Adecco sees stabilising revenue trends in Q1 2013
Adecco sees stabilising revenue trends in Q1 2013
A solid first quarter on the back of a resilient gross margin and good cost control
First quarter 2013 HIGHLIGHTS
Revenues down -5% organically1 and adjusted for trading days
Gross margin at 18.0%, down 20 bps (-10 bps organically)
SG&A down 3% organically and excluding restructuring and integration costs
Restructuring costs in Q1 2013 amounted to EUR 11 million, of which EUR 6 million related to France
EBITA2 excluding restructuring costs at EUR 138 million
EBITA margin at 3.0%, down 80 bps compared to Q1 last year, excluding restructuring and integration costs
Net income attributable to Adecco shareholders of EUR 67 million
To date 7.5 million shares purchased for EUR 299 million under current share buyback programme
Key figures Q1 2013
in EUR millions
EBITA before restructuring and integration costs
Net income attributable to Adecco shareholders
Adecco Group, the world’s leading provider of Human Resources solutions, today announced results for the first quarter of 2013. Revenues were EUR 4.6 billion, down 7% organically or down 5% organically and adjusted for trading days. The gross margin was 18.0%, a decrease of 20 bps versus the prior year and down 10 bps organically. Continued strong cost control resulted in 3% lower SG&A organically and when excluding restructuring and integration costs. The Q1 2013 EBITA margin excluding restructuring costs was 3.0%, down 80 bps compared to Q1 last year. Net income attributable to Adecco shareholders was EUR 67 million.
Patrick De Maeseneire, CEO of the Adecco Group said: “Considering the economic headwinds in Europe, we achieved a solid first quarter. Revenues are starting to bottom out in Europe with the gap to the market narrowing in France. North America continues to hold up well driven by both General and Professional Staffing. Price discipline and the business mix resulted in a resilient gross margin, despite the negative impact from fewer trading days in Q1 2013. Measures taken to align the cost base with revenue developments are evident in the reduction in SG&A year-on-year and our profitability remained solid. We exited the first quarter with revenues down 4% in March, organically and adjusted for trading days, and April showed a similar trend. We remain focused on our six strategic priorities and on reaching our above 5.5% EBITA margin target. Given recent trends and more favourable economic conditions expected towards the end of 2013, we are convinced we will achieve this target by 2015.”
Q1 2013 FINANCIAL PERFORMANCE
Group revenues in Q1 2013 were EUR 4.6 billion, down 10% or down 8% in constant currency. Organically, revenues were down 7% (-5% organically and adjusted for trading days). Permanent placement revenues amounted to EUR 81 million, a decrease of 9% in constant currency, while revenues from the counter-cyclical Career Transition (outplacement) business totalled EUR 71 million, up 5% in constant currency.
In Q1 2013, gross profit amounted to EUR 821 million and the gross margin was 18.0%, down 20 bps compared to the prior year’s first quarter. Organically the gross margin was down 10 bps in the quarter under review. Temporary staffing had an organic 25 bps negative impact on the gross margin, partly due to timing of the bank holidays. This in particular impacted temporary staffing margins in Germany and Sweden, where temporary employees are on Adecco’s payroll. Organically, permanent placement and other activities had a neutral impact on the gross margin, whereas the impact was 15 bps from outplacement.
Selling, General and Administrative Expenses (SG&A)
SG&A in Q1 2013 amounted to EUR 694 million, a decrease of 5% or 4% in constant currency compared to Q1 2012. SG&A was 3% lower year-on-year on an organic basis and excluding restructuring and integration costs. Restructuring costs were EUR 11 million in the quarter under review, of which EUR 6 million related to France, EUR 1 million for other countries and EUR 4 million for the consolidation of several data centres in North America. In the prior year’s first quarter, costs related to the integration of DBM totalled EUR 3 million and EUR 8 million related to restructuring costs for various European countries. Sequentially, SG&A was flat in constant currency and when excluding restructuring costs. Organically, FTE employees decreased by 5% (-1,800) compared to the first quarter of 2012 and the branch network decreased by 5% (-280 branches). At the end of the first quarter of 2013, the Adecco Group had over 31,000 FTE employees and operated a network of over 5,200 branches.
In the period under review, EBITA excluding restructuring costs was EUR 138 million and the margin was 3.0%, compared to the Q1 2012 EBITA margin of 3.8%, excluding restructuring and integration costs. EBITA was EUR 127 million compared with EUR 182 million in the first quarter of 2012. The Q1 2013 EBITA margin was 2.8% compared to 3.6% in Q1 2012.
Amortisation of Intangible Assets
Amortisation in Q1 2013 was EUR 11 million, compared to EUR 14 million in Q1 2012.
In Q1 2013, operating income was EUR 116 million. This compares to EUR 168 million in the first quarter of 2012.
Interest Expense and Other Income / (Expenses), net
The interest expense amounted to EUR 19 million in the period under review, compared to an expense of EUR 18 million in Q1 2012. Other income / (expenses), net was an expense of EUR 2 million in Q1 2013, compared to income of EUR 3 million in the first quarter of 2012. Interest expense is expected to be around EUR 75 million for the full year 2013.
Provision for Income Taxes
The effective tax rate in the period under review was 29% compared to 27% in Q1 2012.
Net Income attributable to Adecco shareholders and EPS
In the period under review, net income attributable to Adecco shareholders was EUR 67 million. This compares to EUR 112 million in Q1 2012. Basic EPS in Q1 2013 was EUR 0.37 (Q1 2012: EUR 0.59).
Cash flow, Net Debt3 and DSO
Cash used in operating activities was EUR 28 million in the first quarter of 2013 compared to operating cash flow of EUR 137 million generated in the same period last year. Q1 2013 was impacted by social security payments relating to prior years and by lower collection of receivables at the end of March, given the timing of Easter. The Group invested EUR 20 million in capex and paid EUR 69 million for treasury shares. Net debt at the end of March 2013 was EUR 1,070 million compared to EUR 972 million at year end 2012. DSO was 54 days in the first quarter of 2013, as well as in the first quarter of 2012.
In Q1 2013, currency fluctuations had a negative impact on revenues of approximately 2%.