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For more information, please contact:
Machteld Merens/Jan-Pieter van Winsen
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Q3 2012: costs down by € 18 million versus previous quarter

Q3 2012: costs down by € 18 million versus previous quarter

 

Key points Q3 2012

"Our performance in North America and Japan was again solid but European conditions softened further", says Ben Noteboom, CEO of Randstad. "In France, business confidence is eroding fast. Many clients in Europe feel the effects of economic uncertainty. There is an urgent need to reform European labor markets. In November the new collective labor agreements in Germany will kick in, and we are prepared for the resulting changes. We are actively protecting client profitability, and our costs are substantially down quarter-on-quarter, which means we are on track to reach our savings targets. Our delivery models are continuously updated for best efficiency. Our inhouse concept is once more proving its value. With concepts like these, and with the proven professionalism of our people, we are well placed to cope with difficult circumstances while also benefiting from growth opportunities."

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1organic growth is measured excluding the impact of currencies, acquisitions, disposals and reclassifications. When calculating growth, SFN Group is included on a pro forma basis in 2011 and therefore not excluded as an acquisition effect
2operating expenses and EBITA adjusted for integration costs and one-offs
3EBITA: operating profit before amortization/impairment acquisition-related intangible assets and goodwill
4before amortization and impairment acquisition-related intangible assets and goodwill, integration costs and one-offs

Revenue
Another quarter with a rather mixed picture. We saw continued growth in North America, Asia and Latin America, and decline in Europe and Australia. As a result, revenue per working day was down 3.6% compared to the year-on-year decline of 0.8% in the previous quarter. Currency effects had a positive impact of 3.4%, partly offset by 0.8 fewer working days and the effect of some disposals. Combined with the effect of the consolidation of SFN Group this led to a 4% growth in revenue. Revenue per working day contracted by 5% in July and 3% in August and September.

The decline in perm fees recovered to -/-6.6% (Q2 2012: -/-9.0%). Strong growth was maintained across North America, China and Latin America, whereas the slowdown in Europe and Australia stabilized. Perm fees made up 1.7% of revenue and 9.3% of gross profit (Q2 2012: 9.7%).

Strong growth was maintained in revenue from other services, such as payroll services, managed services and recruitment process outsourcing (RPO).

Diverging trends across regions persist. North America grew by 4% per working day compared to 7% in Q2 2012. In Europe, revenue per working day declined by 7% (Q2 2012: -/-4%). Most countries showed a continued gradual decline, but the decline in France (-/-11%) and Germany (-/-5%) accelerated towards the end of the quarter. In the Rest of the World, trends improved in Asia, where Japan (+7%) maintained a strong performance, and in Latin America our business grew by 23%. This was offset by weaker demand in Australia (-/-7%).

Inhouse services grew by 13%, or 3% (Q2 2012: 3%) adjusted for the reclassification of SFN's on-site business where we implemented the inhouse services concept. Staffing revenue contracted by 9% (Q2 2012: -/-7%), influenced by lower demand in the industrial segment across Europe. Professionals were 3% below last year (Q2 2012: 1%), despite continued growth in North America.

Gross profit
In Q3 2012 gross profit amounted to € 799.2 million, up 4% compared to last year. The organic change was -/-6% (Q2 2012: -/-5%). Currency effects added € 33 million to gross profit compared to Q3 2011.

The gross margin was 18.2%, compared to 18.1% in Q3 2011. On a like-for-like basis, reflecting the consolidation of SFN, the gross margin in Q3 2011 would have been 18.3%. The temp margin was 0.4% below last year (Q2 2012: -/- 0.6%) and reflects ongoing price/mix effects. Perm fees had no impact in the mix. Other HR services added 0.3% to the gross margin.

Our gross margin in North America maintained its momentum and continued to expand, contributing to the 5% growth of our North American gross profit. In Europe, the decline in gross profit stabilized at -/-11%. Gross margin pressure in the Netherlands stabilized, while it eased somewhat in Germany. In Southern Europe we faced increased margin pressure.

