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Gross profit up 8% YoY in Q4 2018 for The Adecco Group

The Adecco Group has released its results for the fourth quarter of 2018.


The Adecco Group delivered a solid underlying performance in 2018, while continuing to invest in its digital transformation. Revenues grew 3% organically and trading days adjusted to EUR 23, 867 million, with a deceleration through the year as European markets slowed. Gross margin improved organically by 10 bps, supported by strong growth in permanent placement. EBITA margin excluding one-offs was down 40 bps to 4.5%, impacted by increased investments in the Group’s strategic initiatives, a reduction in CICE subsidies in France, and the ongoing business transformation in Germany. These headwinds were partly offset by underlying margin improvements, relating to the GrowTogether programme, which increased through the year, in-line with plan. Markets with especially strong performances in 2018 included: France, which grew 5% organically and trading days adjusted, ahead of the market and with an improving underlying EBITA margin, excluding the negative CICE impact; Italy with growth of 9% organically and EBITA margin improvement of 50 bps; Japan with growth of 5% organically and trading days adjusted, and EBITA margin improvement of 30 bps. Switzerland, Australia & New Zealand and Latin America all achieved double-digit revenue growth. 


Free cash flow of EUR 569 million was lower than in the prior year, due to lower EBITA and increased investments. During the year the Group distributed EUR 350 million in dividends and repurchased shares for a total of EUR 110 million, under the share buyback programme. Acquisitions, divestments, and other investing activities totalled a net outflow of EUR 182 million, including an outflow of EUR 393 million for the acquisitions of Vettery and General Assembly, and an inflow of EUR 226 million relating to the proceeds from disposal of investment in Beeline. Net debt ended the year at EUR 1,124 million, representing a ratio of 1.0x net debt to EBITDA excluding one-offs.


Q4 2018 revenues were EUR 6,127 million, an increase of 1% year-on-year on a reported basis. Temporary staffing revenues were flat at EUR 5,311 million; permanent placement revenues rose 18% to  EUR 140 million; revenues from career transition were EUR 80 million, down 6%; and revenues in outsourcing and other activities grew by 6% compared to the prior year, all on an organic basis. By business line, revenues were flat in general staffing, up 1% in professional staffing, and up 3% in solutions, all on an organic basis. Gross profit was EUR 1,169 million in Q4 2018, up 8% on a reported basis and up 5% organically. Gross margin was 19.1%, up 120 bps compared to Q4 2017.


SG&A excluding one-offs was EUR 875 million, up 8% year-on-year on a reported basis, of which approximately 4% related to M&A (General Assembly and Vettery). EBITA was EUR 235 million. EBITA excluding one-offs was EUR 294 million, up 9% organically. EBITA margin excluding one-offs was 4.8%, up 20 bps compared to Q4 2017 on a reported basis.


Alain Dehaze (pictured), group chief executive officer, commented, “The Group ended the year with a strong performance, despite an increasingly challenging market backdrop in Europe. While revenues declined by 1% (TDA), we outperformed in a number of key regions, including France, US General Staffing and Italy. Underlying profitability also further improved in Q4 2018, building on the positive trend of the prior quarter. Investments in our ‘Perform, Transform, Innovate’ strategy, which have impacted margins in 2017 and 2018, are now delivering the first financial results, in addition to laying strong foundations for future profitable growth. In 2018, we Performed: expanding our market share in France and returning to growth in US General Staffing, in-line with 2017 commitments. Pricing programmes also gained traction and we delivered market leading growth in perm. Although Germany impacted the Group performance, we are making changes to strengthen the business.  We also Transformed: the GrowTogether programme is scaling up and driving productivity improvements, which supported improved operating margins in most regions in Q4. As we optimise and digitise internal processes, we reduce costs and also increase client and candidate satisfaction, as evidenced by a five point improvement in NPS in 2018.  And we Innovated: by adding unique businesses to our portolio of New Ventures, including General Assembly (up-/re-skilling) and Vettery (digital permanent placement). Combined with the strengths of our existing brands, we are creating a 360˚ service offering to support our customers across the whole HR solutions landscape, online and offline.


