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Switzerland – Adecco sees strong growth and strict cost control

03 March 2011

Revenues were up by +26% (+12% organically) to 18.7 billion Euro at Adecco SA (ADEN:VTX), the world's largest Human Resources services group.

Permanent placement revenues amounted to 288 million Euro, an increase of +58% in constant currency (+24% organically), while outplacement revenues totalled 223 million Euro, a decline of -28% in constant currency.

In 2010, EBITA amounted to 722 million Euro, an increase of +142% and up by +34% adjusted and organically compared to 2009. The EBITA margin was 3.9% compared to 2.0% in the prior year. EBITA before integration costs was 755 million Euro and the margin was 4.1%, up 100 basis points (bps) compared to the adjusted EBITA margin of 3.1% in the prior year.

In Q4 2010 revenues were 5.0 billion Euro, an increase of +32% compared to Q4 2009. Organically, revenues were up +17%. Permanent placement revenues amounted to 75 million Euro, an increase of +77% in constant currency (+44% organically), while outplacement revenues totalled 50 million Euro, a decline of -24% in constant currency.

In Q4 2010, the gross margin was 17.9%, up +30 bps compared to the prior year's fourth quarter and down -50 bps organically and adjusted. The temporary staffing business had a negative impact on the gross margin of -30 bps in Q4 2010. The outplacement business negatively impacted the gross margin by 40 bps, whereas the permanent placement business had a positive impact of +20 bps in Q4 2010.

Selling, General and Administrative Expenses (SG&A) in Q4 2010 increased by +19% compared to Q4 2009. Integration costs totalled 12 million Euro in Q4 2010. Organically and adjusted and before integration costs, SG&A was up +4%, compared to the same period last year, and increased +4% sequentially in constant currency. Organically, FTE employees increased by +3%, compared to the fourth quarter of 2009. Sequentially, FTE employees increased by +1%, mainly due to hirings in the Emerging Markets and North America. The branch network, on an organic basis, was reduced by -5% (-280 branches) compared with the fourth quarter of 2009.

In the period under review, EBITA was 211 million Euro compared with 89 million Euro reported in the fourth quarter of 2009. The Q4 2010 EBITA margin was 4.2% compared to 2.3% in the prior year. EBITA before integration costs was 223 million Euro and the margin was 4.5%, up 110 bps in Q4 2010 when compared to the adjusted Q4 2009 EBITA margin of 3.4%.

Amortisation in Q4 2010 was 14 million Euro compared to 8 million Euro in Q4 2009.

In Q4 2010, operating income was 197 million Euro. This compares to 81 million Euro in the fourth quarter of 2009.

The interest expense amounted to 15 million Euro in the period under review, 1 million Euro higher than in Q4 2009. Other income/(expenses), net was an expense of 1 million Euro in Q4 2010 compared to an expense of 4 million Euro in the fourth quarter of 2009.

In Q4 2010, currency fluctuations had a positive impact of approximately +6% on revenues.

Revenues in France increased by +19% to 1.5 billion Euro in Q4 2010. Growth in the industrial staffing segment remained strong. EBITA was 60 million Euro in the quarter under review compared to 36 million Euro in Q4 2009. On an adjusted basis EBITA increased by +20% in Q4 2010 year-on-year. The EBITA margin was 4.0% in Q4 2010, equal to the adjusted EBITA margin in Q4 2009.

In North America, Adecco's revenues increased by +54% in constant currency to 953 million Euro in Q4 2010. Organically, revenues were up +18%. Excluding the outplacement business, revenues in North America were up +21% on an organic basis. While revenues in the outplacement business remained weak, the EBITA margin was strongly double-digit. General staffing revenues grew by +25% organically, while professional staffing, excluding the counter-cyclical outplacement business, generated solid organic double-digit revenue growth.

EBITA was up +89% in constant currency and up +9% organically and adjusted. Integration costs related to MPS amounted to 8 million Euro in Q4 2010. The EBITA margin in Q4 2010 was 5.1%. Acquisitions added 50 bps to the EBITA margin in Q4 2010.

In the UK & Ireland, revenues in Q4 2010 increased +41% in constant currency to 411 million Euro. Organically revenues declined by -1%. EBITA was 4 million Euro in the quarter under review and the EBITA margin was 1.1%. Integration costs related to MPS amounted to 4 million Euro in Q4 2010.

