Adecco weathers the storm with strong cost reductions
(Thomson Reuters ONE) - Corporate news announcement processed and transmitted by Hugin AS.The issuer is solely responsible for the content of this announcement. ------------------------------------------------------------------------------------ The pressure on the revenue decline rate has eased in most marketsover the course of Q2 2009Q2 HIGHLIGHTS (Q2 2009 versus Q2 2008) * Revenues of EUR 3.6 billion, down 31% (-32% in constant currency) * Strong SG&A reduction of 21% adjusted1 and in constant currency * Restructuring costs amounted to EUR 54 million in Q2 2009 as Adecco initiated further measures * Adjusted EBITA[2] margin at 2.4% * Operating income impacted by EUR 192 million impairment charges on goodwill and intangible assets * Strong operating cash flow of EUR 282 million in H1 2009 * DSO improved by 5 days to 53 days in Q2 2009 * Adecco agrees to make a recommended cash offer of 62 pence per share for UK-based staffing firm Spring Group plcKey figures+-------------------------------------------------------------------+| | Q2 2009 | Q2 2009 | Q2 2009 | Q2 2009 || | reported | reported | adjusted[1] | adjusted[1] || | | growth | | growth || | | | | in constant || in EUR millions | | | | currency ||-----------------+----------+----------+-------------+-------------|| Revenues | 3,591 | -31% | 3,591 | -32% ||-----------------+----------+----------+-------------+-------------|| Gross profit | 640 | -36% | 640 | -34% ||-----------------+----------+----------+-------------+-------------|| EBITA | 32 | -90% | 86 | -68% ||-----------------+----------+----------+-------------+-------------|| Operating | (173) | -157% | | || income / (loss) | | | | ||-----------------+----------+----------+-------------+-------------|| Net income / | | | | || (loss) | | | | || attributable to | (147) | -169% | | || Adecco | | | | || shareholders | | | | |+-------------------------------------------------------------------+Zurich, Switzerland, August 11, 2009: Adecco Group, the worldwideleader in Human Resource services, today announced results for Q22009. Revenues declined by 32% on a constant currency basis to EUR3.6 billion. SG&A was reduced by a strong 21% on an adjusted basisand in constant currency. The adjusted EBITA margin was 2.4%.Operating cash flow was EUR 282 million in H1 2009, compared to EUR238 million in the prior year. DSO improved by 5 days to 53 days inthe second quarter.Patrick De Maeseneire, Chief Executive Officer of the Adecco Group,said: "The pressure on the revenue decline rate has eased in mostmarkets over the course of Q2 2009. In spite of the revenue decline,the pricing environment in our major market France remained rationaland temp gross margins in the US were sequentially pretty stable. Ourconsiderable efforts to adapt the cost base are starting to pay off.SG&A was reduced by 21% on an adjusted basis and in constantcurrency. The adjusted EBITA margin reached 2.4% in Q2 2009, up 30bps sequentially. We expect business conditions to remain demanding.However, our initiatives in terms of structurally optimising our costbase, combined with our value-based strategy, position the AdeccoGroup well, not only in the current environment, but more importantlywhen the upswing materialises."Q2 2009 FINANCIAL PERFORMANCERevenuesIn Q2 2009, Group revenues were down 31% to EUR 3.6 billion comparedto the prior year's second quarter. On a constant currency basis,revenues declined by 32%, and by 33% organically[3]. Permanentplacement revenues amounted to EUR 44 million in Q2 2009, a declineof 56% and outplacement revenues totalled EUR 84 million, an increaseof 57%, both in constant currency.Gross ProfitThe gross margin in Q2 2009 was at 17.8%, a decline of 30 bps on anadjusted basis. Last year's gross margin was 19.3% on a reportedbasis and 18.1% on an adjusted basis. The lower gross margin in thetemporary staffing business, partly impacted by lower utilisation inGermany and Sweden, where temporary employees are on Adecco'spayroll, and the negative impact on gross margin from the weakpermanent placement business, was only partially compensated by thepositive contribution of the outplacement business.Selling, General and Administrative Expenses (SG&A)In the second quarter of 2009, SG&A declined by 21% on an adjustedbasis and in constant currency compared to the prior year's quarter.SG&A was reduced by 12% on a reported basis compared to Q2 2008. SG&Adeclined sequentially by 8% adjusted and in constant currency. FTEemployees were reduced by 19% (-6,800) organically compared to Q22008, while the branch network was reduced by 13% (-900 branches). Atthe end of the second quarter of 2009, the Adecco Group operated anetwork of more than 5,800 offices and had over 29,000 FTE employees.FTE employees at the end of Q2 2009 declined by 