Adecco Announces Q1 2004 Results and Proposals for AGM

Today Adecco announces the Companyís unaudited financial results for the first quarter of 2004. In addition, the Board of Directors has outlined a number of proposals
which will be put forward to the AGM, scheduled for June 29, 2004. Jrme Caille, Adecco Group Chief Executive Officer, commenting on the Q1 2004 results, said: We are pleased with our sales performance, which was up 4.4% in local currency in the first quarter, our fastest growing quarter since Q2 2001. Moreover, we have not lost any major clients due to the recent events ñ in fact, we actually succeeded in growing our client base further in the quarter. I am tremendously proud of these results, which demonstrate the resilience of our business in what has been a very challenging period for the Company.

Gross margins came under pressure in the quarter, mainly due to pricing pressure and changes in business mix. In addition, our profitability was significantly impacted by the non-recurring costs related to the audit delay, of which EUR 36 million was incurred in the first quarter. However, we anticipate that sales and profitability will improve after this challenging first quarter resulting in further increases from higher margin permanent placements, temporary staffing pay rate increases and a decline in workers compensation in the US. I am confident that we are now well positioned to continue to grow our leadership in the world of work.

Commenting on the proposals for the AGM, John Bowmer, Executive Chairman of the Board, said: I am delighted to announce that we have assembled a very talented new Board who will be able to greatly contribute to the future success of Adecco.

First quarter 2004 results

Sales
Group sales for the first quarter were up 4.4% over Q1 2003 in local currency at EUR 3.8 billion. Sales were down 1% in Euro due to the impact of exchange rate movements. In the Adecco Staffing Division, sales growth was 5% in local currency and 1% in Euro. Sales in local currency in Europe were up 5% with growth in France, Spain, Italy, the UK and Belgium offset by declines in the Adecco SA, Q1 2004 Results Page 2 of 5 Netherlands and Germany, whilst in Switzerland sales were flat. In North America, sales in local currency were up 3%, reflecting 3% growth in the US. In Asia/Pacific sales in local currency were up 10%, largely boosted by a 10% increase in Japan.

In the Ajilon Professional Division, sales growth was 2% in local currency (down 5% in Euro). This is the first quarter of underlying growth in the business, showing the effect of the economic recovery. In the LHH/Career Services Division, sales were down 22% in local currency (down 32% in Euro), reflecting the further decline in demand for outplacement services during the initial period of the economic recovery.

Gross margin
In the first quarter, the Groupís gross margin was 16.6%, down 109 basis points compared to 17.7% in the first quarter of 2003 and down 26 basis points compared to 16.9% in the fourth quarter of 2003. The decrease in gross margin was largely due to pricing pressure and changes in business mix. This change in business mix was driven by two major elements, the rapid decrease of LHH given the outplacement cycle and the faster growth of large accounts in the economic recovery compared to higher margin transactional business from smaller companies.

Operating costs
Operating costs increased by 8% in local currency compared to Q1 2003 and by 1% in Euro. This increase was primarily due to the charging of EUR 36 million for additional audit fees and fees for other advisers. Excluding these costs, the operating costs increased by 1% in local currency. The ratio of operating costs to sales this quarter increased to 15.1% of sales (excluding the additional audit fees and fees for other advisers to 14.1% of sales) compared with 14.8% in Q1 2003.

Operating income
Operating income before amortisation and additional audit fees and fees for other advisers was EUR 96 million compared to EUR 113 million of operating income before amortisation in the first quarter of 2003. Operating income before amortisation was EUR 60 million this quarter, down 45% in local currency (down 47% in Euro), representing a return on sales of 1.6%. Excluding EUR 36 million charged for additional audit fees and fees for other advisers, return on sales decreased by 49 basis points in local currency terms to 2.5% in Q1 2004 from 3.0% in Q1 2003. Operating income excluding amortisation and corporate expenses in local currency decreased 8% to EUR 119 million compared to Q1 2003.

Operating income was EUR 59 million, down 47% in Euro compared to EUR 112 million in Q1 2003, representing an overall return on sales of 1.6%.

Interest and other expenses
Interest expense decreased to EUR 15 million compared to EUR 21 million in the first quarter of 2003. Net foreign exchange losses were EUR 3 million compared to EUR 1 million in the first quarter of 2003. Interest
income was EUR 3 million in the first quarter of 2004 compared to EUR 2 million in Q1 2003. Non-operating income was EUR 2 million compared to non-operating expenses of EUR 4 million in the first quarter of 2003.

Provision for income taxes
The provision for income taxes decreased to EUR 16 million this quarter from EUR 24 million in the first quarter last year. The effective tax rate increased to 35% from 27% in Q1 2003. This increase is primarily due to additional audit fees and other advisersí fees being incurred in lower tax jurisdictions, certain other income streams being taxed at higher tax rates and not benefiting from favourable tax dispute settlements as enjoyed in 2003.

Net income
Net income decreased in the first quarter by 53% to EUR 30 million.

