.8%, up 100 basis points compared to the adjusted prior year’s Q2 EBITDA margin of 2.8%. Revenues in June were up approximately 16% organically and adjusted for business days.

To date, we see no signs of a slowdown of our business in the third quarter, and remain confident of strong revenue development near term. Indeed, our revenue growth in July developed in line with the one in June.

We go now through the key numbers in more detail. As you know, the new French business tax law is effective as of January 2010, and since this is the treatment going forward we opted to adjust 2009 for this impact.

We also excluded the negative 54 million euro impact on SG&A related to restructuring costs incurred in last year’s second quarter. Dominik will give more details on the adjustments in his part of the presentation.

Revenues in the second quarter of 2010 were up 29% to 4.6 billion euro. Organically, revenues increased by 13%.

Gross profit amounted to 835 million euro. Our gross margin was 17.8% as said, equal to Q2 2009, and down 110 basis points when adjusting Q2 2009 for the change in the French business tax law, and when excluding acquisitions.

SG&A increased by 8% and was flat organically and adjusted. In the second quarter, EBITDA before integration costs grew double digit, up 46% on an adjusted basis and organically.

The EBITDA margin before integration costs was 3.8%, up 100 basis points year-on-year. Net income was 97 million euro in the quarter under review.

We now go to the organic revenue development by region. First of all, all regions are back to organic revenue growth, which hasn’t been the case since three years.

North America achieved 15% organic revenue growth in Q2 2010, driven by strong growth in the general staffing business. When excluding the counter-cyclical outplacement business, North America was up 21% organically.

In Europe, revenues in the second quarter were up 15% compared to the same period last year. The revenue momentum accelerated in most countries, France, Germany, Italy, Nordics, and Iberia all grew double digit.

Benelux and Switzerland also improved materially and returned to positive single-digit revenue growth. The European region was still held back by UK and Ireland, where revenues were down 3% organically.

The rest of the world was up 4%. Growth in Q2 2010 was still mitigated by Japan, where revenues were down 14%.

The emerging markets on the other hand continued to deliver very strong results with revenues increasing 27% on an organic basis, up from 19% organic year-on-year revenue growth in Q1. As mentioned before, the group’s gross margin was 17.8% in Q2 flat year-on-year and down 110 basis points organically and adjusted.

For easier comparison, we adjusted the Q2 ’09 results to reflect the new French business tax law impact, which was 40 basis points. The temporary staffing business had a negative impact of 60 basis points on the group’s gross margin in Q2.

The permanent placement business contributed for the first time since seven consecutive quarters positively to the group’s gross margin and this with 20 basis points. Our Perm revenues were up 77% in constant currency and 27% organically.

Our placement business had a negative impact of 70 basis points. Recall that the outplacement business still positively contributed 110 basis points to the change of group’s gross margin in Q2 of last year.

Acquisitions had a positive impact of 70 basis points this quarter, up from a positive impact of 40 basis points in the first quarter. As MPS was included for the entire second quarter, compared to only two months in Q1.

Overall, this is a good result given where we are in the cycle. Our strict pricing approach and the increased exposure to professional staffing are clearly contributing to this achievement.

We now review our main markets in more detail. France, our largest market, generated 20% revenue growth in the second quarter.

Revenues were 1.4 billion euro. Growth was mainly driven by better demand in automotive, chemicals and manufacturing.

In Q2 2010, the EBITDA margin was 3.8%, up 80 basis points compared to the adjusted prior year’s second quarter. Pricing stabilized on a sequential basis.

Revenue growth in June continued to be strong with plus 23% adjusted from business days. In North America revenues were up 51% in constant currency.

On an organic basis, we achieved 15% revenue growth in Q2. Demand was strongest in automotive, consumer goods and technology.

Excluding the decline in counter-cyclical outplacement business, revenues were up 21% in North America organically. On that basis, revenues in June were up 25%.

Business in general staffing was up significantly with revenue growth of 25% on an organic basis, and professional staffing, excluding our outplacement business also generated solid double-digit revenue growth, driven by strong demand in the engineering and technical segment. The EBITDA margin was 4.9%, down 30 basis points compared to Q2 ’09, largely as a consequence of the weakening outplacement business.

Acquisitions added 50 basis points to the EBITDA margin in Q2 2010. Integration costs for MPS amounted to 3 million euro in the quarter under review.