Operating expenses
Our focus on costs and ensuring the adaptability of the organization resulted in a decrease in operating expenses of € 18 million compared to Q2 2012, assuming constant currencies. Currency effects added around € 8 million to the cost base. Cost savings were realized across all regions. In Europe costs reduced by € 10 million, to which Germany, the United Kingdom, Spain and Italy contributed most. Cost savings in the Netherlands were offset by higher marketing costs related to the sponsorship of the Dutch Olympic Team. In North America costs reduced by € 6 million, of which € 1 million of additional synergies.

Compared to last year, assuming SFN had already been consolidated, operating expenses decreased by € 26 million, which includes € 7 million of synergies. Currency effects added € 28 million to the cost base, while divestments lowered the cost base by € 6 million. In Europe and North America, costs decreased by € 26 million and € 2 million respectively. We continued to invest in growth in emerging markets, especially in China and Latin America.

Operating expenses were adjusted for restructuring costs of € 9.5 million, mainly in the Netherlands and Iberia. We anticipate a payback period of around 12 months. Last year's cost base was adjusted for acquisition related costs of € 6.1 million.

Average headcount (in FTE) amounted to 29,220 for the quarter, down 1% versus Q2 2012. At the end of Q3 2012, the number of FTEs was 780, or 3%, lower than at the end of Q2 2012. Since the end of Q3 2011 the number of FTEs reduced by 1,980, or 6%. The reduction in FTEs in Q3, which follows the trend in gross profit, occurred mainly across Europe. In North America, headcount was just below Q2 2012 levels.

Productivity (measured as gross profit per FTE) was 4% ahead of last year. We operated a network of 4,567 outlets (Q2 2012: 4,607), 40 fewer than in the previous quarter, as we continued to optimize our branch network in countries such as North America (-/-14), the United Kingdom (-/-12) and the Netherlands (-/-11).

EBITA
In Q3 2012 underlying EBITA decreased by 8% to € 161.4 million, with an EBITA margin of 3.7% (Q3 2011: 4.1%). On a like-for-like basis the EBITA in Q3 2011 would have been € 182.3 million or 4.0% of revenue. Currency effects added € 4.6 million to EBITA.

We focus on capturing profitable growth in North America and the Rest of the World, while in Europe our focus is on client profitability, by optimizing our delivery models and costs. We are well on track to meet our savings target of € 70-100 million (annualized) by the end of Q2 2013. Our field steering approach ensures adaptability of the field organization. In addition we closely monitor productivity and efficiency of the whole organization, including overhead and head office costs.

Amortization of intangibles and impairment goodwill
Amortization of acquisition-related intangible assets amounted to € 43.2 million, which is € 13 million below Q2 2012. The decrease is caused by the fact that (part of) the brand names, which were acquired as part of the SFN acquisition, have been amortized over 10 months.

Net finance costs
In Q3 2012 net finance costs reached € 2.6 million versus € 7.1 million in Q3 2011. Net finance costs include the net interest expenses on our net debt position, as well as currency effects and adjustments in the valuation of certain assets and liabilities. Interest expenses amounted to € 5.5 million compared to € 7.1 million in Q3 2011. Interest costs decreased in line with lower interest rates and the normal seasonal decrease in net debt. Last year net debt increased towards the end of the quarter as a result of the acquisition of SFN. The remaining effect of € 2.9 million (gain) was mainly caused by adjustments in the valuation of certain assets and liabilities. Foreign currency changes did not have a significant impact.

Tax
In Q3 2012 the effective tax rate before amortization and impairment of acquisition-related intangibles and goodwill, integration costs and one-offs amounted to 32% (2011: 31%). For the full year we expect a tax rate at the higher end of our indicated range of between 29% and 32%. The increase compared to last year is mainly caused by a changed geographical mix with higher profitability in countries with above average tax rates, and lower profitability in countries with below average tax rates.

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1amortization and impairment of acquisition-related intangible assets and goodwill

Net income and earnings per share
In Q3 2012 diluted EPS decreased from € 0.66 to € 0.62.

Balance sheet
Operating working capital decreased by € 97 million. Despite a normal seasonal pattern, where Q3 revenue exceeds Q2 revenue, the reduction occurred mainly as a result of strong cash flow generation. Like in the previous quarter we faced some delay, because month-end was in a weekend, but the impact was significantly less in the third quarter.

