3rd Quarter Results
Adecco reports solid Q3 2012 results
The Group achieves strong profitability on the back of price discipline and
Third quarter 2012 HIGHLIGHTS
*Revenues of EUR 5.3 billion, flat year-on-year (-5% organically1)
*Gross margin at 17.9%, up 70 bps year-on-year (+50 bps organically)
*SG&A down 2% year-on-year, organically and excluding restructuring costs
*EBITA2 excluding restructuring costs at EUR 232 million
*EBITA margin at 4.4%, up 10 bps compared to last year, excluding
*Restructuring costs amounted to EUR 22 million of which EUR 19 million
related to France
*Net income of EUR 118 million, down 18%
*Operating cash flow of EUR 284 million in the first nine months of 2012
(EUR 217 million in 2011)
Key figures Q3 2012
in EUR millions reported constant currency growth
Revenues 5,279 0% -5%
Gross profit 947 +4% -1%
EBITA excluding restructuring costs 232 +2% -3%
EBITA 210 -7% -12%
Operating income 197 -8% -12%
Net income 118 -18%
Zurich, Switzerland, November 6, 2012: Adecco Group, the world's leading
provider of Human Resources solutions, today announced results for the third
quarter of 2012. Revenues were flat or down 5% organically, to EUR 5.3
billion. The gross margin was 17.9%, an increase of 70 bps versus the prior
year and up 50 bps organically. Continued strong cost control resulted in 2%
lower SG&A, on an organic basis and excluding restructuring costs. The Q3 2012
EBITA margin excluding restructuring costs was 4.4%, up 10 bps compared to the
EBITA margin of Q3 last year. Net income was down 18% to EUR 118 million. The
Group generated operating cash flow of EUR 284 million in the first nine
months of 2012.
Patrick De Maeseneire, CEO of the Adecco Group said: "Our focus on price
discipline continues to show in our results. I am pleased to report an
increase of 50 bps organically of our gross margin to 17.9%. At the same time,
we remained disciplined on the cost-side. SG&A was down 2% year-on-year
organically and excluding restructuring costs. As a consequence the EBITA
margin was up 10 bps to 4.4%, when excluding the restructuring costs. Looking
at developments from a geographical viewpoint, we continue to witness diverse
trends across our markets. In France, we maintained good profitability despite
declining revenues. In North America revenue growth accelerated to 3%
organically also driven by good growth in the IT segment. The UK held up well
and we outperformed the market in Germany. Organic growth in Japan further
weakened, as last year's results included a few large projects. Elsewhere, we
performed well in the Benelux against the market and the same holds true for
the Nordics. In Italy and Iberia, the revenue decline rate stabilised. Growth
of LHH, our career transition and talent development business accelerated to
9% organically in Q3 2012, with strong profitability. While the outlook
remains uncertain, we are convinced we have the global reach, a strong
combination of businesses and a disciplined approach to pricing and cost
control which will get us to our EBITA margin target of above 5.5% midterm."
Q3 2012 FINANCIAL PERFORMANCE
Group revenues in Q3 2012 were EUR 5.3 billion, flat or down 5% in constant
currency. Organically, revenues were down 5%. Permanent placement revenues
amounted to EUR 85 million, a decrease of 10% organically, while revenues from
the counter-cyclical career transition (outplacement) business totalled EUR 65
million, up 5% organically.
In Q3 2012, gross profit amounted to EUR 947 million and the gross margin was
17.9%, up 70 bps compared to the prior year's third quarter. Organically the
gross margin was up 50 bps in the quarter under review. Temporary staffing had
an organic 30 bps positive impact on the gross margin. Organically, permanent
placement had a neutral impact on the gross margin, whereas the impact was +10
bps from outplacement and +10 bps from other activities.
Selling, General and Administrative Expenses (SG&A)
SG&A in Q3 2012 amounted to EUR 737 million, an increase of 8% or 2% in
constant currency compared to Q3 2011. SG&A was 2% lower year-on-year on an
organic basis and excluding restructuring costs. Restructuring costs for
France and Germany were EUR 20 million in the quarter under review. In
addition, restructuring costs incurred for the consolidation of several data
centres in North America amounted to EUR 2 million in Q3 2012. Sequentially,
SG&A was down 2% on an organic basis and when excluding restructuring costs.