Revenues in UK and Ireland increased by 84% in constant currency, positively impacted by the acquisitions of Spring Group and MPS. Organically revenues declined by 3%, an improvement compared to the 9% organic revenue decline reported in the first quarter of this year, whereas our temping business is still held back, the perm business has delivered a solid growth rate of 37% organically.

The region contributed an EBITDA of 5 million euro, despite integration costs related to Spring and MPS, which amounted to 4 million euro in Q2 2010. Compared to continental Europe, the UK market continues to like.

In Japan, revenues in Q2 declined by 14% in constant currency to 314 million euro. Demand remained stable quarter-on-quarter, and we’re still impacted by our large exposure to the late cyclical of this segment.

EBITDA declined by 45% in constant currency and the EBITDA margin was 5.2% compared to 8.2% in Q2 ’09. Costs continued to be very well controlled and managed, resulting in still superior profitability in the Japanese market.

Market conditions have stabilized in Japan, but we still don’t see any signs of a material pickup. In Germany and Austria, the revenue momentum in Q2 accelerated significantly.

Revenues in the second quarter increased organically by 20% compared to a decline of 4% in Q1. The region generated an EBITDA of 14 million euro, a significant improvement from the 4 million euro loss posted in the prior year’s second quarter.

The EBITDA margin was 4.6%. Our general staffing branch in Germany grew by 30%, whereas the later cyclical professional staffing brand, DIS, returned to positive revenue growth of 5%.

Revenue growth in June, adjusted for business days was 34% for the general staffing brands, and 13% for the professional staffing brand, DIS. The revenue growth in the emerging markets accelerated to plus 27% in Q2, up from plus 19% in Q1.

Growth was driven by Eastern Europe, where revenues increased by 37%, and India, where the strongest growth with revenues of 66% was posted. In South America, revenues increased by 23% in constant currency, of course.

The EBITDA margin was 2.6%. Given the vast growth potential we see in the emerging markets, we continue to invest.

Finally, we discuss Adecco’s development by business line on an organic basis. In Q2, revenues in office and industrial were up 15%, a strong improvement from the minus 1% year-on-year revenue declining rate in Q1.

In the industrial business, revenues were up 24%, following a 5% increase in Q1. Most notable improvements in the year-on-year growth rates were evident in North America from plus 13% in Q1 to plus 37% in Q2; in Germany and Austria from minus 1% to plus 33%; in Italy, from plus 1% to plus 29%; and in France from plus 9% to plus 24%.

The office business is still clearly lagging the industrial business. Revenues declined by 2%.

This compares to minus 12% in Q1. In Japan, the revenue decline rate improved in Q2 to minus 13% from minus 24% in Q1.

North America grew 11% after an increase of 7% in Q1. While the decline rate in the UK and Ireland improved from minus 14% in Q1 to minus 11% in Q2.

In the professional business segments, revenues in Q2 returned to growth of 2%. This compares to minus 7% in Q1.

Excluding our outplacement business, growth was 6% in Q2 2010. And with this, I conclude the first part of my presentation and hand over to Dominik.

Thank you Patrick. Good morning, ladies and gentlemen.

Welcome from my side as well. I would like to begin with an overview of the profit and loss statement.

In Q2 ’10 we had revenues of 4.6 billion euro, up 29% on a reported basis, and an increase of 13% organically. The gross margin was 17.8% in Q2 ’10 flat compared to Q2 ’09, and down 110 basis points, when adjusting Q2 ’09 for the change in the French business tax law, and excluding acquisition.

With respect to the new French tax law, we adjusted the prior year’s second quarter for easier comparison, same as we did in the first quarter. We therefore exclude 15 million euro from cost of services, and 1 million from SG&A in Q2 ’09.

In Q2 ’10 the impact on cost of services was 17 million euro and 1 million euro on SG&A. SG&A was up 8% in Q2 ’10 compared to the prior year.

Organically and adjusted, SG&A was flat compared to Q2 ’09. sequentially, SG&A was up 3% on an organic basis.

The group’s EBITDA was 168 million euro, up 39% on an adjusted basis and organically. The EBITDA margin was 3.6%, up 80 basis points in Q2 ’10 compared to the adjusted Q2 ’09 margin of 2.8%.