7% compared to theend of the first quarter 2009.Restructuring costs amounted to EUR 54 million in Q2 2009 (France:EUR 29 million, Benelux: EUR 10 million, Iberia: EUR 10 million,Other: EUR 5 million), higher than the previously indicated EUR 14million for Q2 2009, since the first French social plan wassuccessfully implemented with a FTE employee reduction of 700 insteadof the originally planned 600. Additionally, the Group recorded thefirst restructuring expenses with respect to the Adia social plan inFrance (350 FTE employees) announced in June 2009. Furthermore, theGroup decided to integrate Alta Gestion into Adecco Iberia which willlead to headcount reductions and an optimisation of the branchfootprint. These additional initiatives will further improve the coststructure of Adecco.EBITAIn the period under review, the adjusted EBITA decreased to EUR 86million, a decline of 68% in constant currency. The adjusted EBITAmargin was 2.4% in the second quarter this year, up 30 bpssequentially. This compares to an adjusted EBITA margin of 5.0% inthe prior year. Reported EBITA was EUR 32 million, a decline of 90%compared to Q2 2008.Amortisation and Impairment of Goodwill and Intangible AssetsAmortisation of intangible assets in the second quarter of 2009amounted to EUR 13 million compared to EUR 12 million in Q2 2008. Inaddition, the Group impaired EUR 192 million on goodwill andintangible assets in Q2 2009. The German market was severely impactedby the economic downturn, resulting in a EUR 125 million impairmentof goodwill for the German operations. Further, EUR 67 million relateto impairment on intangible assets of which EUR 61 million relate toTuja in Germany and EUR 6 million to the discontinuation of the AltaGestion brand in Iberia.Operating Income / (Loss)In Q2 2009, the Adecco Group reported an operating loss of EUR 173million, impacted by the impairment charges on goodwill andintangible assets of EUR 192 million. This compares to an operatingincome of EUR 304 million in the second quarter of 2008, which waspositively impacted by the modified calculation of French socialcharges of EUR 54 million.Interest Expense and Other Income / (Expenses), netIn the period under review, the interest expense amounted to EUR 15million, EUR 1 million less than in Q2 2008. Other income /(expenses), net was EUR 1 million in Q2 2009 compared to EUR 7million in the second quarter of 2008. Lower interest income and again on disposal of a business in Q2 2008 are the main reasons forthe decline. Interest expense is expected to amount to approximatelyEUR 60 million for the full year 2009.Provision for Income TaxesIn Q2 2009, the Group recorded a tax benefit of EUR 40 millioncompared to a tax expense of EUR 81 million in Q2 2008. The effectivetax rate in Q2 2009 was 21% compared to 28% in Q2 2008. The effectivetax rate in Q2 2009 was positively impacted by a change in the mix ofearnings and the successful resolution of prior years' audits. Thiswas substantially offset by the negative impact of the goodwillimpairment charge, which is not tax deductible.Net Income attributable to Adecco shareholders and EPSThe Company posted a net loss attributable to Adecco shareholders ofEUR 147 million in the second quarter of 2009, impacted by theimpairment charge on goodwill and intangible assets, which comparesto net income attributable to Adecco shareholders of EUR 212 millionin Q2 2008, which had been positively impacted by the modifiedcalculation of French social charges. The basic EPS in Q2 2009 was aloss of EUR 0.85, compared to income of EUR 1.21 in Q2 2008.Cash flow, Net Debt[4] and DSOThe operating cash flow generated in the first half of 2009 amountedto EUR 282 million (H1 2008: EUR 238 million). The Group paiddividends of EUR 173 million and invested EUR 54 million in capitalexpenditure. Net debt at the end of June 2009 was EUR 611 million,slightly lower than the EUR 617 million at the end of 2008. DSOimproved by 5 days to 53 days in the second quarter of 2009, drivenby France, USA & Canada, Germany, UK & Ireland and Iberia.Currency ImpactIn Q2 2009, currency fluctuations had a positive impact ofapproximately 1% on revenues and no impact on EBITA.GEOGRAPHICAL PERFORMANCE(The pie charts are visible in the PDF version of the report)In France, revenues declined by 34% to EUR 1.2 billion in Q2 2009.Costs associated with headcount reductions and branch closuresamounted to EUR 29 million in the quarter under review due to anadditional 100 FTE employees leaving the Group under the first socialplan and the recently announced Adia reorganisation. On an adjustedbasis, EBITA declined by 73% to EUR 19 million in Q2 2009. Theadjusted EBITA margin was 1.6% in Q2 2009, compared to 4.0% in theprevious year.In the second quarter of 2009, revenues in the USA & Canada declinedby 29% in constant currency to EUR 543 