The moving average of Days Sales Outstanding improved by 1.2 days compared to Q3 2011 and by 0.1 days sequentially. The improvement was driven by the changes in the revenue mix, and continuous improvements in our invoicing and collection processes.

At the end of Q3 2012 net debt amounted to € 1,437.4 million compared to € 1,653.7 million at the end of Q2 2012. As expected, net debt decreased sequentially as a result of the free cash flow. The leverage ratio, which includes the EBITDA of SFN on a pro forma basis, reached 2.2. The covenants of the syndicated credit facility allow a leverage ratio of up to 3.5, while we aim at a maximum leverage ratio of 2. Apart from certain uncommitted credit lines, Randstad has a committed syndicated credit facility of € 1,755 million which runs until May 2013. To extend the maturity of committed financing, Randstad secured a syndicated credit facility of € 1,300 million as of May 2013, and the majority of this facility runs until May 2017. In order to refinance the remaining € 455 million, Randstad is making good progress in exploring various forms of financing with different maturity profiles (short-term, medium-term, long-term).

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1amortization and impairment of acquisition-related intangible assets and goodwill
2diluted EPS before amortization and impairment acquisition-related intangible assets and goodwill, integration costs and one-offs
3operating working capital is trade and other receivables minus current part financial fixed assets minus trade and other payables

Free cash flow was € 207.3 million, up 7% compared to last year. The movement in working capital is in line with normal seasonal patterns, but strong focus on collection of trade receivables paid off. Net capital expenditures, which relate to office refurbishments and investments in IT equipment and software, were slightly lower than last year. Translation and other effects of € 13.8 million are mainly caused by currency effects on the valuation of drawings under the syndicated credit facility, which are denominated in currencies other than euro.

Revenue increased by 4% per working day on a pro forma basis (Q2 2012: 7%) and growth was stable throughout the quarter. Perm fees grew by 9% (Q2 2012: 6%). The gross margin continued to expand due to strong discipline and an improved business mix.

Our combined US staffing and inhouse business grew by 4% (Q2 2012: 5%), led by the administrative segment and permanent placements. Inhouse services, including all of the on-site business of SFN, grew by 2% (Q2 2012: 4%). Our US professionals businesses grew by 4% per working day (Q2 2012: 10%). Growth was maintained across most sectors. In HR Solutions we saw solid double-digit growth in managed services and recruitment process outsourcing based on a combination of new client wins and higher volumes in existing accounts. Canadian revenue grew by 4% per working day (Q2 2012: 5%) against a strong comparison base.

We remained focused on cost control, while realizing synergies. The EBITA margin for the region reached 5.1%, and included € 7.2 million of cost synergies. Last year's EBITA margin of 4.7% would have been 4.1%, had SFN been included in the consolidation.

Integration SFN and synergies
The integration process is on track. The integration of the staffing business was practically completed in Q3 2012. The integration of the professionals businesses progressed in line with expectations and the implementation of the new ICT environment is expected to commence in Q4 2012. In Q3 2012, we incurred integration costs of € 6.5 million. Since the integration process began we have incurred integration costs of € 31.8 million. Pre-tax cost synergies are € 7.2 million as of Q3, 2012. Besides the pre-tax cost synergies we are also aiming at tax synergies of $10 million. These tax synergies have been realized.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications. When calculating growth, SFN Group is included on a pro forma basis in 2011 and therefore not excluded as an acquisition effect. Growth rates in North America reflect the change in revenue recognition in both years.

Revenue per working day contracted by 11% (Q2 2012: -/-3%), with -/- 13% in September. The slowdown was visible across all segments. Inhouse services grew by 6% (Q2 2012: 24%), although demand decelerated throughout September. Staffing was 12% below last year. Revenue in our professionals business contracted by 17% (Q2 2012: -/-6%). Perm fees were 9% below last year (Q2 2012: -/-13%). The French gross margin was 0.2% below last year (Q2 2012: -/- 0.7%) and is mainly a result of the change in the calculation method for subsidies. This led to a relative shift of subsidies towards the second half of the year when compared with the method used in 2011. The number of FTEs was 1% below the previous quarter. We continue to focus on costs by making use of the flexibility in our cost base, and creating larger branches.

