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Switzerland – Adecco sees slower growth in Q4 2011

01 March 2012

The world’s largest staffing firm, Adecco SA (ADEN:VTX), today announced that annual group revenues for 2011 amounted €20.5 billion, an increase of +10% organically compared to the €18.7 billion the firm made in the prior year.

Permanent placement revenues in the year were €344 million, an increase of +18% organically, while revenues from the outplacement business fell -16% organicaly, totalling €206 million.

In 2011, EBITA increased by +14% organically to €814 million (Q4 2010: €722 million) while the EBITA margin was up 10 basis points (bps) to 4.0%, compared to the 3.9% in the same quarter last year.

In Q4 2011, revenues increased organically by +3% to €5.2 billion from €5 billion in Q4 2010.

In Q4 2011, gross profit amounted to €930 million and the gross margin was 17.9%, flat compared to Q4 2010. The temporary staffing business had a negative impact on the gross margin of 40 bps in Q4 2011 while permanent placement had a positive impact of 10 bps on the quarterly gross margin. The impact was 30 bps from the outplacement and sequentially, the gross margin was up 70 bps.

Selling, General and Administrative Expenses (SG&A) in Q4 2011 increased +4% in Euro and +1% organically, amounting to €713 million when compared to Q4 2010. Sequentially, SG&A was flat on an organic basis and when excluding integration costs. Organically, FTE employees increased by +3% when compared to the fourth quarter of 2010. Sequentially, the number of FTE employees organically was unchanged. The branch network expanded, on an organic basis, by +1% (+65 branches) compared with Q4 2010.

In Q4 2011, EBITA was €217 million, up 3% organically, compared with €211 million in the fourth quarter of 2010. The Q4 2011 EBITA margin remained flat at 4.2%.  

Global performance in Q4 2011

"Within Europe, revenue growth in Germany & Austria remained double-digit in January 2012. Most other countries slowed further going into the new year," the company said.

However, revenues in France remained flat and amounted to €1.5 billion. Revenues were also flat in the industrial staffing segment, still running against a high comparison base and further slowing from the 7% growth rate in Q3 2011, while professional staffing continued to grow double-digit. Permanent placement revenues were up +22%. EBITA was €62 million compared to €57 million in Q4 2010. The EBITA margin was 4.3% in Q4 2011, up 40 bps compared to Q4 2010. In renegotiating client contracts, the firm recovered around 90% of the negative impact from the payroll tax subsidy cut for the full year 2011, ahead of initial expectations, so that the negative impact on the FY 2011 French gross margin was less than 10 bps.

The firm also announced that it plans to combine its two main brands in France, Adecco and Adia under one roof, a move that will cut around 530 full-time posts out of 6,300 in the country. The company expects to invest approximately €45 million to complete this initiative, the majority of which would be incurred during the second half of 2012.

In Germany & Austria the company reported that growth was ahead of the market. Revenues increased by +14% to €393 million, or by +17% when adjusted for the fewer working days in Q4 2011. The industrial staffing business continued to grow at double-digit rates. The office segment grew +3% and professional staffing was up +15% year-on-year. EBITA amounted to €22 million and the EBITA margin was 5.6%, as anticipated. The firm noted that salary increases, in accordance with the collective wage agreement and effective as of November 2011, impacted profitability in Q4 2011 due to the time lag of renegotiating client contracts. This, however, should no longer have a negative impact in Q1 2012.

In the firm’s home market, Switzerland, revenues declined by -4% in Q4 2011 in constant currency, while the EBITA margin remained at 13.1%.

In the UK & Ireland, markets which the firm called “challenging”, revenues were surprisingly up +13% in constant currency amounting to €466 million, driven mainly by new client wins. Permanent placement revenues were up +5% in constant currency. EBITA was €5 million in the quarter and the EBITA margin was 1.2%, up 10 bps compared to Q4 2010.

In Q4 2011, revenues in the Benelux countries decreased by -1% as revenue development was slightly behind the market in the Netherlands, but ahead of the market in Belgium. The EBITA margin was 4.4% in the quarter.

Revenue growth in Italy slowed to 4% in Q4 2011, comparing against a quarter with very strong growth in 2010 of 35%. Demand was also impacted by the economic uncertainties in the country. Italy achieved an EBITA margin of 4.0% in Q4 2011, down 90 bps year-on-year.

In Iberia, one of the struggling markets, revenues declined by -8% as economic conditions in the region remained difficult.

Revenues in the Nordic countries were also down -4% in constant currency although revenue growth in Sweden was still positive in Q4 2011, while revenues in Norway declined year-on-year, both in constant currency. The EBITA margin in Q4 2011 was 3.9%.

In North America, Adecco generated revenues of €917 million, flat in constant currency compared to Q4 2010 when the firm had revenues of €953 million. General staffing revenues grew by +2% in constant currency. Professional staffing revenues declined by -2% year-on-year, held back by the IT staffing business and with the Engineering & Technical segment comparing against very strong growth in Q4 2010 (Q4 2010 +36% organically vs. Q4 2011 -1% in constant currency). EBITA was up +21% in constant currency to €48 million. The EBITA margin was 5.2%, up 90 bps compared to Q4 2010.