Excluding 7 million euro integration cost, EBITDA was 175 million euro and the EBITDA margin was at 3.8%, up 100 basis points. Net income amounted to 97 million euro in the quarter under review.

Now let me discuss in more detail how our cost base developed in the second quarter. We continued to maintain strict cost control throughout the quarter, despite double-digit revenue growth.

SG&A increased by 8% on a reported basis compared to the prior year’s second quarter. When adjusting last year’s Q2 for 54 million euro of restructuring cost, and on an organic basis SG&A remained flat year-on-year, reflecting an organic reduction of FTEs by 7%, and branches by 11%, offset mainly by higher bonuses, some wage inflation and integration costs.

Sequentially, the reported SG&A increased by 10%. Given that MPS was only consolidated as of February 1, 2010, 12% of the 10% increase is due to the consolidation of MPS for the entire second quarter.

Of the remaining 6%, 3% is related to currency, and 3% represents the organic cost increase. Two thirds of the organic cost increase is related to higher bonuses, as our result in the second quarter was pretty good.

Sequentially and on an organic basis, FTEs increased by 1% mainly due to hiring in the emerging markets. Moving on to the balance sheet, at the end of first half ’10, we had cash and short-term investments of 438 million euro.

DSO were 53 days in the second quarter equal to Q2 ’09. Goodwill and intangible assets amounted to 4 billion euro at the end of June ’10.

Compared to year-end ’09, goodwill and intangible assets increased by 1 billion euro, primarily as a result of the consolidation of MPS group, as well as currency movement. Adecco’s shareholder equity was 3.4 billion euro at the end of June, up 307 million euro compared to year-end ’09, driven by net income, the dividend payout, and currency fluctuations.

Turning to the cash flow statement on slide 20, operating cash flow generated in the first half of ’10 amounted to 30 million euro compared to 282 million euro in the prior year. Given the improvement in revenues, working capital needs increased in the first half of this year compared to the same period last year.

Nonetheless, we were able to generate a positive operating cash flow in the first half of 2010. Cash flow from investing activities was impacted by the purchase price consideration for the MPS group.

The cash paid for MPS amounted to 835 million euro net of cash acquired. We invested 45 million euro on CapEx, and paid dividends of 91 million in the first half of 2010.

Net debt at the end of June ’10 was 1.07 billion euro, an increase of 959 million euro compared to year-end ’09. The increase in net debt is mainly a consequence of the purchase price consideration for MPS group.

Note, that the net debt increased slightly from Q1 to Q2 as the business picked up, and we pay dividends of 91 million euro. Let me now give you a brief update on the integration of our acquired businesses Spring and MPS.

First of all, the integration of both, Spring and MPS is well on track. On MPS, decisions on lead brands have been made and communicated.

Our combined US legal business will operate under the brand name Special Counsel. Our combined finance and accounting business will operate under the brand name Accounting Principles [ph], and our combined IT business will operate under the brand name, Modis.

Spring and Adecco UK combined the front office systems in professional staffing during the second quarter 2010. All back offices, including MPS UK will be consolidated until the year-end.

We are well on track to achieve our expected annual synergy target of 13 million euro for Spring until the end of ’10 and a 25 million euro for MPS within 2 years. We will give a more detailed update on integration and synergies at our Investor Day in Miami in September.

And finally, I would like to update you on our financial guidance for 2010. As previously stated, we are planning for CapEx of around 100 million euro for the year 2010.

Interest expenses are expected to be around 65 million euro for ’10, excluding the interest income. Our corporate costs are expected to be approximately 70 million euro.

Following the consolidation of MPS Group, we expect amortization of intangibles of approximately 55 million euro for the Adecco group in 2010, and in Q3 2010, we expect the tax rate of approximately 35%, whereof 10% is related to the French business tax. Please consider that Q3 of last year was positively impacted by the reassessment of existing accruals in France of about 11 million euro.

With this, I hand back to Patrick.

Thank you Dominik. Let me finish with some comments on the outlook for our business.

Throughout the second quarter, the revenue momentum continued to accelerate in most markets, and to date, we have not seen a slowdown in our business. We exited the quarter with 16% revenue growth in June for the group organically and adjusted for business days.

July showed growth in line with June. We continued to exploit growth opportunities, while at the same time price discipline and cost control remained priorities in the company.

