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Q2 2000 Adecco SA Reports 49% Increase In Operating Income For First Half of 2000

For the first time including Olsten Corporation results as from April 3rd, 2000

Chéserex, Suisse, Jul 31, 2000 

 Adecco SA, the world's leading provider of personnel services, today announced its results for the half-year ended July 2, 2000. Revenues and profits reflected a further strong organic growth, reinforced by the addition of Olsten as from April 3, 2000. Combined, revenues increased year-to-date by 45% and operating income by 49%.

Adecco revenues for the first half were CHF 12.1 billion, 45% above last year's CHF 8.3 billion for the same period with the now consolidated Olsten contributing approximately CHF 1.3 billion to this growth. At constant exchange rates, the revenue growth was 39%, reflecting a 6% positive currency translation impact. This was caused by the appreciation of the US dollar, the British pound, the Japanese yen and the Canadian dollar, partly offset by a lower Euro against the Swiss franc.

Six-month operating income posted a 49% gain over the same period last year, rising to CHF 510 million from CHF 342 million. The operating margin increased from 4.1% to 4.2% despite CHF 35 million of merger-related integration expenses, which are included in operating expenses. Excluding these one-time costs, margins increased 40 basis points to 4.5%.

"We are extremely pleased with these results", said John Bowmer, Adecco's CEO. "We continue to experience strong growth and have further enhanced our operating margin whilst aggressively merging Adecco and Olsten operations. Since the closing of the deal in mid-March, teams around the world have worked on the integration with well-prepared plans. We are on track to meet or exceed our expectations. Management of all operations is now fully integrated. In the US, the headquarters have been moved to the former Olsten head office in Melville, the IT system conversion started in May and the new, combined organization is in place. The merger of the joint IT and Accounting business is substantially completed, the 150 French branches of Olsten have been converted to the Adecco IT system, and the integration of the South American operations is close to completion. This fast combination of the two organizations makes us optimistic that synergies will exceed the costs of integration in the fourth quarter of 2000. The main cost synergies will accrue next year, as we expect the integration to be fully complete by the end of the first quarter 2001.

Income before amortization of goodwill and restructuring charges increased to CHF 316 million, a rise of 47% compared to the 6 months of last year despite the higher interest costs associated with the acquisition of Olsten. Indeed, as the majority of the additional loans are denominated in US dollars, the interest charge has been negatively impacted by the appreciation of the US dollar. Thus, unlike revenues that benefited from a 6% currency impact, income before amortization of goodwill and restructuring charges benefited only marginally from currency fluctuations. Further, a special, lower than anticipated restructuring charge of CHF 63 million has been recorded in the second quarter, covering in particular the costs of closing the Adecco US headquarters in Redwood City.

Progress Across the Globe 

A comparison of the half-year 2000 to the half-year 1999 shows revenue increase of 31% in France, 50% in North America, 30% in the UK, 53% in the rest of Europe, and 97% in the rest of the world. Major positive contributors to Europe were Italy and Belgium. Japan accounted for the majority of the increase in the rest of the world.

Commenting on the regional performance and the impact of the acquisitions, Mr. Bowmer noted, "France has shown a continued very strong organic growth above 20%. The other major contributors to our organic sales increase were Italy with an increase of nearly 300% and Japan in excess of 40%. While our sales have increased in our IT business because of the merger with Olsten, this sector has not developed organically as originally anticipated. However, we remain optimistic for the second half of the year. Similarly, Olsten's contribution will have a major impact on the future growth. Our first half-year performance demonstrates the value of our diversified business and regional portfolio, as we are in a position to offset weaker markets through strong growth in others. This ultimately reduces the volatility of earnings".

US GAAP Results 

For the six months ended July 2, 2000 Adecco reported under US Generally Accepted Accounting Principles (US GAAP) revenues of CHF 12.1 billion and a net loss of CHF 233 million after charging goodwill amortization of CHF 486 million and restructuring charges of CHF 63 million.

According to Chief Financial Officer, Felix Weber, "This net result reflects the accounting principles of US GAAP and Adecco's chosen goodwill amortization schedule of five years. Adecco considers operating income and income before amortization of goodwill and restructuring charges to be the most relevant benchmarks of the company's financial performance, as they measure our operational performance and our ability to fund growth and to distribute dividends. It is important to note that the acquisitions integrated last year have created a positive operating income, thus having contributed positively already in the first year."


ADECCO SA Financial Highlights
In CHF Millions
6 Months Ended July 2, 2000
6 Months Ended July 4, 1999
Net Service Revenues
Operating Income
Income Before Amortization of Goodwill and Restructuring Charges
Restructuring Charges
Amortization of Goodwill
Net Loss
Net Service Revenues by Region
In CHF Billions
6 Months Ended July 2, 2000
6 Months Ended July 4, 1999
North America
Rest of Europe
Rest of the World
Specialist/Career Services Brands (included in geographic regions)
Income before amortization of goodwill and restructuring charges is not meant to portray net income or cash flow in accordance with U.S. generally accepted accounting principles. Goodwill amortization is a non-cash charge to operating income; however, income before amortization of goodwill does not represent cash available to shareholders. This may not be comparable to similarly entitled items reported by other companies. Adecco amortizes goodwill over its estimated life of five years. Further, statements made in this press release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. The Company's actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors as set forth in the Company's reports on Form 20-F made pursuant to the Securities Exchange Act of 1934. For instance, the Company's results of operations may differ materially from those anticipated in the forward-looking statements due to, among other things: management's ability to effectively integrate Olsten Corporation into the Company's existing operations; the Company's ability to continue to mitigate the effects of legislation in France upon gross margins; increased price competition, the general level of economic health and activity in the markets and countries in which the Company operates; the impact of changes in foreign currency exchange rates; changes in interest rates; and the continued availability of qualified personnel. In addition, the market price of the Company's stock may be volatile from time to time as a result of, among other things: the Company's operating results, the operating results of other staffing service providers, and changes in the performance of global stock markets in general.

Adecco SA is the global leader in personnel services. With the addition of Olsten, the Adecco network connects up to 600,000 associates with business clients each day through its network of over 28,000 employees and over 4,500 offices in 60 countries around the world. Registered in Switzerland, and managed by a multinational team with expertise in markets spanning the globe, Adecco delivers an unparalleled range of flexible staffing and career resources to corporate clients and qualified associates.

Adecco provides clients with staffing services and solutions covering all major industries as well as specific professions. The worldwide Adecco Brand network focuses on global industries in transition, including automotive, banking, electronics, logistics, and telecommunications. Adecco is also positioned as a worldwide leader in each of the major professional staffing segments with several world-class business lines: aoc (Accountants on Call) and Jonathan Wren for Finance, Banking and Accounting; Ajilon and Computer People for high-end Information Technology, TAD and Roevin for Engineering and Technical. These Adecco businesses provide their clients with a broad range of staffing solutions, from temporary work to permanent placement, to consulting and managed services. Adecco also offers a range of HR solutions with Econova/Lee Hecht Harrison, delivering outplacement and career management services. Adecco clients retain this unique range of services through local, national and multinational contracts.

Adecco SA is listed on The Swiss Exchange [ADECCO N (ADEN 700'939)], NYSE [ADO], the Bourse de Paris [RM 12819]. 
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