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Adecco Results

Adecco has announced its Q4 and Full Year Results

Group revenues in Q4 2008 were down 14% to EUR 4.6 billion compared to Q4 2007. On a constant currency basis and organically, revenues declined by 15%. In the fourth quarter of 2008, permanent placement revenues declined by 24% in constant currency to EUR 70 million.

Gross Profit
In Q4 2008, the gross margin was 18.2% (adjusted 18.0%), compared to 17.8% reported in the same period last year. The gross margin in the temporary staffing business was 10 bps lower in Q4 2008 compared to Q4 2007. The decline of the permanent placement business had a negative impact on gross margin, but was more than compensated by the growing contribution of the outplacement business.

In the period under review, EBITA was EUR 123 million, a decrease of 52% or 37% organically and adjusted. The resulting adjusted EBITA margin was 3.6% in Q4 2008. This compares to an EBITA margin of 4.8% in the prior year.

Operating Income
Primarily as a result of the impairment charges to goodwill and intangible assets of EUR 116 million, the company recorded an operating loss of EUR 5 million in Q4 2008. This compares to an operating income of EUR 246 million in the same quarter last year.

Net Income and EPS
Primarily due to the impairment charges, the company posted a net loss in the fourth quarter of 2008 of EUR 22 million which compares to a net income of EUR 150 million in the prior year. The basic loss per share was EUR 0.12 (EUR 0.81 basic EPS per share in Q4 2007).

Group revenues for 2008 were EUR 20.0 billion, a decline of 5% compared to the prior year. In constant currencies, revenues were down 3%, while on an organic basis, revenues declined by 5%. Permanent placement revenues were EUR 354 million, a decline of 4% in constant currency compared to 2007.

Gross Profit
In 2008, the gross margin was 18.4% compared to 18.6% in 2007. When excluding the impact of the modified calculation of French social charges, the underlying gross margin improve

In 2008, EBITA amounted to EUR 908 million, a decline of 16% on a reported basis and down 11% organically and underlying compared to 2007. Excluding the positive impact of the modified calculation of French social charges in both 2008 and 2007, the EBITA margin was down 20 bps to 4.2% compared to the prior year.

Operating Income
Operating income in 2008 was EUR 748 million, down 29% compared to 2007, impacted by the impairment charges on goodwill and intangible assets. Additionally, the benefit of the modified calculation of French social charges had a significantly higher impact on the operating income in 2007.

Net Income and EPS
In 2008, net income was down 33% to EUR 495 million (2007: EUR 735 million), corresponding to a net income margin of 2.5%. Basic EPS was EUR 2.82 (EUR 3.97 in 2007).

Dieter Scheiff, CEO of the Adecco Group said: The industry was confronted with an exceptionally challenging business environment, particularly during the fourth quarter. Nevertheless, we have remained price disciplined and raised the gross margin on an underlying basis by 30 bps to 18.1% in 2008. We have also acted quickly to reduce our cost base, and accelerated headcount reductions throughout the year. These actions together resulted in a good underlying EBITA margin of 4.2%, only down 20 bps compared to the prior year. Operating cash flow remains strong at over EUR 1 billion on par with last year.


Compared to Q4 2007, revenues in France declined by 17% to EUR 1.4 billion in Q4 2008. Adecco remained price disciplined and focused on adapting costs to trading conditions. EBITA, declined by 70% to EUR 22 million compared to Q4 2007. When adjusting for the French social charges benefit, the legal provision associated with the French antitrust procedure and costs linked to headcount reductions and branch optimization, the EBITA margin declined by 70 bps to 3.4%, compared to 4.1% a year ago.

In the USA & Canada, Adecco's revenues declined by 16% in constant currency to EUR 678 million in Q4 2008. Organically, revenues were down 15%. In the Office and Industrial businesses, the decline in revenues was most pronounced, while revenues in Human Capital Solutions continued to grow strongly. EBITA declined by 36% in constant currency, while the EBITA margin was lower by 120 bps to 3.8%. Investments to structurally improve customer mix and efficiency amounted to EUR 3 million in the quarter.

In Japan, fourth quarter revenues declined by 6% in constant currency to EUR 414 million. Excellent cost management resulted in an EBITA margin of 7.1%, down 10 bps compared to the prior year.

In Germany, revenues were down 13%, to EUR 342 million in the period under review. EBITA, in Germany, declined by 39% compared to Q4 2007, corresponding to an EBITA margin of 6.5% (Q4 2007: 9.2%). The decline in the profitability is a combination of a lower utilisation and negative operating leverage.