Organically, FTE employees decreased by 3% (-1,000) compared to the third
quarter of 2011. The branch network, on an organic basis, decreased by 2%
(-100 branches) compared with the third quarter of 2011. At the end of the
third quarter of 2012, the Adecco Group had close to 33,000 FTE employees and
operated a network of over 5,500 branches.
In the period under review, EBITA was EUR 210 million compared with EUR 226
million reported in the third quarter of 2011. The Q3 2012 EBITA margin was
4.0% compared to 4.3% in Q3 2011. EBITA excluding restructuring costs was EUR
232 million in Q3 2012 and the margin was 4.4%, up 10 bps compared to the
EBITA margin of Q3 2011.
Amortisation of Intangible Assets
Amortisation in Q3 2012 was EUR 13 million, unchanged from Q3 2011.
In Q3 2012, operating income was EUR 197 million. This compares to EUR 213
million in the third quarter of 2011.
Interest Expense and Other Income / (Expenses), net
The interest expense amounted to EUR 19 million in the period under review,
the same as in Q3 2011. Other income / (expenses), net was an expense of EUR 1
million in Q3 2012, compared to income of EUR 2 million in the third quarter
of 2011. Interest expense is expected to be around EUR 80 million for the full
Provision for Income Taxes
The effective tax rate in the period under review was 33% compared to 26% in
Net Income / Net Income attributable to Adecco shareholders and EPS
In the period under review, net income / net income attributable to Adecco
shareholders was EUR 118 million. This compares to EUR 145 million in Q3 2011.
Basic EPS in Q3 2012 was EUR 0.62 (Q3 2011: EUR 0.76).
Cash flow, Net Debt3 and DSO
Cash generated from operating activities amounted to EUR 284 million in the
first nine months of 2012 and compares to EUR 217 million in the same period
last year. The Group paid dividends of EUR 256 million and capital expenditure
amounted to EUR 71 million in the first nine months of 2012. Net debt at the
end of September 2012 was EUR 1,101 million compared to EUR 892 million at
year end 2011. DSO was 55 days in the third quarter of 2012, compared to 56
days in the same period last year.
In Q3 2012, currency fluctuations had a positive impact on revenues of
Revenues in France amounted to EUR 1.3 billion, down 16% compared to Q3 2011.
Permanent placement revenues were down 15%. In the quarter under review, EBITA
was EUR 35 million compared to EUR 64 million in Q3 2011. The EBITA margin was
2.6% in Q3 2012, down 140 bps compared to the prior year's third quarter.
Excluding EUR 19 million restructuring costs incurred in Q3 2012, the EBITA
margin was at a solid 4.1%, compared to 4.0% a year ago. The plans to combine
the business of the Adecco and Adia brands under the single brand of Adecco
are fully on track.
In North America, Adecco's revenues increased 3% organically to EUR 977
million in Q3 2012. General Staffing revenues increased 2% in constant
currency and Professional Staffing revenues grew by 5% organically. The North
American IT Professional Staffing segment grew 6% year-on-year organically in
Q3 2012, driven by solid growth in the US of 8% organically. Revenues
developed solidly in Finance & Legal and Medical & Science, up 6% and 20%
respectively year-on-year, both in constant currency. The Engineering &
Technical segment was flat in constant currency. Permanent placement revenues
continued to develop strongly, up 15% organically. EBITA was EUR 41 million
and the EBITA margin was 4.3%, up 20 bps compared to Q3 2011. Excluding EUR 2
million restructuring costs incurred for the consolidation of several data
centres in North America, the EBITA margin was at 4.4% in Q3 2012.
In the UK & Ireland, revenues were up 9% in constant currency to EUR 517
million. Permanent placement revenues were down 31% in constant currency,
compared with a strong third quarter in 2011. EBITA was EUR 4 million in Q3
2012, and the EBITA margin was 0.7% compared to an EBITA margin of 2.9% in Q3
2011. In the quarter under review profitability was impacted by the
sponsorship costs for the London Summer Olympics.
In Germany & Austria, Q3 2012 revenue development continued to be ahead of the
market. Revenues declined by 1% organically to EUR 418 million, compared
against a strong base last year (Q3 2011: +23% year-on-year revenue growth).
EBITA amounted to EUR 35 million and the EBITA margin was 8.3% compared to
9.6% in Q3 2011. Restructuring costs to optimise the cost base amounted to EUR
1 million in the quarter under review. Excluding these costs, the Q3 2012
EBITA margin was 8.5%.
In Japan, revenues were down 5% in constant currency to EUR 379 million.
