Adecco starts to see improvements in the revenue trend
(Thomson Reuters ONE) - Corporate news announcement processed and transmitted by Hugin AS.The issuer is solely responsible for the content of this announcement. ------------------------------------------------------------------------------------ Profitability significantly increased compared to the second quarterQ3 HIGHLIGHTS (Q3 2009 versus Q3 2008) * Revenues of EUR 3.7 billion, down 27% (-28% in constant currency) * Gross margin of 17.4% on an adjusted[1] basis, down 60 bps * Strong SG&A reduction of 22% adjusted[1] and in constant currency * Adjusted EBITA[2] margin at 3.4% * DSO improved by 6 days to 53 days in Q3 2009Key figures+-------------------------------------------------------------------+| | Q3 2009 | Q3 2009 | Q3 2009 | Q3 2009 || | reported | reported | | adjusted[1] || | | growth | adjusted[1] | in || in EUR | | | | constant || millions | | | | currency ||---------------+-----------+-----------+-------------+-------------|| Revenues | 3,718 | -27% | 3,718 | -28% ||---------------+-----------+-----------+-------------+-------------|| Gross profit | 658 | -28% | 647 | -31% ||---------------+-----------+-----------+-------------+-------------|| EBITA | 135 | -47% | 125 | -52% ||---------------+-----------+-----------+-------------+-------------|| Operating | 127 | -48% | | || income | | | | ||---------------+-----------+-----------+-------------+-------------|| Net income | | | | || attributable | 90 | -46% | | || to Adecco | | | | || shareholders | | | | |+-------------------------------------------------------------------+Zurich, Switzerland, November 5, 2009: Adecco Group, the worldwideleader in Human Resource services, today announced results for Q32009. Revenues declined by 28% in constant currency to EUR 3.7billion. The gross margin declined by 60 bps to 17.4% on an adjustedbasis. SG&A was reduced by 22% adjusted and in constant currency,resulting in an adjusted EBITA margin of 3.4%, up 100 bpssequentially. DSO improved by 6 days to 53 days in the third quarter.Patrick De Maeseneire, Chief Executive Officer of the Adecco Group,said: "Market conditions have improved during the third quarter,especially in general staffing, and we have seen a gradualimprovement of the revenue trend for the Adecco Group. Our efforts tostructurally optimise our operations have led to a clearly lower SG&Abase. The positive revenue trend and the reduction in costs haveresulted in an adjusted EBITA margin of 3.4%, a material sequentialincrease of 100 basis points. As in the past, we will act in a highlydisciplined way with regards to pricing and further optimise ourunderlying cost base".Q3 2009 FINANCIAL PERFORMANCERevenuesGroup revenues in Q3 2009 were down 27% to EUR 3.7 billion comparedto Q3 2008, or by 28% on a constant currency basis andorganically[3]. Permanent placement revenues amounted to EUR 40million in Q3 2009, a decline of 54% and outplacement revenuestotalled EUR 65 million, an increase of 31%, both in constantcurrency.Gross ProfitThe gross margin in Q3 2009 was at 17.7%, a decline of 30 bpscompared to the prior year. On an adjusted basis, the gross marginamounted to 17.4%, a decline of 60 bps versus Q3 2008. The negativeimpact on gross margin from the temporary staffing business and theweak permanent placement business was partially compensated by thepositive contribution of the outplacement business. As expected inthis phase of the economic cycle, the pricing environment in thetemporary staffing business became more challenging during thequarter under review. Adecco could limit the decrease in thetemporary staffing gross margin in Q3 2009 to 90 bps compared to theprior year.Selling, General and Administrative Expenses (SG&A)In Q3 2009, SG&A was reduced by 21% compared to Q3 2008. On anadjusted basis and in constant currency, SG&A declined by 22%compared to the prior year's period. Sequentially, SG&A declined by6% adjusted and in constant currency. Restructuring costs amounted toEUR 1 million in Q3 2009 (EUR 4 million for various countries, partlyoffset by EUR 3 million reversal of restructuring costs in France).FTE employees were reduced by 21% (-7,600) compared to Q3 2008, whilethe branch network was reduced by 15% (-1,000 branches). At the endof the third quarter of 2009, the Adecco Group operated a network ofmore than 5,700 offices and had over 28,000 FTE employees. FTEemployees at the end of Q3 2009 declined by 4% compared to the end ofthe second quarter of 2009.EBITAIn the period under review, EBITA declined by 47% to EUR 135 million,resulting in an EBITA margin of 3.6%, compared to 5.0% in the prioryear. The adjusted EBITA was EUR 125 million in the quarter underreview, a decline of 52% in constant currency. The adjusted EBITAmargin was 3.4% in Q3 2009, up 100 bps sequentially. The contributionof the counter-cyclical US Human Capital Solutions business to AdeccoGroup's adjusted EBITA amounted to 12% in the third quarter, comparedto 27% in Q2 2009.Amortisation of Intangible AssetsAmortisation of intangible assets amounted to EUR 8 million in thethird quarter of 2009 compared to EUR 10 million in Q3 2008.Operating IncomeIn Q3 2009, the Adecco Group reported operating income of EUR 127million, which compares to EUR 244 million in Q3 2008.Interest Expense and Other Income / (Expenses), netThe interest expense in the period under review amounted to EUR 17million, EUR 