In Japan, where the firm earlier this year acquired VSN Inc, a provider of professional staffing services, revenues increased by +5% in constant currency to €374 million. The EBITA margin was 5.6%, up 60 bps when compared to Q4 2010. The firm said it continued to benefit from outsourcing contracts won in 2010 and 2011 while the recent acquisition of VSN Inc also increases its exposure to professional staffing in the country.

The Group also reported that revenues in Australia & New Zealand were up +4% in constant currency this quarter with a very solid EBITA margin of 4.3%, up 160 bps compared to Q4 2010.

Emerging Markets continued to deliver very strong revenue growth of 21% in constant currency. The EBITA margin was 4.1%, up 80 bps compared to the prior year.

The firm saw a +3% increase (in constant currency) of revenues in its General Staffing business (Office & Industrial) to €4 billion. Revenues in the Industrial business were up +2% in constant currency. The firm said that revenue growth in Germany & Austria remained strong, up +15% year-on-year. In France revenues were flat in Q4 2011 and Italy slowed to 4%, after several quarters of strong double-digit revenue growth. Revenues in North America declined by -6% in constant currency. In the Office business, revenues increased +5% in constant currency. In Japan revenues were also up +5% and in North America revenues increased by +12%, both in constant currency. However, in the UK & Ireland revenues were down -2% and in the Nordics down -9%, both in constant currency. Revenues in France declined by -8%.

Professional Staffing revenues in the fourth quarter increased +4% in constant currency. Germany & Austria and France continued to deliver double-digit revenue growth. Also, UK & Ireland grew double-digit in constant currency in Q4 2011, mainly driven by good developments in IT. Revenues in North America declined by -2% in constant currency.

In Information Technology, revenues increased +8% in constant currency. In North America, revenues declined by -8% in constant currency. On the other hand, revenues in the UK & Ireland developed strongly, increasing double-digit in constant currency, driven by a few larger project wins.

The firm’s Engineering & Technical business was up +2% in constant currency. Growth continued to be solid in Germany & Austria and France with revenues up +11% and +18% respectively. In North America, revenues declined by -1% year-on-year, compared to a very strong fourth quarter last year, where revenues increased by +36% organically.

In Finance & Legal, revenues were down -1% in constant currency. Revenues in North America increased by +5%, while business in the UK & Ireland remained difficult, resulting in a revenue decline in Q4 2011 of 11%, all in constant currency.

Revenues in Medical & Science were flat in constant currency.

Patrick De Maeseneire, CEO of the Adecco Group said: “In 2011 we achieved double-digit organic revenue growth for the second consecutive year. General staffing, especially the industrial segment, continued to lead growth, while professional staffing growth remained moderate.”

“Geographically, Germany & Austria, Italy and Emerging markets all grew strongly double-digit. France grew 10% and North America was up 8% organically. Japan and Benelux grew slower, but performed better than the market. UK & Ireland and Iberia were clearly more challenging markets, with the latter facing declining revenues in the second half of 2011.”

“With unemployment at high levels, scope for price increases was limited, and the gross margin was impacted by the business mix. Nevertheless, we continued to be disciplined and kept costs under tight control, leading to solid EBITA growth of 14% organically and an EBITA margin of 4.1% before integration costs.”

Looking ahead, he said that the firm continued “to watch developments carefully and keep enhancing our profitability. In current times, our clients need flexibility and we have the right offering for them. With the good results achieved in 2011, continued price discipline and strict cost management, we are on track to reach our 5.5% EBITA margin target, midterm.” The company reported that year-on-year revenue growth continued to soften during Q4 2011, albeit compared against a strong fourth quarter in 2010. In January 2012 revenues were down -1% compared to the prior year, on an organic basis and adjusted for trading days. While revenue growth in Germany & Austria remained double-digit in January 2012, most other countries slowed further going into the new year. In North America, revenues were up slightly year-on-year in January 2012, adjusted for trading days, while revenue growth in the Emerging markets continued to be healthy.

Aside from the investment planned to integrate its French brands, the company also expects additional costs of €10 million in the first half of 2012 to further optimize its cost base in European countries and to protect profitability.

Adecco SA is a Swiss provider of human resource services, including temporary staffing, outsourcing, permanent placement, outsourcing, outplacement and career management, training and consulting. The firm is one of the Big Three staffing firms in the world as analysed in Staffing Industry Analysts research operating in more than 60 countries.

Following the announcement of Adecco’s financial results, in early trading the firm’s shares were up +6.84% at CHF48.44 helped by a proposed dividend of CHF1.80 per share for 2011 (up 64% from the dividend paid for 2010). This is down -22% from a year ago but +51.47% above the 52- week low of CHF31.98 set on 5 September 2011. This values the company at CHF8.64 billion.  


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