In Japan, fourth quarter revenues declined by -4% in constant currency to 336 million Euro. EBITA declined by -23% in constant currency and the EBITA margin was 5.0%, impacted by ramp up costs related to outsourcing contracts. Business in the later cyclical office segment, accounting for close to 80% of Adecco's revenues in Japan, remained slow.

In Germany & Austria, Q4 2010 revenues were up +33% (+32% organically) to 347 million Euro. The strong growth continued to be driven by the industrial staffing business. Growth in the office segment and in the professional staffing business was also double-digit. Germany & Austria generated EBITA of 26 million Euro in Q4 2010 compared to 12 million Euro in Q4 2009. The EBITA margin improved strongly year-on-year to +7.4%, up +200 bps compared to the adjusted EBITA margin of 5.4% in Q4 2009.

In Q4 2010, revenues in:

Benelux increased by +19% (+16% organically).

Italy was up +35%.

Portugal and Spain increased by +11%.

Nordic countries increased by +23% in constant currency.

Emerging Markets continued to develop strongly in Q4 2010 with revenues up +20% in constant currency, mainly driven by Eastern Europe and India. EBITA was up +38% in constant currency, while the EBITA margin was +3.3%.

In Q4 2010, Adecco's revenues in the Office and Industrial businesses increased by 19% in constant currency (+18% organically) to 3.4 billion Euro.

The Industrial business continued to be strong with revenues up +25% in constant currency, following an increase of +24% in Q3 2010. Growth remained strong in North America with revenues up +30% year-on-year in constant currency.

In Germany & Austria revenue growth even accelerated from +39% in Q3 2010 to +43% in Q4 2010 and in Italy from +40% in Q3 2010 to +43% in Q4 2010.

In France revenues grew +21% in Q4 2010, the same year-on-year growth rate as in Q3 2010, despite a tougher base.

In the Office business, revenues increased +7% in constant currency (+6% organically). This compares to +3% organic revenue growth in Q3 2010.

Revenues in Japan decreased by -5% in constant currency in Q4 2010, following a -6% constant currency decline in Q3 2010.

Revenues in North America, on the other hand, increased by +23% in constant currency (+19% organically) in Q4 2010 after 19% constant currency growth (+14% organically) in Q3 2010. Growth in the Nordic countries continued to be strong with revenues up +25% in constant currency in Q4 2010.

The Professional Staffing revenues in the fourth quarter of 2010 increased +53% in constant currency and by +10% on an organic basis. The gross margin declined by +160 bps to +24.8%, due to the slowing outplacement business.

In Information Technology (IT), Adecco's revenues increased +65% in constant currency (+12% organically). In North America revenues were up +105% in constant currency (-5% organically). The new lead brand Modis grew +12% in North America. Revenues in the UK & Ireland increased by +81% in constant currency (+21% organically).

Adecco's Engineering & Technical (E&T) business was up +54% in constant currency (+22% organically). Revenue growth continued to be very strong in North America with revenues up +92% in constant currency (+36% organically), while revenues in Germany & Austria increased by +16% in the fourth quarter of 2010.

In Finance & Legal (F&L), revenues increased by +129% in constant currency (+11% organically). Revenues in North America increased by +127% in constant currency and were up +5% organically.

In Q4 2010, revenues in Medical & Science (M&S) increased by +50% (+10% organically), whereas in Sales, Marketing & Events (SM&E) revenues were up +8% (+5% organically), both in constant currency. In the quarter under review, revenues in Human Capital Solutions (HCS) declined by -22% in constant currency.

Patrick De Maeseneire, CEO of the Adecco Group, said "2010 was a good year for Adecco. Most markets returned to strong double-digit revenue growth during the year. The growth was mainly driven by the industrial staffing segment, and also the later cyclical office and professional staffing segments returned to growth."

"Our discipline in pricing and cost control led to a strong increase in EBITA of 40%, on an organic adjusted basis, and before integration costs. Coming out of the downturn, our customers clearly value flexibility more than in the past and see it as a strategic component of their labour force. We therefore strongly believe that penetration rates of flexible labour will surpass the previous peaks of 2007 and 2008."

"We will continue to take advantage of the good business conditions, while managing our cost base diligently. This, together with the good results achieved in 2010, puts us in a good shape to achieve our mid-term EBITA margin target of over 5.5%."

In early trading Adecco's shares were up by +4.94% to 64.75 Swiss Francs.

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