In the UK & Ireland, revenues in Q4 2008 declined by 19% in constant currency. At the EBITA level the region reported a loss of EUR 8 million. The unsatisfactory results are partly caused by weak permanent placement business.

In Italy, revenues declined by 25% in Q4 2008, and in the Benelux by 6% (-9% organically). In the Nordics, revenues were down by 19% in constant currency, while in Iberia revenues declined by 30%.

Emerging Markets revenues continued to show healthy growth of 12% in constant currency and 11% organically, mainly driven by Latin & Central America. The corresponding EBITA margin was 4.0% in the period under review.


In Q4 2008, Adecco's revenues in the Office and Industrial businesses declined by 18% in constant currency and organically to EUR 3.4 billion. In the Industrial business, revenues declined by 21% in constant currency and on an organic basis. The decline was mostly driven by France where revenues were down 19%, Germany which declined by 18%, Italy by 29%, Iberia by 37% and by the USA & Canada where revenues decreased 20% in constant currency. Revenues in the Office business declined by 13% in constant currency and organically. While Japan was down 6% in constant currency and France by 5%, the revenue decline was more pronounced in the USA & Canada, with a decline of 22%, in the UK & Ireland where revenues were down 20% and in the Nordics by 21%, all in constant currency.

The Professional Business[6] revenues in the fourth quarter of 2008, declined by 6% in constant currency and by 7% on an organic basis. The gross margin improved by 90 bps to 27.4%, which was mainly driven by Human Capital Solutions and the Engineering & Technical business.

In Information Technology (IT), Adecco's revenues decreased 9% in constant currency and by 10% organically. Weak developments in the USA & Canada led to a revenue decline in constant currency of 14%, whereas revenues in the UK & Ireland declined by 5% in constant currency compared to Q4 2007.

Adecco's Engineering & Technical (E&T) business was down 10% in constant currency. In Germany revenues were up by 2% compared to Q4 2007. France declined by 6%, while the USA & Canada, faced a revenue decline of 7% and UK & Ireland declined by 42%, both in constant currency.

In Finance & Legal (F&L), revenues declined by 12% in constant currency and were down 14% organically. Weak demand in USA & Canada was only partially offset by better demand in Continental Europe.

In Q4 2008 revenues in Sales, Marketing & Events (SM&E) were down by 1%, whereas revenues in Human Capital Solutions (HCS) were up 13% and Medical & Science grew 2%, all in constant currency.

In today's exceptionally difficult business environment, resulting in pronounced pressure on revenues, protecting margins through disciplined pricing and cost reductions is a key priority for the management of the Adecco Group. The commitment to value based management is even more important under the current circumstances, and the company is well positioned to seize opportunities in this downturn.

Looking into the near future, management currently sees no signs of improvement. In January, Adecco Group revenues were down 25% on an organic basis and adjusted for trading days compared to the prior year. Adapting the cost base remains at the forefront of management's priorities, and initiated actions in the second half of 2008 are well underway.

Given the sharp deceleration experienced in Q4 2008 and the weak start in 2009, Adecco Group plans to spend EUR 50 million in H1 2009 in order to reduce costs with the aim to defend margins and to structurally improve the business. Investments to structurally improve the organization, with strict financial discipline and with the focus on professional and specialized business fields, aim to optimally position the Adecco group for the next economic upswing.

Update on the French antitrust procedure
On February 2, 2009, the Adecco Group received the decision of the French Competition Council (Conseil de la Concurrence) on the antitrust procedure involving Adecco and Adia France and its main competitors in France. The decision imposed a fine of EUR 34 million. The Company, having carefully analyzed the judgement, decided that it will appeal against certain aspects of the decision relating to the calculation of the fine before the Paris Court of Appeal, since it considers the level of fine as too high. Irrespective of the outcome of the appeal, the Adecco Group is committed to the highest standards of business integrity and compliance. In particular, the Adecco Group unconditionally respects and supports the legal and regulatory framework in relation to fair competition and antitrust.

Management changes
Jeff Doyle (42), the current Chief Operating Officer of the Adecco Office and Industrial business in Australia will replace Ray Roe as Country Manager, Australia and New Zealand as of August, 2009. Ray Roe will retire at the end of July 2009 after 16 successful years within the Adecco Group.


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