Net debt and cash flow
Net debt, defined as short-term and long-term debt and off-balance sheet debt less cash and marketable securities, was EUR 837 million at the end of Q1 2004. This represents a reduction of EUR 81 million during
the first quarter, even after incurring additional audit fees and fees for other advisers, and a reduction of EUR 453 million from the level at the end of Q1 2003. Strong operating cash flow of EUR 87 million was a major
contributor to this reduction. Divisional performance in the first quarter 2004

Adecco Staffing
Adecco Staffing is the number 1 in the world, and is ranked number 1 in 9 of the 13 most important staffing markets. In the first quarter Adecco Staffing increased sales by 5% and increased gross margin by 1% in local currency. Contribution decreased by 5% in local currency.
Adecco France achieved sales growth of 4% and continued to grow market share in the quarter. Contribution decreased by 25%, largely due to pricing pressure and this quarterís comparison with an
exceptionally strong first quarter last year.
Adecco North America sales were up 3% in local currency and improved contribution ñ a particularly good
result given the additional work created by the audit.
Adecco UK sales were up 7% in local currency, the second year of constant growth. Contribution was up 49% in local currency compared to last year, largely due to a series of low cost branch openings and a highly targeted approach to the market.

Adecco Japan posted sales growth of 10% in local currency. However, contribution in local currency was down 60% largely due to our investment in building our presence in this market following recent regulatory reforms.
Adecco Italy sales were up 12% in local currency, a further improvement over the previous quarter, and contribution increased 25% in local currency.

Adecco Spain sales grew by 8% and contribution improved by 38%, largely as a result of gross margin improvements and its efficient cost structure.

Adecco Switzerland sales were flat with contribution down 26% in local currency largely due to the decrease in the high margin permanent placement business.

Germany sales were down by 2% compared to last year. Contribution improved significantly from last yearís level.
Adecco Benelux sales were flat overall with a decline in the Netherlands of 7% offset by a 7% sales growth in Belgium.

Ajilon Professional
Sales for the first quarter in local currency continued to improve to EUR 412 million, an increase of 2% compared to Q1 2003 in local currency. Profits were up 11% in local currency to EUR 15 million (up 3% in Euro). In the US sales in local currency were down just 1% at Ajilon Consulting and down 5% at Ajilon Finance. In the UK sales in local currency were up 7% at Ajilon Consulting, up 1% at Ajilon Engineering and up 17% at UK Ajilon Finance while sales at Ajilon Office Angels were down 1%. LHH/Career Services At LHH which represents 1% of Group revenues and 9% of profits, sales for the quarter of EUR 43 million were
down 22% in local currency (32% in Euro). Profits declined by 39% to EUR 11 million (down 48% in Euro) in line with the decrease in sales as the division adjusted its cost base to adapt to current business levels.

Corporate Expenses
Corporate expenses increased by EUR 39 million to EUR 59 million in the first quarter of 2004. This increase is primarily driven by EUR 36 million of additional audit fees and fees for other advisers. In addition, employee stock options of EUR 5 million were expensed for the first time in this quarter.

Proposals for the Annual General Meeting

Changes to the Board
The Board has decided to propose the following candidates at its Annual General Meeting: Jakob Baer, currently CEO of KPMG Switzerland (will join the Board as of October 1, 2004); Jrgen Dormann, CEO and Chairman of the Board of ABB; Philippe Foriel-Destezet, Member of the Board, Adecco SA, Klaus J. Jacobs, Philippe Marcel, Member of the Board, Adecco SA, Francis Mer, former Finance Minister of France; Thomas O’Neill, Member of the Board and Chairman of the Audit & Finance Committee of Bell Canada Enterprises, David Prince, former Group Finance Director of Cable & Wireless, Member of the Board and Chairman of the Audit and Finance Committee of Therapeutics Group; Peter Ueberroth, Entrepreneur, Member of the Board of The Coca Cola Company.

Elimination of 5% voting limit
At present, a shareholder holding more than 5% is registered as shareholder without voting right for the shares exceeding such 5%. The Board of Directors proposes to abolish this restriction, following the principle one share one vote.

Outlook
Worldwide demand for temporary staffing is accelerating and Adecco expects it to further strengthen over the course of 2004. In the short term, Adecco expects some margin pressure resulting from competitive pricing as well as a change in business mix with a decrease in demand for outplacement services. Furthermore, profitability will continue to be impacted by the significant non-recurring costs related to the delay in finalising the 2003 audited results. However, Adecco remains confident about the medium term profitability outlook and expects gross margins to be positively impacted by the increase in the number of permanent placements, the recovery of the professional staffing sector, particularly in Information Technology, and the accelerated growth in deregulated countries with higher margins. Furthermore, the Company’s lower cost base and higher productivity will result in a high conversion of top line sales growth into bottom line profitability.

Forward-looking statements
Information in this release may involve guidance, expectations, beliefs, plans, intentions or strategies regarding the future. These forward-looking statements involve risks and uncertainties. All forward-looking statements included in this release are based on information available to Adecco S.A. (the Company) as of the date of this release, and we assume no duty to update any such forward-looking statements. Factors that could affect the Company’s forward-looking statements include, among other things: the outcome of investigations by governmental agencies or stock exchanges; the pace of economic recovery in various regions and the demand for temporary staffing; the impact and result of any litigation (including US class action litigation); any adverse developments in existing commercial relationships, disputes or legal proceedings; volatility of the Company’s stock price; intense competition in the markets in which the Company competes; and negative reactions from the Company’s shareholders, creditors or vendors with respect to any of the foregoing matters. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations. Numerous factors could cause or contribute to such differences. Please refer to the Company’s Annual Report on Form 20-F for the year ended December 29, 2002, and other reports filed with or submitted to the US Securities and Exchange Commission from time to time, for a further discussion of the factors and risks associated with our business.