Revenue per working day contracted by 3% (Q2 2012: -/- 1%), in line with the Dutch staffing market, which excludes Yacht. Normal seasonal patterns remained visible. Randstad the Netherlands outperformed the administrative segment, while Tempo-Team outperformed the industrial segment. At Yacht revenue declined by 6% (Q2 2012: -/- 6%). Although volumes remained fairly stable and utilization was under control, hours per week and bill rates were lower. The gross margin was stable compared to the previous quarter, yet it is still below last year. Underlying operating expenses were somewhat lower than in the previous quarter. Higher marketing costs, that were associated with the sponsorship of the Dutch Olympic Team, offset lower personnel expenses. The number of FTEs was 1% lower than in Q2 2012. By the end of the quarter the number of FTEs was 9% below the level at the end of Q2 2012 and reflects the restructuring program in Randstad the Netherlands. Operating expenses were adjusted for restructuring costs of € 7.5 million, mainly related to the head office reorganization of Randstad the Netherlands. We anticipate a payback period of around 12 months. The underlying Dutch EBITA margin reached 5.7%.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications.
2revenue in Q3 2012 was impacted by a reassessment of a limited number of contracts at Yacht. The effect has been reflected in the organic growth rate

On an organic basis, German revenue per working day contracted by 5% (Q2 2012: -/-2%), while it was -/-9% in September. Last year growth slowed from 16% in Q2 to 10% in Q3. Our volumes showed a decreasing trend throughout the quarter reflecting increased economic uncertainty. As expected, we also experience increased uncertainty in the German market around the implementation of equal pay as of November 1, 2012 in a limited number of industries. Our inhouse business grew by 2% (Q2 2012: 5%), while staffing revenue contracted by 13% (Q2 2012: -/-12%). Growth in professionals, which no longer includes the aerospace business, was 11% (Q2 2012: 7%), led by the IT segment. Gross margin pressure in our staffing and inhouse business persists but the effect reduced compared to previous quarters. Operating expenses were 8% lower than last year, due to good cost control and a restructuring program. In Q3 2012, the number of FTEs reduced by 5% sequentially. The German EBITA margin reached 6.2%.

Revenue per working day was 7% below last year (Q2 2012: -/-6%). The rate of decline was stable throughout the quarter. Revenue in inhouse services was 1% below last year (Q2 2012: -/-5%), while our staffing business contracted by 10% (Q2 2012: -9%). We continue to focus on improving our business mix, while focusing on client profitability. Professionals grew by 2% (Q2 2012: 7%) on the back of the successful implementation of the growth accelerator in 2011. Revenue from non-staffing services, such as service checks and HR Solutions, continued to grow, led by outplacement. The gross margin was stable compared to the previous year. Operating expenses were at the same level as the previous quarter. As a result, the EBITA margin was 3.8%.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications

Revenue per working day was 9% below last year (Q2 2012: -/- 8%). Professionals grew by 1% (Q2: -/-5%). Growth was led by engineering, finance and managed services, predominantly through temporary staffing. Demand within our education business strengthened, while our care businesses was under pressure as we exited certain market segments. Revenue at our inhouse business was 24% lower than Q3 2011 (Q2 2012: -/-13%), as we focused on client profitability. Perm fees were 22% lower than the same period last year (Q2 2012: -/-14%). The competitive environment remained challenging, reflected in lower temp margins and fees per placement. Good cost control was maintained and in line with the trends in our business, we reduced our staff by 1% compared to the previous quarter. Operating expenses were adjusted for € 0.5 million of restructuring charges as we continued to streamline the organization.