For the third quarter, we feel comfortable with our second quarter cost base, without considering integration costs and excluding currency impacts. The second-quarter results show that we make good progress to grow the top line, while benefiting from operating leverage as a result of the cost measures taken in the down turn.

Let me therefore confirm our clear commitment to achieve an EBITDA margin of above 5.5% mid-term. And with this, I would like to open the floor for your questions.

Good morning, Patrick. Good morning, Dominik.

I just wondered, could we start by talking about the performance of MPS, because it looks like in the quarter, MPS as a standalone had a very strong performance, particularly at the EBIT level. Could you give us a little bit of a sense for how MPS is doing?

Good morning. I am Dominik speaking.

And MPS is doing very well, especially in the US we have very good margins in this business, and MPS contributed basically around basically 30% to the US profit. There we have on top considered some kind of integration cost, which are there, but the majority of the integration costs are more on the Adecco business.

So basically, if we look to the second quarter, we showed in North America and MPS the EBIT margin of around 6.5%, which is quite positive for a business which we just acquired. And if you look to the trends within MPS, we see very good demand in the engineering business, we see the IT business is growing.

Within Adecco US the IT business is slightly down compared to prior year. so it is doing very well, and if we look to the UK, it also has in the UK, especially our profitability.

Of course, in the UK we have to see that there is more finance accounting business and so on is also strongly involved in the public sector, which is maybe going forward a little bit difficult, but overall we are very pleased with the development of MPS.

And can you just say what the organic sales growth of MPS was in the US and UK, exiting Q2?

It is – let us say, it is very difficult to see the organic because we also have some movements already. And they basically are back to growth like in professional.

Okay. And then just your comment on July for the Group as a whole, that July is basically tracking similar to June.

I'm guessing that means a year-on-year growth. I know it's difficult, because there's a lot of seasonality involved, particularly in countries like France in July versus June.

But if you try to adjust for seasonality, do you have a sense for what is happening on your business in your overall Group business, July versus June? Whether there's still some positive momentum coming through month on month, as opposed to year-on-year?

I mean, as we talked really about months compared to months, which is very difficult. And we have to compare this and really this with a rather long-term view to look what is the month-on-month development.

If we look back the last 10, 11 years, I would say it is more or less, the development is more or less the median of the last 10, 11 years value, let us say, strong pickups, and we had also kind of deceleration. So, and this is more or less also reflecting a little bit in the year-over-year growth rate.

And then lastly on permanent recruitment, I think you said Perm for the Group as a whole was up 27% in Q2, and you also gave us the UK number, plus 37%. Can you give us a bit of country detail for Perm in some of the other key countries?

And also tell us what Perm as a whole was doing in June, July?

So, if we look overall, the 27% is our organic growth in Perm. Of course, with the acquisition of MPS and Spring, we had a lot of Perm.

Therefore, for the whole company is up 70%. And if we look to the let us say main markets, where the majority of our Perm revenue is coming from, we see there very good movement.

France from minus 7 in Q1 to plus 26%; and North America minus 1% plus 14%. This is below when because the outcome is also much (inaudible) to Professionals, which is maybe a bit later in the cycle.

UK from minus 5% to 37%. The emerging markets are very strong.

They are up from 31% in Q1 to 62% in Q2, and if we look throughout the quarter, we have seen let us say a pretty similar development like in the temping business, which means that our growth rate throughout the quarter increased, the exit rate organically Perm [ph] 33%, and July is a pretty similar level.

And that French growth that you gave me, the plus 26%, is that including Pole Emploi?

No. The Pole Emploi is for us not a dedicated Perm business.

It is let us say a similar business, but did not include Pole Emploi in this. This is only the normal Perm placement business, where our clients have paid for a placement for a candidate.

Thanks a lot.

Yes, good morning everybody. I just wondered – it's a follow-on to Jaime's question really on the growth, and obviously you gave the month-for-month growth.

But in your most cyclical, most light industrial businesses, what are you actually seeing there in terms of the number of temps, or the hours per temp? Are you seeing any – obviously, you comment at the Group level, but is there any cause for concern at those very, very front-end businesses?

And in particular, maybe if you could make some comment between number of hours they're working, and also the – versus the volume of temps, please.

So, the overall number of hours increased somewhat. But it is not enough.