Organically revenues were down 15% and were impacted by the completion of
several outsourcing projects. Profitability remained strong. EBITA was EUR 23
million and the EBITA margin was 6.1%, up 60 bps compared to the third quarter
of 2011. The acquired company VSN Inc. continued to develop well. VSN added 20
bps to the EBITA margin in Japan in Q3 2012.
Revenues in Italy declined by 14% in Q3 2012, compared against a high base of
Q3 last year when revenues increased +19% year-on-year. Italy achieved a
strong EBITA margin of 5.7% in Q3 2012, down only 60 bps year-on-year, despite
the decline in revenues.
In Q3 2012, revenues in Benelux decreased by 3%. Revenue development was in
line with the market in the Netherlands, but ahead of the market in Belgium.
The region achieved solid profitability with an EBITA margin of 5.1% in Q3
2012, driven by both the Netherlands and Belgium.
Revenues in the Nordics were up 6% in constant currency. Revenues in Sweden
were down single-digit year-on-year in Q3 2012, but solidly increased in
Norway, Denmark and Finland. The EBITA margin in Q3 2012 was 4.6%.
In Iberia revenues declined by 12% as economic conditions in the region
remained challenging. Revenues in Australia & New Zealand as well as in
Switzerland declined 11% in constant currency in Q3 2012.
The Emerging Markets grew 9% in constant currency to EUR 466 million, mainly
driven by Latin America. The EBITA margin was 3.5%, up 80 bps when compared to
the same period last year.
Revenues of Lee Hecht Harrison (LHH), Adecco's career transition and talent
development business were EUR 76 million, up 34% in constant currency and up
9% organically compared to Q3 2011. EBITA was EUR 19 million and profitability
remained strong, as the EBITA margin reached 24.3%. The integration of DBM,
which the Group acquired and included in the results since September last
year, has been successfully completed and no further integration costs have
been incurred during Q3 2012.
BUSINESS LINE PERFORMANCE
Adecco's revenues in the General Staffing business (Office & Industrial)
decreased by 7% organically to EUR 4.0 billion. Revenues in the Industrial
business were down 9% in constant currency (-10% organically). In France,
revenues declined by 16% organically in Q3 2012 and in Italy by 15%. Germany &
Austria was down 2% organically year-on-year. In constant currency, revenues
in Industrial in North America grew 1% in Q3 2012. In the Office business,
revenues were down 2% in constant currency. Whereas revenues in Japan were
down 17%, revenues in North America continued to hold up well and were up 4%
and in the UK & Ireland revenues increased double-digit, all in constant
Professional Staffing4 revenues increased 2% in constant currency (1%
organically). Revenues in North America were up 5% organically, same as in the
UK & Ireland, where revenues were up 5% in constant currency. Revenues in
France were down 9%.
In Information Technology (IT), revenues were flat in constant currency (+2%
organically). In North America, revenues grew by 6% organically, with the US
IT Professional Staffing segment growing by 8% organically. Revenues in the UK
& Ireland grew by 6% in constant currency.
Adecco's Engineering & Technical (E&T) business was up 9% in constant currency
(3% organically). In Germany & Austria revenues grew by 5%, while in France
revenues grew by 6%. In North America revenues were flat compared to the same
period last year, whereas the UK & Ireland grew strongly double-digit, both in
In Finance & Legal (F&L), revenues were down 2% in constant currency. Revenues
in North America increased 6%, while business in the UK & Ireland remained
difficult, with revenues declining by 15% in Q3 2012, all in constant
In Q3 2012, revenues in Medical & Science (M&S) were down 1% in constant
currency (-3% organically). While revenues in North America were up 20%,
revenues in the Nordics declined by 16%, both in constant currency. Revenues
in France were down 15% in the quarter under review.
In the third quarter of 2012, revenues in Solutions5 were up 26% in constant
currency or up 8% organically. Revenue growth in MSP (Managed Service
Programmes) and VMS (Vendor Management System) continued to be double-digit in
Developments continue to be diverse across the different geographies. In
September, revenues declined by 3% organically and adjusted for business days.
Revenue growth at the beginning of the fourth quarter slightly weakened from
the -5% organically seen in Q3 2012, driven by the UK, Germany, and the
Emerging Markets. The revenue decline rate in France and Japan stabilised. In
North America revenue growth continued to develop well driven by both General
and Professional Staffing.
