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Switzerland — Adecco confident of continued improvements in demand near term

06 May 2010
Adecco SA (ADEN:VTX), the world's largest Human Resource services group, today publishes interim results for the first quarter of 2010 ended 31 March.

Group revenues in Q1 2010 were up +7% to 4.0 billion Euro compared to Q1 2009. Organically, revenues declined by -1%. Permanent placement revenues amounted to 61 million Euro in Q1 2010, an increase of +17% in constant currency (-5% organically) and outplacement revenues totalled 63 million Euro, a decline of -26% in constant currency.

The gross margin in Q1 2010 was 18.0%, a decline of -50 bps compared to the prior year, and down -130 bps when adjusting for the new French business tax law, effective as of January 2010 and excluding acquisitions, which added 40 bps to the Group's gross margin in Q1 2010. The temporary staffing business had a negative impact of 70 bps on the gross margin in Q1 2010 and the outplacement business negatively impacted the gross margin by 60 bps. The impact on gross margin from the permanent placement business was neutral in Q1 2010.

In Q1 2010, selling, general and administrative expenses (SG&A) declined by -7% compared to Q1 2009. Showing good cost control, on an adjusted organic basis, SG&A was reduced by -11% compared to the prior year's period. Integration costs amounted to 5 million Euro in Q1 2010.

Corporate costs were negatively impacted by 6 million Euro acquisition related expenses. Organically, FTE employees were reduced by -15% (-4,800) compared to the first quarter of 2009, while the branch network was reduced by -13% (-790 branches). At the end of Q1 2010, the Adecco Group operated a network of more than 5,500 offices and had over 31,000 FTE employees (2,700 FTE employees added from the MPS Group).

In the period under review, EBITA increased by +162% to 113 million Euro, resulting in an EBITA margin of 2.8%, compared to 1.2% in the prior year. On an adjusted organic basis, EBITA increased by +13% in the quarter under review. The EBITA margin was up +30 bps in Q1 2010 when compared to the adjusted Q1 2009 EBITA margin of 2.5%.

In Q1 2010, the Adecco Group reported operating income of 100 million Euro. Operating income was 30 million Euro in Q1 2009.

In France, revenues increased by +6% to 1.2 billion Euro in Q1 2010 mainly driven by automotive, chemicals and heavy industrials. This compares to a revenue decline rate of -13% in Q4 2009. EBITA amounted to 32 million Euro in the quarter under review, an increase of +43% on an adjusted organic basis. The EBITA margin was 2.7% in Q1 2010, up +70 bps compared to the adjusted prior year's first quarter. The impact on Q1 2010 EBITA due to the new business tax in France, amounted to 15 million Euro in Q1 2010.

In the UK & Ireland, revenues in Q1 2010 increased by +55% in constant currency compared to Q1 2009, but declined by -9% organically. Adecco saw improving trends in the financial, healthcare and automotive sectors although compared to Continental Europe, the UK is lagging. At the EBITA level, the region posted a profit of 2 million Euro. Integration costs relating to MPS and Spring amounted to 2 million Euro in the quarter under review.

In Germany & Austria, Q1 2010 revenues decreased by -4% to 263 million Euro. EBITA in Germany & Austria increased by +269% and the Q1 2010 EBITA margin improved significantly to 5.1% compared to 1.3% in Q1 2009. In March, the industrial staffing business grew at a double-digit rate.

In Benelux revenues declined by -2% (-6% organically), while in Italy revenues increased by +1% in the first quarter of 2010. In Q1 2010, revenues in the Nordics declined by -6% in constant currency, while in Spain and Portugal revenues returned to year-on-year growth of +4%.

Emerging Markets posted strong growth in Q1 2010 with revenues up +19% in constant currency, driven by Eastern Europe and India. EBITA was up +52% in constant currency, while the EBITA margin increased by +60 bps to +2.7%.

In Q1 2010, Adecco's revenues in the Office & Industrial businesses were 2.7 billion Euro, flat in constant currency and down -1% on an organic basis. In the Industrial business, revenues were up +5% in constant currency, following a -19% decline in constant currency in Q4 2009. The improvements of the growth rates were most pronounced in North America, where the year-on-year revenue trend improved from -14% in Q4 2009 to +13% in Q1 2010 in constant currency, in France from -14% to +9%, in Germany & Austria from -34% to -1% and in Italy from -31% to +1%. In the Office business, revenues declined by -11% in constant currency (-12% organically), a further improvement compared to the fourth quarter of 2009, where revenues declined by -22% in constant currency.

The Professional Business revenues in Q1 2010 increased by +29% in constant currency (-7% organically). The gross margin declined by -480 bps to 25.3%, mainly driven by the slowing outplacement business.

In Information Technology (IT), Adecco's revenues increased by +51% in constant currency (-7% organically). In North America, revenues in Q1 2010 were up by +55% (-7% organically) and in the UK & Ireland revenues were up by +160% (+1% organically), all in constant currency.

Adecco's Engineering & Technical (E&T) business was up by +20% in constant currency (-1% organically). In Germany E&T revenues declined by -8% in the first quarter of 2010.

In Finance & Legal (F&L), revenues increased by +58% in constant currency (-10% organically).

In Q1 2010, revenues in Medical & Science (M&S) increased by +27% (-4% organically), whereas in Sales, Marketing & Events (SM&E) revenues declined by -5% (-8% organically), both in constant currency., Revenues in Human Capital Solutions (HCS) declined by -19%, in constant currency.

Patrick De Maeseneire, Chief Executive Officer of the Adecco Group, said "in the first quarter of 2010, trading conditions improved significantly in most markets and the revenue decline rate for the Group improved to -1% organically from -18% in Q4 2009. We saw very good demand progression primarily in the general staffing segment in our main markets France and North America, where revenues returned to year-on-year growth in Q1 2010."

"Pricing remained competitive, but we maintained our discipline and were able to achieve a gross margin of 18.0%, also thanks to our increased exposure to professional staffing."

"Looking into the second quarter, we continue to see good revenue developments in the majority of our markets. We will continue our strong cost control, which together with our disciplined pricing, position us very well to take full advantage of the improving economic conditions."

The group says further in a statement "the revenue momentum steadily improved throughout the first quarter of 2010 and this positive trend continued into April. Revenues in March for the Group increased approximately by +3%, organically and adjusted for business days."

"Current developments in the industry clearly point to further revenue acceleration and management is confident of continued improvements in demand near term. At the same time, strict pricing and cost control remains at the forefront of management's priorities, while selective investments in high-growth segments or markets are carefully evaluated. The integration of Spring and MPS is well on track and management is confident to achieve the targeted synergies."

"The structural cost reductions in the recent downturn, resulted in a leaner branch network and optimised delivery channels. With the recent acquisitions, the higher margin professional staffing exposure increased from 21% to 26% of revenues compared to the prior year, whereas MPS was only consolidated for two months in Q1 2010."

"Consequently, Adecco is very well positioned for attractive operating leverage in the quarters to come, and management is fully committed to its mid-term EBITA margin target of over 5.5%."

In early trading Adecco's shares were down by -1.71% to 60.25 Swiss Francs.

 

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