“As the Group continues its digital transformation, our people remain our greatest asset – it is only through their passion and commitment that we succeed as a team. I therefore want to thank every one of our 34,000 colleagues worldwide for their contribution to making the Adecco Group the global #1 in HR solutions.” 


In France, revenues were EUR 1,413 million, an increase of 1%, or a decline of 1% trading days adjusted. Growth slowed compared to Q3 2018 but continued to outperform the market. Revenues increased by 1% in General Staffing, which accounts for over 90% of revenues, and grew by 3% in Professional Staffing. The slowdown in revenue growth was broad based by industry sector. Permanent placement revenues were up 22%. EBITA excluding one offs was EUR 105 million with a margin of 7.4%, compared to 6.3% in the prior year.


In North America, UK & Ireland general staffing, revenues were EUR 848 million, an increase of 6%, or 4% trading days adjusted. North America General Staffing, which accounts for approximately 75% of revenues, was up 8%, or 6% trading days adjusted, driven by client wins and strong seasonal demand. UK & Ireland General Staffing represents approximately 25% of revenues and was up 1%, or down 1% trading days adjusted, reflecting generally soft market conditions. Permanent placement revenues were up 12% in North America General Staffing and were flat in UK & Ireland general staffing. Overall EBITA excluding one offs was EUR 32 million representing an EBITA margin  of 3.8%, compared to 3.0% in Q4 2017. In North America, UK & Ireland Professional Staffing, revenues were EUR 867 million, flat or down 2% trading days adjusted. North America Professional Staffing represents approximately 65% of revenues and was down 2%, or 4% trading days adjusted. UK & Ireland Professional Staffing represents approximately 35% of revenues and was up 3%, or 2% trading days adjusted, driven by growth in engineering & technical. Permanent placement revenues increased by 31% in North America Professional Staffing and by 13% in UK & Ireland Professional Staffing. Overall EBITA excluding one-offs was EUR 56 million with a margin of 6.3%, compared to 6.0% in Q4 2017.


In Germany, Austria, Switzerland, revenues were EUR 521 million, down 6%, or down 9% trading days adjusted. In Germany & Austria, revenues were down 10%, or down 13% trading days adjusted, driven by a further slowdown in the market and the consolidation of the Adecco and Tuja general staffing businesses. In Switzerland, revenues grew by 8% or by 6% trading days adjusted. For the region, EBITA excluding one offs was EUR 6 million, with an EBITA margin of 1.0%, a year-on-year decrease of 150 bps.


In Benelux and Nordics, revenues were EUR 516 million, down 6%. In the Nordics, revenues were flat with growth in Norway offsetting a decline in Sweden. Revenues in Benelux were down 9%, or down 11% trading days adjusted. Belgium experienced a high-single-digit revenue decline, while the Netherlands declined double-digits, due to softer market conditions and reduced demand at a few large clients. EBITA excluding one-offs was EUR 12 million, with an EBITA margin of 2.2%, compared to 2.7% in Q4 2017.


In Italy, revenues were EUR 515 million, up 2%, or up 1% trading days adjusted. Permanent placement revenues increased by 17%. EBITA margin excluding one offs was 8.3%, up 110 bps year-on-year, driven by improvement in the temporary staffing gross margin and the strong growth in permanent placement.


In Japan, revenues were EUR 341 million, up 6%, with good growth in professional staffing and permanent placement. EBITA excluding one-offs was EUR 23 million and the EBITA margin excluding one offs was 6.7%, an increase of 80 bps year-on-year. Positive business mix and improved pricing more than offset ongoing strategic IT investments.


In Iberia, revenues were EUR 286 million, down 1%, or down 4% trading days adjusted. The EBITA margin excluding one offs was up 40 bps year-on-year to 6.2%, driven by positive pricing development and business mix. 


In Rest of World, revenues were EUR 696 million, up 3%, or 1% trading days adjusted. Revenues grew 13% in Australia & New Zealand, 5% in Latin America and were flat in Eastern Europe & MENA, while declining by 4% in Asia, and by 14% in India, all trading days adjusted. For the region, EBITA excluding one-offs was EUR 27 million with a margin of 4.0%, up 60 bps compared to last year’s EBITA margin a result of continued focus on client profitability.

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