Given current trends, we continue to focus on price discipline and the tight
alignment of the cost base to revenue developments. Consequently, in Q4 2012,
we anticipate further EUR 15 million investments to optimise the cost base, in
addition to the already announced EUR 65 million for 2012 (EUR 45 million for
France, EUR 10 million for other countries, EUR 10 million for the data centre
consolidation in North and South America), of which EUR 37 million have been
incurred in the first 9 months of this year. SG&A in Q4 2012 is expected to
remain approximately in line with the third quarter of 2012, on an organic
basis and when excluding restructuring costs.
With the disciplined approach to pricing and cost control and building further
on Adecco's strategic priorities, we remain convinced that we are on track to
reach an EBITA margin of above 5.5% midterm.
Mark Du Ree, the current Regional Head of Japan is retiring at the end of
2012. The Board of Directors and the Executive Committee would like to thank
Mark for his achievements and for his commitment to the Adecco Group over the
past 27 years. Mark has been the Country Manager of Adecco Japan since 2002
and he led the successful build-up and strong profitability of Adecco in Japan
during this time.
Effective as of January 1, 2013, Christophe Duchatellier will take on an
extended role as the Regional Head of Asia and Japan and will join the Adecco
Group Executive Committee. Christophe joined the Adecco Group in 2010, after
18 years with Michael Page, where in his latest role he was the Regional
Managing Director of Europe and member of the Executive Board. Upon joining
Adecco, Christophe initially managed the Professional Staffing business in
France and at the beginning of 2012 was appointed Regional Head of Asia.
Update on the share buyback programme
In June 2012, the Company launched a share buyback programme of up to EUR 400
million on a second trading line with the aim of subsequently cancelling the
shares and reducing the share capital. The share buyback commenced in mid-July
2012. To date, the Company has acquired 2 million shares for a total
consideration of EUR 76 million under this programme.
For further information please contact:
Adecco Corporate Investor Relations
Investor.email@example.com or +41 (0) 44 878 89 89
Adecco Corporate Press Office
Press.firstname.lastname@example.org or +41 (0) 44 878 87 87
Q3 2012 Results Conference Calls
There will be a media conference call at 9 am CEST as well as an analyst
conference call at 11 am CEST, details of which can be found in the Investor
Relations section on our website.
UK / Global + 44 (0)203 059 58 62
United States + 1 866 291 41 66
Cont. Europe + 41 (0)91 610 56 00
Financial Agenda 2012/2013
*Q4/FY 2012 results March 13, 2013
*Annual General Meeting April 18, 2013
*Q1 2013 results May 7, 2013
*Q2/1H 2013 results August 8, 2013
*Q3 2013 results November 6, 2013
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. as
of the date of this release, and we assume no duty to update any such
forward-looking statements. The forward-looking 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. Factors that could affect the Company's
forward-looking statements include, among other things: global GDP trends and
the demand for temporary work; changes in regulation of temporary work;
intense competition in the markets in which the Company operates; integration
of acquired companies; changes in the Company's ability to attract and retain
qualified internal and external personnel or clients; the potential impact of
disruptions related to IT; any adverse developments in existing commercial
relationships, disputes or legal and tax proceedings.
About the Adecco Group
The Adecco Group, based in Zurich, Switzerland, is the world's leading
provider of HR solutions. With close to 33,000 FTE employees and over 5,500
branches, in over 60 countries and territories around the world, Adecco Group
offers a wide variety of services, connecting close to 700,000 associates with
over 100,000 clients every day. The services offered fall into the broad
categories of temporary staffing, permanent placement, career transition and
talent development, as well as outsourcing and consulting. The Adecco Group is
a Fortune Global 500 company.
Adecco S.A. is registered in Switzerland (ISIN: CH0012138605) and listed on
the SIX Swiss Exchange (ADEN).
1 Organic growth is a non US GAAP measure and excludes the impact of currency,
acquisitions and divestitures.
2 EBITA is a non US GAAP measure and refers to operating income before
amortisation of intangible assets.
3 Net debt is a non US GAAP measure and comprises short-term and long-term
debt less cash and cash equivalents and short-term investments.
4 Professional Staffing refers to Adecco's Information Technology, Engineering
& Technical, Finance & Legal, and Medical & Science businesses.
Solutions include revenues from Human Capital Solutions, Managed Service
5 Programmes (MSP), Recruitment Process Outsourcing (RPO) and Vendor
Management System (VMS).
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