Economic circumstances remained challenging in this region. Revenue per working day was 12% below Q3 2011 (Q2 2012: -/- 10%), while it ended the quarter 8% below September 2011. The competitive environment across Iberia became more challenging over the summer. Revenue in Spain was down 12% (Q2 2012: -/- 9%), mainly driven by lower demand in manufacturing and distribution. In Portugal, revenue contracted by 13% (Q2 2012: -/- 12%), while it was -/-7% in September. Good cost control was maintained in both countries. Operating expenses in Iberia have been adjusted for restructuring costs of € 1.5 million, which relates to the merger of Randstad and Tempo-Team in Portugal and organizational changes in Spain.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications
2revenue in Q3 2012 was impacted by a reassessment of a limited number of managed services contracts. The effect has been reflected in the organic growth rate

Across other European countries revenue per working day contracted by 5% (Q2 2012: -/-6%). In Italy, revenue declined by 9% (Q2 2012: -/- 8%). The decline eased throughout the quarter and was -/-6% in September. The competitive environment became more challenging in recent months. Revenue at our Swiss business grew by 2% (Q2 2012: -/-2%), led by improved performance in staffing and professionals, while inhouse maintained good growth. In Poland revenue was just below the level of last year, which is a good performance following the deliberate termination of a large contract in Q4 2011. In the Nordics the decline eased compared to previous quarters, led by good performance in Sweden. Growth in professionals across Denmark and Sweden remained strong. Our Hungarian business remained under pressure as we lost one of our largest contracts by the end of 2011, and in the Czech Republic revenue was 4% below Q3 2011 (Q2 2012: -/-8%). Greek revenue came under pressure and was 9% below last year. Turkey performed solidly, maintaining double-digit growth. Good cost control was maintained across the region and the EBITA margin reached 3.2%.

In Japan (37% of the region) revenue grew by 7% (Q2 2012: 5%). Growth strengthened across all segments and good profitability was achieved. Revenue in Australia and New Zealand (28% of the region) was 7% below last year (Q2 2012: -/-1%) caused by challenging IT and banking & finance markets. China, with a strong focus on perm, maintained solid double-digit growth. Growth in our Indian business was maintained at 17%. In Latin America (18% of the region), our Argentinean business continued to expand while maintaining its focus on profitability. Our Mexican business was somewhat under pressure, while in Brazil we maintained strong double-digit growth and we continued to invest in growth by focusing on professionals and perm. In Chile our focus is also on professionals, which resulted in good growth.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications

Revenue per working day contracted by 9% (Q2 2012: -/- 7%). In North America, the staffing business grew by 6% (Q2 2012: 8%) with continued strong focus on the administrative segment and perm fees. In the Rest of the World region, staffing revenue grew by 13% (Q2 2012: 11%). In Europe, staffing revenue was down by 10% (Q2 2012: -/- 8%). French and German staffing revenue contracted by -/-12 and -/-13% respectively (Q2 2012: -/- 6 and -/-12% resp.) and reflect increased uncertainty in these markets, especially in the industrial segments. The decline of Dutch staffing revenue was 5% (Q2 2012: -/-4%), while in Belgium staffing revenue contracted by 10% (Q2 2012: -/-9%) and reflects a continued gradual decline. We saw similar levels of decline in the other European countries. The underlying EBITA margin reached 3.7% and reflects ongoing price/mix effects. On a like-for-like basis, assuming SFN would have been consolidated in 2011, the EBITA margin in Q3 2011 would have been 4.0%.

Inhouse services, mainly focused on industrial and logistical clients, grew by 13% (Q2 2012: 15%) or 3% when adjusted for the transfer of SFN's on-site business. Inhouse services in North America grew by 2% (Q2 2012: 4%). In Europe, growth was led by France (6%) and the Netherlands (6%). Our German inhouse business grew by 2%, while Belgium was 1% below Q3 2011. In the UK we focus on client profitability, and revenue was 24% below last year. The EBITA margin reached 4.6% compared to 4.7% in Q3 2011.

Professionals contracted by 3% (Q2 2012: 1%), mainly as a result of lower demand across Europe. Perm fees declined by 15% (Q2 2012: -/-10%). Overall growth in the North American region was 2% compared to 7% in the previous quarter. Our French business contracted by 17% (Q2 2012: -/-6%). Revenue at our Dutch professionals businesses contracted by 13% (Q2 2012: -/-10%). In the UK, revenue was 1% above Q3 2011 (Q2 2012: -/-5%), led by good performance in finance and engineering, while the trend in education further improved. The EBITA margin reached 4.0%. On a like-for-like basis, assuming SFN would have been consolidated in 2011, the EBITA margin in Q3 2011 would have been 4.8%.