2 million higher than in Q3 2008. Other income /(expenses), net was an expense of EUR 1 million in Q3 2009 comparedto income of EUR 2 million in the third quarter of 2008. Interestexpense is expected to be slightly below EUR 60 million for the fullyear 2009.Provision for Income TaxesThe effective tax rate in Q3 2009 was 18% compared to 27% in Q3 2008.The effective tax rate in Q3 2009 was positively impacted by a changein the mix of earnings.Net Income attributable to Adecco shareholders and EPSNet income attributable to Adecco shareholders in Q3 2009 was down46% to EUR 90 million compared to EUR 168 million in Q3 2008. BasicEPS was EUR 0.52 (EUR 0.96 for Q3 2008).Cash flow, Net Debt[4] and DSOThe operating cash flow generated in the first nine months of 2009amounted to EUR 349 million compared to EUR 669 million in the sameperiod last year. The Company paid dividends of EUR 173 million,invested EUR 64 million in capital expenditure and deposited cash ofEUR 128 million for the Spring Group acquisition in an escrowaccount. Net debt at the end of September 2009 was EUR 702 millioncompared to EUR 617 million at year end 2008. DSO improved by 6 daysto 53 days in the third quarter of 2009.Currency ImpactIn Q3 2009, currency fluctuations had a positive impact ofapproximately 1% on revenues and EBITA.GEOGRAPHICAL PERFORMANCE(The pie charts are visible in the PDF version of the report)In France, revenues declined by 27% to EUR 1.3 billion in Q3 2009,following a decline of 34% in Q2 2009. Throughout the quarter, theCompany experienced an increase in demand in the automotive, chemicaland transport sectors. EBITA declined by 33% to EUR 47 million andwas positively impacted by EUR 14 million, primarily due to areassessment of existing accruals and a reversal of restructuringcosts. Adjusted EBITA declined by 53% to EUR 33 million in Q3 2009.The adjusted EBITA margin was 2.5% in Q3 2009, up 90 bpssequentially.In the USA & Canada, revenues and EBITA declined by 25% in constantcurrency, resulting in an EBITA margin of 4.4% despite the slowinggrowth rates encountered in the Human Capital Solutions business. TheHuman Capital Solutions business contributed 67% to EBITA in USA &Canada in Q3 2009, compared to 80% in Q2 2009.In Germany, Q3 2009 revenues decreased by 39% to EUR 247 million. Ona sequential basis, the German business significantly improvedprofitability with an EBITA of EUR 20 million, corresponding to anEBITA margin of 8.1%. Better bench management and cost cuttingmeasures positively contributed to this quarter's result.In Q3 2009, revenues in Japan amounted to EUR 298 million, a declineof 28% in constant currency. EBITA declined by 36% in constantcurrency and the EBITA margin was 6.7%, down 80 bps compared to Q32008. Japan was the only region besides the Emerging Markets toexperience a worsening in the revenue decline rate in the thirdquarter compared to the second quarter of this year, mainly due toour late cyclical clerical business. The efficient delivery model,strict cost management and price discipline again contributed to anexcellent EBITA margin.In the UK & Ireland, revenues in Q3 2009 were down 28% in constantcurrency. In terms of EBITA, the region was at break-even.In Italy, revenues declined by 43% in the third quarter of 2009.Italy reported an EBITA of EUR 5 million, corresponding to an EBITAmargin of 3.4%. Cost cutting measures initiated in previous quarterspositively contributed to this result. Revenues in the Beneluxdeclined by 18% or 24% organically, while in the Nordics, revenuesdeclined by 35% in constant currency and in Iberia by 33%.Emerging Markets continued to show resilience to the economicdownturn as revenues declined only 4% in constant currency. The EBITAmargin was 3.5% in Q3 2009, which resulted in an EBITA of EUR 10million.BUSINESS LINE PERFORMANCE(The pie charts are visible in the PDF version of the report)In Office & Industrial, Adecco's revenues in Q3 2009 were EUR 2.8billion, a decline of 32% in constant currency. In the Industrialbusiness, revenues declined by 34% in constant currency, following a41% fall in Q2 2009. The most pronounced improvement in theyear-on-year decline rate was experienced in Iberia, progressing fromminus 50% in Q2 2009 to minus 36% in Q3 2009. France improved fromminus 37% in Q2 2009 to minus 29% in Q3, whereas the USA & Canadaimproved from minus 41% in Q2 2009 to minus 33% in Q3 2009 inconstant currency. In the Office business, revenues declined by 28%in constant currency, posting the same decline rate as in Q2 2009.Revenues in Japan declined by 28%, having fallen 24% in Q2 2009,while the decline rate improved in the USA & Canada with revenuesdown 20%, following 28% in Q2 2009, all in constant currency. In theUK & Ireland, revenues were down 29% in constant currency. In France,revenues declined by 33%.In the Professional Business[5] segment, revenues in Q3 2009 declinedby 17% in constant currency and by 20% on an organic basis. The grossmargin increased by 10 bps to 27.8%, despite the weak permanentplacement business.In Information Technology (IT), Adecco's revenues decreased 14% inconstant currency and by 21% organically. In the USA & Canadarevenues in Q3 2009 were down 24% and in the UK & Ireland down 26%,both in constant currency. In France, revenues were flat.Adecco's Engineering & Technical (E&T) business was down 25% inconstant currency. The USA & Canada revenues declined