million. As a result of thepositive contribution from the Human Capital Solutions business,EBITA declined by 6% in constant currency and the EBITA marginincreased by 130 bps to 5.3%.In Germany, second quarter revenues declined by 44% to EUR 229million. At the EBITA level, Germany posted a loss of EUR 3 million.This compares to an EBITA of EUR 44 million and a corresponding EBITAmargin of 10.8% in the same quarter last year. Lower utilisation,also due to fewer trading days, as well as certain one-time costs,negatively impacted the results in the period under review.In Q2 2009, Japan's revenues declined by 24% in constant currency toEUR 332 million. EBITA declined by 22% in constant currency and theEBITA margin was 8.2%, up 20 bps compared to Q2 2008. Excellent costmanagement and price discipline are the main reasons for the strongresult.In the UK & Ireland, revenues in Q2 2009 were down 31% in constantcurrency. In terms of EBITA, the region posted a small loss.Continued weak demand in Italy led to a revenue decline of 48% in Q22009. Italy recorded an EBITA of EUR 7 million, corresponding to anEBITA margin of 4.4%. Cost cutting measures executed in the previousquarter started to show positive effects. Revenues in the Beneluxdeclined by 20% or 27% organically, while in the Nordics, revenuesdeclined by 39% in constant currency and in Iberia by 42%.Emerging Markets revenues held up well, only declining by 2% inconstant currency. The EBITA margin was 3.2% in the period underreview, which resulted in an EBITA of EUR 9 million. Growth inconstant currency remained positive in Latin & Central America, NorthEast Asia and India.BUSINESS LINE PERFORMANCE(The pie charts are visible in the PDF version of the report)In the Office & Industrial business, Adecco's revenues in Q2 2009were EUR 2.6 billion, a decline of 38% in constant currency. Revenuesin the Industrial business declined by 41% in constant currency.Revenues were down by 37% in France, by 51% in Germany, by 53% inItaly and in the USA & Canada by 41% in constant currency. In theOffice business, revenues were down by 28% in constant currency.Japan's decline accelerated to minus 24% in constant currency, whilethe decline rate stabilized in the USA & Canada with revenues down28% and in the UK & Ireland where revenues were down 33%, both inconstant currency. In France, revenues declined by 32%.In the Professional Business[5] segment, revenues in Q2 2009 declinedby 15% in constant currency and by 18% on an organic basis. The grossmargin improved by 110 bps to 29.1%, driven by the Human CapitalSolutions business.In Information Technology (IT), Adecco's revenues decreased 10% inconstant currency and by 17% organically. In the USA & Canadarevenues in Q2 2009 were down 24% and in the UK & Ireland down 19%,both in constant currency. In France, revenues rose by 6%organically.Adecco's Engineering & Technical (E&T) business was down 29% inconstant currency. The USA & Canada faced a revenue decline of 25% inconstant currency, while revenues in Germany also declined by 25% inthe second quarter of 2009.In Finance & Legal (F&L), revenues declined by 33% in constantcurrency and by 37% on an organic basis. Weak demand in the USA &Canada was the main reason for the decline.In Q2 2009, revenues in Medical & Science (M&S) declined by 14% andin Sales, Marketing & Events (SM&E) by 12%, whereas revenues in HumanCapital Solutions (HCS) were up 36%, all in constant currency.Adecco agrees to make a recommended cash offer of 62 pence per sharefor Spring Group plcThe Adecco Group announces that it has today agreed to make arecommended public offer for the entire issued and to be issued sharecapital of Spring Group at 62 pence in cash per Spring Group share.Spring Group is a UK listed company, with sales of £517 million in2008 and a net cash position of £40 million at the end of 2008. Theacquisition will be structured as a UK scheme of arrangement ofSpring Group and the total consideration payable will beapproximately £108 million. Patrick De Maeseneire comments: "SpringGroup offers an excellent strategic fit and substantial synergypotential for Adecco in the UK staffing market. With thistransaction, Adecco will strengthen its position in the fragmented UKmarket and further increase its professional staffing exposure. Afterthe successful completion of the transaction, Adecco intends to offerthe current CEO of Spring Group, Peter Searle, the position ofcountry manager of the combined operations of Adecco UK & Ireland andSpring Group. With his significant operational expertise and proventrack record in the staffing industry, Peter will strengthen themanagement capabilities of Adecco in the UK & Ireland." Furtherinformation on this transaction is available athttp://www.adecco.com/InvestorRelations/Pages/Disclaimer2009Q2.aspxManagement outlookAlthough market conditions