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1organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications. When calculating growth, SFN Group is included on a pro forma basis in 2011 and therefore not excluded as an acquisition effect

Other information

M&A
In Q3 2012 we increased our stake in Supreme Education, a UK-based recruitment agency to 100%. This transaction does not have a material impact on our financial results and financial position.

We have used our call option to increase our stake in Gulp, a German IT professionals company, from 70% to 100%. We have completed this transaction in October 2012.

In October 2012 we have sold a small part of our UK staffing business, which operated under the Select brand. This transaction does not have a material impact on our financial results and financial position.

Other
In October Randstad signed three alliance agreements with partners in geographies where Randstad does not have a presence. These alliances include Adcorp (South Africa), ANCOR (Russia and CIS countries), and Barona (Finland). The aim of the alliances is to team-up in international tenders and cross-referral of work across the respective geographies.

Outlook
Whereas revenue growth was 0% in Q1 and 0.8% in Q2, revenue declined by 3.6% in the third quarter. Good growth was maintained in North America, and it strengthened in Japan and in Latin America. Across most European countries the gradual decline continued. In France, but also in Germany, we are witnessing a more challenging environment. As these diverging trends persist, we focus on capturing profitable growth in North America and the Rest of the World, while in Europe our focus is on client profitability, optimizing our delivery models and costs. We are well on track to meet our savings target of € 70-100 million (annualized) by the end of Q2 2013. Our field steering approach ensures adaptability of the field organization. In addition, we are monitoring productivity and efficiency of the whole organization, including overhead and head office costs. As a result, we expect to incur restructuring costs in Q4 2012.

Analyst conference call
Today, at 10.00 CET Randstad Holding will host an analyst conference call. The dial-in number is +31 (0) 20 796 52 13 or +44 (0)208 817 9301 for international participants. The confirmation code is: 8981837. You can listen the analyst call through real-time video webcast. The link is: http://www.ir.randstad.com/presentations.cfm. A replay of the presentation and the Q&A will also be available on our website by the end of the day.

Disclaimer
Certain statements in this document concern prognoses about the future financial condition, risks, investment plans and the results of operations of Randstad Holding and its operating companies as well as certain plans and objectives. Obviously, such prognoses involve risks and a degree of uncertainty since they concern future events and depend on circumstances that will apply then. Many factors may contribute to the actual results and developments differing from the prognoses made in this document. These factors include, but are not limited to, general economic conditions, a shortage on the job market, changes in the demand for (flexible) personnel, changes in legislation (particularly in relation to employment, staffing and tax laws), the role of industry regulators, future currency and interest fluctuations, our ability to identify relevant risks and mitigate their impact, the availability of credit on financially acceptable terms, the successful completion of company acquisitions and their subsequent integration, successful disposals of companies and the rate of technological developments. These prognoses therefore apply only on the date on which this document was compiled. The Q3 results as presented in this press release are unaudited.

Randstad profile
Randstad specializes in solutions in the field of flexible work and human resources services. Our services range from regular temporary staffing and permanent placement to inhouse, professionals, search & selection, and HR Solutions. The Randstad Group is one of the leading HR services providers in the world with top three positions in Argentina, Belgium & Luxembourg, Canada, Chile, France, Germany, Greece, India, Mexico, the Netherlands, Poland, Portugal, Spain, Switzerland, the UK, and the United States as well as major positions in Australia and Japan. In 2011 Randstad had approximately 28,700 corporate employees and around 4,700 branches and inhouse locations in 40 countries around the world. Randstad generated a revenue of € 16.2 billion in 2011. Randstad was founded in 1960 and is headquartered in Diemen, the Netherlands. Randstad Holding nv is listed on the NYSE Euronext Amsterdam, where options for stocks in Randstad are also traded. For more information see www.randstad.com

Notes to the consolidated interim financial statements

Reporting entity
Randstad Holding nv is a public limited liability company incorporated and domiciled in the Netherlands and listed on Euronext Amsterdam.

The consolidated interim financial statements of Randstad Holding nv as at and for the three- and nine-month period ended September 30, 2012 include the company and its subsidiaries (together called the 'Group').

Significant accounting policies
These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations issued by the International Accounting Standards Board (IASB), as adopted by the European Union (hereafter: IFRS).

