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The world’s largest recruitment firm, Adecco (ADEN: VX) reported revenue for the fourth quarter ending 31 December 2013 of €5 billion, a rise of +4% in constant currency compared with Q4 2012. Gross profit increased organically by +7%, year-on-year during Q4, reaching €913 million.
Adecco achieved an operating income of €210 million during the quarter, a year-on-year rise of +66% in constant currency from €136 million in 2012.
On an annual basis, the company reported revenue for 2013 of €19.5 billion, a fall of -2% in constant currency compared with last year. Gross profit for the period remained static, year-on-year, at €3.6 billion, while operating income rose organically by +21% to €779 million.
According to Staffing Industry Analyst estimates, Adecco’s 2013 annual revenue means that it was responsible for 6.3% of global staffing spend. While its revenue growth of +4% in Q4 outperformed its closest rivals, Randstad and ManpowerGroup, on an annual basis there was very little difference in revenue performance among the three companies with each experiencing a small organic decline.
Patrick De Maeseneire, CEO of the Adecco Group, said: “Last year began with much uncertainty, especially in Europe, but nonetheless we were cautiously optimistic. The 2013 results confirmed our view, with a gradual improvement during the course of the year. In Q1 2013, all our regions in continental Europe saw revenues decline in constant currency; in Q4 2013, Europe grew by +5% and we delivered particularly good growth in Benelux, Iberia, Germany & Austria and Italy.”
“In 2013, we significantly improved our profitability in France, helped by cost efficiencies, the impact of CICE (competitive employment tax credit) and our disciplined approach to pricing. In North America we achieved strong results, with solid revenue growth and good profitability. The Emerging Markets continued to grow well, accelerating during the year.”
“For the Group, our performance in Q4 2013 was especially pleasing: we returned to revenue growth of +4% and delivered +30% growth in EBITA excluding restructuring costs, both in constant currency. This strong operating leverage is a key priority for the Group and we continue to be very focused on reaching our EBITA margin target of above 5.5% in 2015. Based on the good progress on our six strategic priorities, recent trends and more favourable economic conditions expected going forward, we remain convinced we will achieve this target,” Mr De Maeseneire added.
In France, revenue in Q4 2013 of €1.2 billion was flat year-on-year. Permanent placement revenues were down by -1%. EBITA was €63 million, which includes restructuring costs of €10 million.
In North America, revenue in Q4 was €928 million, up by +3% in constant currency. General Staffing revenues grew by +4%, while Professional Staffing revenues grew by +2%, all in constant currency. Permanent placement revenues continued to develop well, up by +17% in constant currency. EBITA was €45 million which includes restructuring costs of €2 million.
In the UK & Ireland, revenue in Q4 was €501 million, up by +7% in constant currency. Permanent placement revenues were up by +2% in constant currency. EBITA was €11 million, impacted by restructuring costs of €2 million.
In Germany & Austria, revenue in Q4 2013 was €425 million, up by +10%. Growth was driven by General Staffing, which increased by +13% and included good growth in the automotive sector. In Q4 2013, a new collective wage agreement took effect from 1 November, leading to higher payments during vacation and sickness, and salary increases as of January 2014. This negatively impacted profitability in Q4 2013.
In Japan, revenue in Q4 was €270 million, down by -3% in constant currency. Revenues in Office, Adecco’s largest segment in the region, declined by -5% in constant currency, partially offset by growth in the smaller IT and Engineering & Technical businesses. Despite the revenue decline, profitability was again strong.
In Italy, revenue in Q4 was up +9%, helped by strong growth in the manufacturing sector. In the Benelux countries, revenues increased by +12%, with especially strong performances in the Netherlands and Luxembourg.
In the Nordics, Q4 revenues were up +1% in constant currency. Markets remained challenging but the company returned to growth in Sweden and saw continued strong growth in Denmark. EBITA of €5 million was impacted by restructuring costs of €1 million.