If we look overall, we see a normal seasonal pattern to July. That of course – this is more a base effect in markets, where we although have seen last summer at the industrial business, and so the highly cyclical (inaudible) business picked up early.

That will be coming out with kind of base effect of what we are seeing. On the other hand, we are seeing then more professional business, which are rather late cyclical than they are doing a little bit better.

So, overall there for the July growth rate is pretty similar than the June growth rate adjusted for trading days.

Okay. And the set of comments about being the median in the last 10, 11 years, I suppose it's a bit harder for a market that's been moving round quite so much.

But do you still feel like on the light industrial side that you're still adjusted for seasonality, getting some positive month-on-month growth, or do you think it's just mixed benefits that you're gaining from now?

Let us say, from June to July things are still slightly better, but as I said, and you have to take the median with which we compare one month to other, which is very sure a number.

Sure, okay. And just in terms of the professional businesses then, in terms of either wage rate growth, or length of assignment, what are you seeing there?

Maybe some of your IT customers about their CapEx spend and project spend; is there sort of granularity that you could give us on the professional businesses, please?

I mean, what we have seen so far is that the engineering business within professionals picked up earlier. So we have seen this very clearly already in Q1, when our US engineering business was growing in Q1 19%, and it had strong acceleration on Q2 to 46%.

So this business is doing very well. You know, we have strong engineering business also in Germany, who comes now in Q2 clearly back to growth.

In the IT space, the picture is a little bit mixed. As I said, the US IT business organically is still declining somewhat.

On the other hand, the MPS IT piece, as far as we can compare it is somewhat up. In the UK, the IT business that is a rather volume account increasing already.

So, there is some growth when we look to base inflation and compared to prior year, it is still lower wages, let us say in markets like the US the wages are more flexible, but sequentially it is pretty stable.

All right. And then we should – well you should get the benefits from the collective labor agreement changes, the wage changes in Germany and then France in the second half of the year.

Is that –?

If you look to this, then the collective wage agreement was implemented in Germany as of January 1. So probably as of July 1, where it was necessary, the big majority we passed to our clients, and there we have to see, but this is more applicable really for the channel staffing brand business, like Adecco (inaudible) that you have certain benefit.

In the DIS business, you nevertheless had before, in professionals, above salaries, which are clearly above the collective wage agreement. So there was no need to change the wage, and there was no need to change the price.

Okay. And sorry, just a final question, it was just – is there any more benefit sort of gross margin level in Q3 of – to the utilization of employees in Germany, or Sweden I think was the other country you had problems from?

I would say, if you look to the overall margin compared to prior year there was still a slight positive impact, but it was less than 10 basis points. For Germany and Sweden, for the whole term margin, and Q3 last year was already pretty good utilized.

So from this point of view, should not expect any major impact, but what you had to see is that of course in a country like Germany or like Sweden, where you have the people on the book, a Q3 margin is clearly much better than a Q2 margin, given the fact that we have in Q2 a lot of bank holidays and in Q3 basically a lot of working days and no bank holidays.

Yes, sure. Okay.

Thanks very much.

Next question please.

Hi, good morning everybody. I have a few questions.

The first is on the pricing pressure on the temp business; I was positively surprised by the minus 60 basis points in Q2. Can you maybe give us a feel for what Q3 could look like?

And the second question is on integration costs. Can you maybe give us an insight into what you expect for integration costs in Q3?

And my final question is on the outplacement business; it obviously had quite a negative impact on your margins in the US. Can you give us what proportion of your EBITA in the US came from the outplacement business, in Q2?

Konrad, I will take your first question, and let Dominik take your second and third one, the pricing pressure, we clearly see stabilizing now. And we also expect this now to stabilize this further into the year.

So in our main markets, whether it is France, US, we will continue to stay at these levels and then of course, further on slightly improve.

Okay.

On the integration cost Dominik?

Maybe you have also to see a little bit by the temp margin, the mix effect, because from the 60 basis points, 20 basis points of this decline is just mix effect as our industry business with the lowest temp margin is growing 24% with an organic growth of 13%, just that – now if we look to the integration costs, we had in the recent quarter for Spring and MPS around 7 million and there is a couple of million higher in Q3, so somewhat higher in Q3. And then, if you look to our outplacement business, Lee Hecht Harrison, they basically contributed one quarter to the reported EBITDA of the US business in the recent quarter.

