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USG People 2011 Third-quarter results

2011 Third-quarter results

Revenue up 2%, EBITA increases to &euro 34 million

Almere, 28 October 2011, 07.00 CET

Third-quarter 2011 highlights

Group revenue up to &euro 853 million, a 2% increase compared to the third quarter last year

Gross profit down 2% compared to last year and gross margin of 20.7% (Q3 2010: 21.5%)

Operating expenses of &euro 136 million, down 3% on the third quarter of 2010 and down &euro 7 million on the previous quarter (Q2 2011: &euro 143 million)

EBITA up to &euro 34 million (EBITA margin: 4.0%) compared to EBITA of &euro 33 million (EBITA margin: 3.9%) in the third quarter of 2010

Reported net income equalled &euro 12 million compared to &euro 22 million in the third quarter of 2010

"We have seen growth in the temporary employment markets slow, with growth coming in lower in the industrial segment in particular," said Rob Zandbergen, CEO of USG People. “The efficiency improvements implemented in our organisation already started paying off in the third quarter in the shape of a robust result. At 15.9%, operating expenses relative to revenue have never been so low, which has reinforced our competitive position. Now we are taking the next step in increasing our commercial strength. We are responding to the trends and developments in the market, which require an ever greater specialisation, with a differentiated strategy for three product/market combinations. From 2012 we are making changes to our organisation which will enable direct governance of our five international brands. This strategy will increase the focus in our multi-brand portfolio in order to align the business models and concepts to the diverse needs of both candidates and clients. And this will in turn translate into an improved growth potential and profitability for the group. & lsquo;People make the difference’ - whether we’re talking work, ambitions or delivering solutions. Thanks to the new strategy USG People will also be able to make this difference, for all its stakeholders.”

Key figures Underlying results1 (in &euro millions)

3 months to

30 September 2011

3 months to 30 September 2010

% change

9 months to 30 September 2011

9 months to 30 September 2010

% change

Revenue

853

833

2%

2,449

2,264

8%

Gross result

176

179

-2%

513

496

3%

Operating expenses

136

140

-3%

423

415

2%

EBITDA

40

39

4%

90

81

11%

EBITA

34

33

3%

70

62

14%

Net income

14

12

15%

18

11

64%

Gross margin

20.7%

21.5%

20.9%

21.9%

Expense ratio

15.9%

16.8%

17.3%

18.3%

EBITA margin

4.0%

3.9%

2.9%

2.7%

 Notes on the 2011 third-quarter results

Revenue

USG People achieved revenue of &euro 853 million in the third quarter, up 2% compared to last year. Acquisitions contributed 0.4% to the growth. The rate of growth compared to last year slowed in the third quarter partly due to strong growth in percentage terms in 2010 and a weakening of growth at our clients in the industrial segment. Overall, the services segment continued its stable development. In

the third quarter, revenue in the public sector, which in the previous quarter was still down 25% on last year, was 11% lower than last year.

General Staffing achieved revenue growth of 6% in the third quarter, with revenue amounting to

&euro 593 million against &euro 561 million in the third quarter of last year. At Specialist Staffing revenue was down 6% on last year, equalling &euro 186 million compared to &euro 197 million in 2010. Revenue at Professionals remained virtually stable, both compared to last year and to the previous quarter. Revenue amounted to &euro 68 million in the third quarter against &euro 69 million in the third quarter of 2010 (Q2 2011: &euro 70 million).

Gross margin

The gross result for the third quarter equalled &euro 176 million, down 2% on the same period last year when a gross result of &euro 179 million was achieved. As a percentage of revenue, the gross result equalled 20.7%, compared to a gross margin of 21.5% in the third quarter of 2010. The difference in gross margin year-on-year continued to narrow gradually in the third quarter in the first quarter the difference with last year equalled 1.1%, in the second quarter 1.0% and in the third quarter 0.8%. The impact of mix effects on the gross margin showed a gradual decline, with a negative impact of 0.5 percentage point in the third quarter. In addition higher cost prices in France and Germany depressed the gross margin by 0.3 percentage points. In France this was due to a reduction in subsidies on social security contributions (since December 2010) whilst in Germany it was a matter of salaries being pushed up by tightness in the labour market. Revenue from recruitment and selection remained stable at 1.0% of total revenue and consequently did not contribute to the change in the gross margin.

Operating expenses

Operating expenses fell to &euro 136 million compared to &euro 140 million in the third quarter of last year. Operating expenses were &euro 7 million lower than the underlying operating expenses in the previous quarter (Q2 2011: &euro 143 million). The fall in expenses in the third quarter was predominantly due to the previously announced efficiency improvements in the Netherlands. The number of FTEs in the group in the Netherlands was down by 220 compared to the second quarter.

EBITA

EBITA rose to &euro 33.9 million, an increase of 3% compared to &euro 32.8 million in the third quarter of last year.

Acquisition-related amortisation

Amortisation equalled &euro 4.7 million in the third quarter, down on underlying amortisation of &euro 5.5 million last year. In addition to the underlying amortisation last year’s third quarter included accelerated amortisation of &euro 2.7 million. Amortisation concerns brand rights, client portfolios and candidate databases valued at the time of acquisitions.

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