by 22% inconstant currency, while revenues in Germany declined by 24% in thethird quarter of 2009.In Finance & Legal (F&L), revenues declined by 33% in constantcurrency and by 36% on an organic basis. Weak demand in the USA &Canada, where revenues declined 41% in constant currency, was themain reason for the decline.In Q3 2009, revenues in Medical & Science (M&S) declined by 13% andin Sales, Marketing & Events (SM&E) by 17%, whereas revenues in HumanCapital Solutions (HCS) were up 20%, all in constant currency.Management outlookThe Adecco Group has seen first signs of a demand pick-up in generalstaffing. In particular, the light industrial segment, noticeably inFrance and in the USA & Canada, improved during the third quartercompared to the low base of the second quarter.The year-on-year revenue decline rate adjusted for business daysimproved over the course of the third quarter of 2009, and the trendcontinued in October with an expected decline rate of 22%. This ismainly driven by a lower comparable base, but also thanks toimproving market conditions.The management team continues to focus its efforts on furtherstructurally optimising the cost base while sticking to itsvalue-based strategy. The recently announced acquisitions willsignificantly increase Adecco's exposure to the attractiveprofessional staffing market, thereby strengthening the Company'sprofitability profile in the mid-term.Adecco expects to incur approximately EUR 35 million of restructuringcosts in the fourth quarter of 2009 for various countries as part ofthe previously announced guidance of EUR 40 million for the secondhalf of 2009.Acquisition of MPS GroupOn October 20, 2009, Adecco announced the acquisition of MPS Group, aleading provider of professional staffing services, for an enterprisevalue of EUR 782 million, or USD 13.80 per share. This acquisitionwill significantly enhance Adecco's position in the professionalstaffing business, particularly in the USA & Canada and the UK.Adecco expects the transaction to be accretive on an adjusted EPS[6]basis in the first year and EVA[7] positive within three years. Thetransaction is expected to close in the first quarter of 2010,subject to shareholder and regulatory approval.Closing of the acquisition of Spring GroupAdecco announced the successful closing of the acquisition of SpringGroup on October 20, 2009. The integration of Spring Group hasrecently been initiated. Adecco expects to achieve annual synergiesof EUR 13 million from the integration of Spring Group within oneyear. Integration costs are expected to be equal to the targetedannual synergies and will be incurred in the first year following theclosing of the acquisition.Issuance of CHF 900 million mandatory convertible bond due 2012On October 20, 2009, Adecco placed a 3-year CHF 900 million mandatoryconvertible bond with a coupon of 6.5%, issued by Adecco Investment(Bermuda) Ltd, a wholly-owned subsidiary of Adecco S.A. The netproceeds of the offering will increase Adecco's financial flexibilityand strengthen its balance sheet in conjunction with the announcedacquisition of MPS Group. The reference share price and initialminimum conversion price of the bond will be CHF 50.50 and theinitial maximum conversion price will be CHF 60.60 (120% of thereference share price). On that basis the number of shares underlyingthe bond upon issue will be approximately in the range of 14.85million to 17.82 million shares. The shares underlying the bond willbe sourced from treasury shares and/or from conditional share capitalof Adecco S.A, at Adecco's election. Settlement of the bond isexpected to occur on November 26, 2009. The bond is intended to belisted and admitted to trading on the SIX Swiss Exchange (ISINXS0460347080).Forward-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 operates; integration of acquired companies; changes in theCompany's ability to attract and retain qualified internal andexternal personnel or clients; the potential impact of disruptionsrelated to IT; any adverse developments in existing commercialrelationships, disputes or legal and tax proceedings.About the Adecco GroupThe Adecco Group, based in Zurich, Switzerland, is the world'sleading provider of HR solutions. With over 28,000 FTE employees andmore than 5,700 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).Q3 2009 Results Conference CallsThere 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.comUK / Global + 44 (0)207 107 06 11United States + 1 866 291 41 66Cont. Europe + 41 (0)91 610 56 00Adecco 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 87Financial Agenda 2009/2010* 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, 2010[1] Adjusted is a non US GAAP measure and excludes the positiveimpact on gross profit of EUR 11 million in Q3 2009 due to favourabledevelopments which resulted in the reassessment of existing accrualsin France and the negative impact on SG&A of EUR 1 million in Q3 2009associated with restructuring costs for headcount reductions andbranch optimisation.[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.[6] Excluding amortisation and integration costs[7] Based on Adecco's cost of capitalThe full report (in English) including tables can be downloaded fromthe following link:http://hugin.info/100102/R/1352744/327401.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: 05.11.2009 - 07:00 Uhr
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