in the quarter under review continued tobe demanding, the sharp acceleration of the revenue decline rates,witnessed in the previous quarters, appears to have stabilised overthe course of the quarter and into July 2009 in most markets.Management continues to focus its efforts on further structurallyoptimising the cost base while sticking to its value-based strategy.This approach, combined with our strong balance sheet, position theAdecco Group well in the current environment and for the future.Looking ahead, management anticipates no material pick-up of businessactivities, and has therefore initiated further restructuringmeasures.Concretely, after the successful execution of the first social planat Adecco in France and the additional measures announced in June tofurther optimise the structural cost base and to reduce headcount byapproximately 350 employees (FTEs) at its subsidiary Adia, as well asadditional measures taken in Iberia, Adecco expects to incurapproximately EUR 40 million of restructuring costs in the secondhalf of 2009 for various countries. With these measures, the AdeccoGroup will have significantly improved its cost base bothstructurally and in alignment with the demanding market conditions.Financial Agenda 2009/2010* Q3 2009 results November 5, 2009* Q4/FY 2009 results March 3, 2010* Q1 2010 results May 6, 2010* Annual General Meeting May 11, 2010* Q2 2010 results August 11, 2010* Q3 2010 results November 9, 2010Forward-looking statementsInformation in this release may involve guidance, expectations,beliefs, plans, intentions or strategies regarding the future. Theseforward-looking statements involve risks and uncertainties. Allforward-looking statements included in this release are based oninformation 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 offuture performance and actual results could differ materially fromour current expectations. Numerous factors could cause or contributeto such differences. Factors that could affect the Company'sforward-looking statements include, among other things: global GDPtrends and the demand for temporary work; changes in regulation oftemporary work; intense competition in the markets in which theCompany competes; changes in the Company's ability to attract andretain qualified internal and external personnel or clients; thepotential impact of disruptions related to IT; any adversedevelopments in existing commercial relationships, disputes or legaland tax proceedings.About the Adecco GroupThe Adecco Group, based in Zurich, Switzerland, is the world'sleading provider of HR solutions. With over 29,000 FTE employees andmore than 5,800 offices, in over 60 countries and territories aroundthe world, Adecco Group offers a wide variety of services, connectingmore than 500,000 colleagues with over 100,000 clients every day. Theservices offered fall into the broad categories of temporarystaffing, permanent placement, outsourcing, consulting andoutplacement. The Adecco Group is a Fortune Global 500 company.Adecco S.A. is registered in Switzerland (ISIN: CH0012138605) withlistings on the SIX Swiss Exchange (ADEN) and on Euronext in France(ADE).There will be a media conference call at 9 am CET as well as ananalyst conference call at 11 am CET, details of which can be foundon our website in the Investor Relations section athttp://webcast.adecco.comAdecco Corporate Investor RelationsInvestor.relations(at)adecco.com or +41 (0) 44 878 89 89Adecco Corporate Press OfficePress.office(at)adecco.com or +41 (0) 44 878 87 87[1] Adjusted is a non US GAAP measure and excludes the negative SG&Aimpact associated with restructuring costs for headcount reductionsand branch optimisation of EUR 54 million in Q2 2009, as well as theimpact of the modified calculation of French social charges in 2005,which positively impacted Q2 2008 with EUR 61 million on gross profitand EUR 54 million on EBITA.[2] EBITA is a non US GAAP measure and refers to operating incomebefore amortisation and impairment of goodwill and intangible assets.[3] Organic growth is a non US GAAP measure and excludes the impactof currency, acquisitions and divestitures.[4] Net debt is a non US GAAP measure and comprises short-term andlong-term debt less cash and cash equivalents and short-terminvestments.[5] Professional business refers to Adecco's Information Technology,Engineering & Technical, Finance & Legal, Medical & Science, Sales,Marketing & Events and Human Capital Solutions business.The full report (in English) including tables can be downloaded fromthe following link:http://hugin.info/100102/R/1333796/316292.pdf --- End of Message ---Adecco SASagereistrasse 10 Glattbrugg SwitzerlandWKN: 922031; ISIN: CH0012138605; Index: SLCI, SMI, SPI, SMIEXP;Listed: Main Market in SIX Swiss Exchange;
Datum: 11.08.2009 - 07:00 Uhr
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