Okay, thanks very much.

Good morning. I've just a couple of questions.

In terms of your cost base, you said you were happy with the Q2 cost base going into Q3. At what point do you think you will start more actively hiring?

At this moment, our hiring like we have done in Q2 are really on those markets where we see growth above 20%, of course, the emerging markets but also markets like Germany, some business lines in France, and then in the US. But again it is very limited with the hirings that we’re expecting to do in 3Q.

You should see similar additions to the FTEs as we have seen Q2 over Q1.

And do you still – I mean, given the spare capacity that must still be in much of the system, at what point do you think you'll get to some of that capacity being fully utilized, and you'll have to hire in line with volume growth?

I mean, let us say, we still believe that we have around 15% kind of overcapacity or spare capacity, let us say spare capacity, but it depends a lot from country to country, and it is not black and white. So we have to really look business by business, unit by unit what makes sense, what makes no sense.

But of course, after this restructuring our clear aim is to show good operational leverage, and therefore we work very closely the cost base, and then when we have to hire that depends a lot in which country or region we see, which revenue development, as you see from Q1 to Q2, we had 1% more FTEs. This will primarily be related to emerging markets, because the emerging markets, they went basically nearly nothing down last year.

They have good growth. We have some addition now from Q2 to Q3.

We have also to consider besides that E&F [ph], integration related, we need some people for a time of overlap to integrate the back office. We have to see in which markets, we here and there see good growth opportunities where we want to come also stronger.

Then we had some head spike in Germany like Patrick outlined them, but we do this very selectively, and then of course, we used this downturn also to change a lot in our delivery model, and this change in delivery model should bring also more efficiency back when the growth is there.

Okay. And then just secondly, on – in terms of growth rates and structural factors impacting, there's been lots of discussion about clients utilizing more temps in this pickup; what are you seeing in that case?

And do you think that that is sustainable, or it's going to run through after a year or two?

If you look at the business growth that we are having, we really have a high multiple than coming out of other downturns, but of course, this was also the most severe downturn if you compare it to GDP growth. Now, you have seen last week, the job report in North America, for example, and you see that on the fixed hirings, there were not a lot of jobs added, only 71,000 in the private sector, and from the end of last year and the beginning of this year, a lot of economists were saying this is going to be a jobless recovery, and we can only describe that, because the companies that are adding capacity in terms of workforce, that are having higher demand or rebuilding stocks, they do it mainly with temporary workers.

And that is why we are growing now so fast, despite the economical growth in Europe still not being that high. Exception given to some countries like Germany.

In US, we still see a very good economic growth, but there also we have, especially on the industrial side a much higher multiple then what we usually have and that is again because our companies are only hiring, or mainly hiring temporary workers. You see that also in the Perm development, our Perm development is very strong, and will continue to pick up we believe.

But then again, you have to see that last year, we went down with almost 50%. So, if you increase now with 27%, you are at 64%.

So you are still down 36%, and going forward you have to take that into account. So, the Perm hirings are picking up, and compared to a very low basis.

Okay, right. Thank you very much.

Good morning, gentlemen. I have a question on the EBITA development you show in Benelux, US and Germany.

Especially in the Benelux, you see sales going up sequentially, but EBITA is going down. And in the US and Germany, it seems like the sequential sales increase is not translating into a similar EBITA improvement.

Can you explain what the reason is for that?

Yes. Good morning Teun.

Dominik speaking. So first of all, we have to see that in our business in the Benelux, our professional staffing business is still somewhat weak, and we had to reduce our benchmark.

So we had also some let us say cost to manage this, in order that the gross margin becomes better going into Q3. And this is the main reason, and we have also to consider that the bank holidays.

This is also the main reason for Germany. We pay them under US GAAP basically when they occur.

And therefore the Q2 margin is in some countries like Germany, where you have people under secondment there, where you have the people under book, is rather a low margin quarter. So that is for the Benelux and also for the German business.

Now for Germany, you have to see on top, if you look into Q3 or if you look back every year you see the very good margin in Q3, and you see the lowest operating margin in Q2. So, we are very confident for the profitability going into Q3 given the fact that we have people employed, we have the highest amount of working days and basically no bank holidays.

And this is also explaining why the margin in Q2 is somewhat below Q1. But you have to look also compared to the prior year.

