In 2004, we set geographic operating margin targets for the Group within our major geographical areas of operation. The objectives were calculated based on historical highs previously reached by Vedior in each of these regions and on the Group’s strategy to extend our leading position in the professional/executive recruitment sectors through both organic and acquisitive growth. The achievement of these targets, which in part depends on economic trends, would result in an overall Group operating margin (after corporate expenses) in the range of 4.6% to 5.6% (see chart below).
Over the past few years, we have continuously improved our operating margins. In 2007, the operating margin target was reached in the Rest of World region and exceeded in the Rest of Europe region. France, the UK and the Netherlands are all on track to reach their operating margin targets in 2008.
We believe that, for a recruitment company, a degree of financial leverage is both appropriate and prudent. We use debt to finance working capital and maintain our net debt within the range of 25% to 50% of trade receivables. The level of borrowing we need depends on our working capital requirement, which in turn depends on the level of sales. Our industry is cyclical, but cash flows are less volatile than earnings because of compensating fluctuations in working capital. At the end of 2007, net debt was €493 million or 29% of trade receivables – well within our target range.
We intend to maintain interest cover higher than 6 (EBITDA: net interest) and leverage lower than 2.5 (net debt: EBITDA). At 31 December 2007, the interest cover ratio was 12.6 and the leverage ratio was 1.1.
Operating margins | Historical overview
Excluding non recurring items 