The accounting policies applied by the Group in these consolidated interim financial statements are unchanged compared to those applied by the Group in its consolidated financial statements as at and for the year ended December 31, 2011.

Basis of presentation
These consolidated interim financial statements are condensed and prepared in accordance with (IFRS) IAS 34 'Interim Financial Reporting'; they do not include all of the information required for full (annual) financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended December 31, 2011.

The consolidated financial statements of the Group as at and for the year ended December 31, 2011 are available upon request at the Company's office or at www.ir.randstad.com.

Estimates
The preparation of consolidated interim financial statements requires the Group to make certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these consolidated interim financial statements, the significant judgments, estimates and assumptions were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2011.

Seasonality
The Group's activities are impacted by seasonal patterns. The volume of transactions throughout the year fluctuates per quarter, dependent upon demand as well as variations in items such as the number of working days, public holidays and holiday periods. Historically, the Group usually generates its strongest revenue and profits in the second half of the year. Historically, in the second quarter cash flow is usually negative due to the timing of payments of holiday allowances and dividend; cash flow tends to be the strongest in the second half of the year.

Effective tax rate
The effective tax rate for the nine-month period ended in September 30, 2012 is 31.0% (2011: 30.2%) and is based upon the estimated effective tax rate for the whole year 2012.

Acquisition of Group companies and buyout of non-controlling interests
The total cash out for acquisitions YTD Q3 2012 amounts to € 5.0 million (Q3 only: € 2.6 million), which is related to the increase of our shareholding in our Chinese company Talent Shanghai from 85% to 100% (Q2) and to arrangements with regard to acquired Group companies in preceding years (Q1, Q2 and Q3). As these companies were already consolidated in full in 2011, no additional contribution to revenue and operating profit resulted from these acquisitions in 2012.

In September 2011, the Group acquired 100% of the shares of SFN Group Inc; SFN Group Inc (USA) is consolidated as from September 2, 2011.

An amount of € 4.3 million is included in goodwill in respect of the finalization in Q3 2012 of the purchase price allocation relating to the acquisition of SFN Group Inc. The amount involved is neither considered material in relation to the total consideration for SFN Group inc. nor to the total goodwill for SFN Group inc.

Disposal of Group companies
The total cash in for disposals YTD Q3 2012 amounts to € 10.4 million (Q3 only: € 1.7 million), which is related to disposed businesses in the Netherlands and Rest of the world in Q1, divestments of some small businesses in Malaysia and Thailand in Q2 (with no cash impact) and cash inflow from disposals in preceding years (Q1 and Q3).

Net debt position
The net debt position as of September 30, 2012 (€ 1,437.4 million) is € 134.8 million higher compared to December 31, 2011 (€ 1,302.6 million), which is mainly influenced by the payment of dividends during the first half year of 2012 offset by positive cash flow from operations. The current syndicated facility is classified under current liabilities as short-term part long term borrowings, since these borrowings will mature in May 2013. In July 2011 we arranged a new syndicated revolving credit facility of € 1,300 million with a forward start structure. This facility matures in 2016. Financial covenants are comparable to the existing facility. Movements on the current syndicated facility are presented as movements on non-current borrowings in the cash flow statement.

Related-party transactions
There are no material changes in the nature, scope and (relative) scale in this reporting period compared to the disclosures in note 41 and 42 of the consolidated financial statements as at and for the year ended December 31, 2011.

Commitments
There are no material changes in the nature and scope compared to the disclosures in note 33 of the consolidated financial statements as at and for the year ended December 31, 2011.

Employee benefits
As of January 1, 2013 the revised IAS 19 'Employee Benefits' will be applicable. We will apply this standard from that date. The negative impact on shareholders' equity as per January 1, 2012 amounts to € 4 million. If this revised standard would have been applicable during 2012, the positive impact on income before taxes for the nine-month period ended September 30, 2012 would have been € 1.5 million.

Events after balance sheet date
Early October 2012, Randstad increased its shareholding in Gulp Information Services GmbH, Germany, from 70% to 100%. As this company is already fully consolidated, this transaction will not result in additional revenue or operating profit. We also sold a small part of our Staffing business in the UK. This transaction does not have a material impact on our results and financial position.

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