Prior year in Germany we had 4 million loss there, maybe 2 million restructuring cost. So, operations were about 2 million, and now we are making here 13 million profit.

So there is a good margin improvement, and there it continues to be good margin improvement. In the US, you have to consider that of course, our Lee Hecht Harrison business, sequentially outplacement business is still sequentially somewhat contracting in terms of profit, and that we have sequentially more integration costs.

We said in the Q1 call also that basically two years ago, we said to our ground force in the US that we make, starting from a certain salary level a pay cut of 5% in order to take more cost out, and a part 2% of this pay cut to get to the people now back. So, this is the reason, but if I look to our US business and take our, let us say, Lee Hecht tariff and then MPS business out, EBIT margin wise, they clearly started their EBIT margins in the second quarter.

All right. And just to follow-up on Benelux then.

Did it come as a surprise to you that in the Professionals business, the idle time was increasing so much still?

Actually, it didn’t increase that much. We only managed it in Q2 that is the true answer.

We managed it in Q2. We took the customers as from now and you will see that also in Q3, it is going to be quite some improvement.

Okay. But that is – implicitly you're saying that you don't expect it to improve in the near-term then?

I said it is going to improve and it is going to improve in the third quarter.

All right. And then the final question.

On the engineering business in Germany, you mentioned that it was going up by 9%. I assume that's mainly euro engineering.

Yes.

Can you tell me what the trend was in the engineering business, throughout the quarter, and what segments are performing well, and which are still weak?

Basically, you talk about the German business or…

No, the German engineering business.

The German business. So, the April was declining, but now it developed.

Then basically in April and in May was back to growth. And then clearly double-digit in June.

The main demand which we are seeing is from the automotive related industries, but also the kind of machinery industry. These are the main reasons we are seeing some picking up.

The area which is still weak, rather weak is the whole aviation part, but there you have also to consider that the aviation part was last year rather resilient, but not so much under pressure than the other sectors.

All right. Thank you very much.

Thanks. Good morning, everyone.

Just a couple from me, firstly on the Nordics, where you saw to me a surprisingly strong revenue improvement, and a particularly good margin given the bank holidays in Q2. Can you just talk about what drove the improvements in both revenues and margin in the Nordics please?

I mean, we have to see – in the Nordics we have two main markets that is Norway and Sweden. And I mean this recent growth is extremely strong.

We are growing around 60%, and this is quite strong. We are clearly gaining there market share, and the utilization rate is really on the very good level.

Last year was still a little bit kind of underutilization. So, this is a very important area, and in the recent, let us say months, also the business in Norway picked up quite well.

So, it just started, but it is our biggest business, in the Nordic region, and we basically are clearly benefiting from the operational leverage there.

Great, thank you. And then, in Japan, sort of by contrast, the performance was not quite so strong and I think in local currency, revenues fell 5% in Q2 compared to Q1 in a quarter that normally you'd see some seasonal improvements.

So can you just talk about your statement that demand is stable there quarter-on-quarter when, if anything, it looks like it might be weakening? And could you give us any update on the regulatory situation in Japan as well please?

On the regulatory situation, the Bill should have passed this summer. It was postponed because of a change on the government, change of the Minister, and is at this moment questioned again.

Now, whether it passes or not, it won’t affect Adecco’s business for more than 5% because with the categories that we operate in, we are not affected by this new legislation. As you know, we’re mainly in office, and these categories stay out of the bill, and it is still to be seen whether it is going to pass or not.

It is at least postponed for the moment.

If you look to Japan, Japan is a country where the seasonality number of terms is very low. So it is pretty stable, besides the incremental growth.

And this kind of stable amount of demand of people, we observe in the Japanese business, and that is the reason why our decline rates on a year-on-year comparison improved let us say from a very low level of minus 24% to minus 14% in Q1 to minus 14% in Q2. It is just the base effect so – and we see no much pick up there.

That means this decline should still improve further, but not because now we see more demand. It is just because last year we had the kind of contraction.

If you look to the margin, and the margin was last year in Q2 very strong, more than 8%, which we said over the last year, this is clearly an outstanding peak margin, and I think the 5.2% even if the business is not picking up, we’re rather at the trough level. And so, even if the margin is declining maybe next quarter, it will be not that strong decline.