In Iberia, revenues were up in Q4 by +10%, driven by strong double-digit growth in the manufacturing and automotive sectors. EBITA of €5 million was impacted by restructuring costs of EUR 2 million.
In Switzerland, revenues were flat in constant currency and profitability continued to be strong, with an EBITA margin of 9.6% compared to 9.7% in Q4 2012.
In Australia & New Zealand, revenues fell by -22% in constant currency. This resulted in significant deleveraging and weak profitability.
In the Emerging Markets, revenue growth was +11% in constant currency, with the strong growth in Eastern Europe further accelerating.
Revenues of LHH, Adecco’s Career Transition and Talent Development business, were up by +12% in constant currency, helped by continued market share gains.
By business sector, in Adecco’s General Staffing business (Office & Industrial), Q4 revenues were €3.7 billion, up +4% in constant currency. In the Industrial business, revenues increased by +6% in constant currency. In France, revenues were flat, while growth of +14% was reported in Germany & Austria and 11% growth was reported in Italy. North America revenues grew by +14% in constant currency. In the Office business, revenues were up +1% in constant currency. Revenues grew by +12% in Emerging Markets and by +4% in the UK & Ireland, both in constant currency. Revenues were down by -5% in Japan, down -6% in North America and down -3% in the Nordics, all in constant currency.
Professional Staffing, Q4 revenues were €1.1 billion, up +2% in constant currency. Revenues in North America were up +2%, in the UK & Ireland up +7% and in Japan up +7%, all in constant currency. Revenues were flat in France and fell by -4% in Germany & Austria.
In Information Technology (IT), Q4 revenues increased by +5% in constant currency. In North America, revenues grew by +5%, driven by the US IT Professional Staffing business, which grew by +8%, both in constant currency. Revenues in the UK & Ireland were up +10% in constant currency.
Adecco’s Engineering & Technical (E&T) business reported Q4 revenue growth of +2% in constant currency. In North America, revenues were up by +2% in constant currency and in France revenues rose by +33%. In Germany & Austria revenues declined by -2%, while in the UK & Ireland revenues fell by -22% in constant currency.
In Finance & Legal (F&L), Q4 revenues rose by +2% in constant currency. Revenues in North America were flat while in the UK & Ireland revenues grew by +7%, both in constant currency.
Medical & Science (M&S) Q4 revenues were down -8% in constant currency. North America declined by -1% and the Nordics declined by -11%, both in constant currency, while revenues in France fell most substantially, down by -20%.
Adecco’s Solutions business continued to perform well, with +16% Q4 revenue growth in constant currency. Revenue growth in MSP (Managed Service Programmes) and VMS (Vendor Management System) continued to be strong double-digit in constant currency.
Looking forward, Adecco’s management team is confident that most European economies have begun to recover: “In Q4 2013, we saw a strong pick-up in our early-cyclical Industrial business, driven by double-digit growth in the manufacturing sector. We expect demand for flexible labour to continue to increase in 2014. Revenue growth in constant currency and adjusted for trading days was +5% for January and February, with revenue trends across all major geographies similar to Q4 2013.”
“Given these trends, we maintain our price discipline and cost control. In 2014, we expect to incur restructuring costs of approximately €20 million for the move to a single headquarters in North America and several smaller projects in other countries. At the same time, we will continue to invest in organic growth opportunities and the consolidation of our IT platforms, whilst focusing on our strategic priorities.”
“We continue to be very focused on reaching our EBITA margin target of above 5.5% in 2015. Based on the good progress on our six strategic priorities, recent trends and more favourable economic conditions expected going forward, we remain convinced we will achieve this target,” the management team’s statement concluded.
In trading today, the company’s share price reacted positively to the results and rose by +4.8% to CHF 78.80 (€64.69), an increase of +49.6% compared with a year ago. Based on its current share price, the company has a market value of CHF 14.9 billion (€12.2 billion).