Thank you. And the last operational one is just on France.

Are you getting any traction in public sector in France?

You know, public sector is a sector that reacts pretty slowly. We are up in the public sector, of course, because of the opening last year, but it is not material in our total increase of 20% that we are having in France.

Thanks. And then very last one.

Dominik, just on the tax rate, I think you guided for a 35% tax rate for Q2, and obviously you came in some way below that. Are there more one-offs that may bring the tax rate down in Q3 as well below that 35% that you've indicated?

Let us say, for the time being I’m not expecting them. Otherwise I would have guided for this.

And as you know with this resolution of tax audit and so on, and this we can only consider when we know it, and although there is no implication of any kind of tax audit resolutions in this 35% guidance for Q3.

Great, thank you very much.

Thank you.

Good morning, Dominik. Good morning, Patrick.

Good morning.

Can I first of all start off with Germany? I'm afraid I caught some of your comments regarding June growth, but I think I missed out one.

So I think you believe that you flagged up the June growth rate in professional was 13%. I'm afraid I missed the general number; was it plus 40%?

It is actually 34%.

34%?

But only for channel stocking [ph].

Yes. And if we look at Germany as a whole for June, what would that number be?

39%.

39%, okay. And we've touched on seasonality of gross margin as well.

Could you give us an indication of what the gross margin was in the second quarter for Germany? And then what sort of seasonal sequential improvements you tend to see in the third quarter as the idle time drops away?

We are not disclosing gross margins by country, and the gross margin was nicely up in Germany because of the cost of (inaudible) utilization, and this was strongly up, and normally the gross margins in the third quarter should be let us say, 150 basis points, 200 basis points higher than in Q2 in an normal environment.

Okay. That's a good way of answering the question.

Thank you. And then moving on to France, could you give us an indication of how the gross margin develops.

And also, what your Perm revenues are running at in the second quarter in France now please?

If you look to the 10 plus margin, in France we are down 80 basis points. So, this is basically a little bit improvement compared to Q1, where we still were down 100 basis points, and our Perm placement business in Q2 was up 26%.

Okay. Have you got a euro number for that?

It is around 10 million.

Yes, okay. And then just finally from me; MPS and Spring obviously are tracking ahead of expectations at the moment.

I think partially that's obviously due to an encouraging revenue environment, but it does feel at the moment as if the cost synergies are maybe tracking a little ahead of expectations as well. Is that something that you'll provide us with more information regarding in September?

Or can you shed a little light on that now?

We are well on track when it comes to the integration of MPS and also when it comes to the synergy [ph] target, and what I said in my speech is that of course, this is an important topic also for our investor day in Miami.

Okay, understood Dominik. Thanks for your time, guys.

Thank you.

Hi there. Could you – I'm not sure if I missed this, but could you give us the April, May and June numbers for Group organic growth?

Toby, we basically we started the Q2 with 8%, and we ended with 16%.

Okay. Then could you also give me, on gross margins, and as we go into Q3 the HCS gross margin it hits an easier comp, should we expect a less negative decline in Q3 than we saw in Q2?

Let us say, it is true that the comps were very tough in the first half this year.

Okay. And then a sort of similar comment on the pricing for the Temp gross margin, and that alone, excluding the mix effect, I think we now annualize when you had finished signing all your contracts at a lower price in Q3 last year.

Should we expect an improvement in pricing by Q4?

I think we never said something that we had a special program to sign contracts at lower prices. So, there was no base effect, or that we said something until Q3, we signed lower prices, and that is really not the case.

We always try to manage our Temp margins very well. And what we are saying is basically what we see since the beginning of the year that pricing is sequentially stabilizing, and last year we had sequential, still somewhat competition, but it was also not a lot because I think over the last year, our Temp margin was very well managed, so based on this is not that we have a certain big basis effect coming in.

Okay. And then finally, the tax rate of 35%.

Did you say that's guidance for the full year, or did you say it's just for Q3?

It is just for the Q3.

Just for Q3. Okay, thanks very much.

Thank you. Thank you, ladies and gentlemen for your attention and interest in our company.

We look forward to hopefully seeing many of you at our investor days in Miami on the 23 and 24 of September, and for your information, we report our Q3 2010 results on the 9th of November. See you soon, and have a nice day.

Thank you. Bye-bye.