Adecco reports strong results for 2010


Adecco reports strong results for 2010
Double-digit revenue growth and strict cost control resulted in strong operating leverage
 
FY 2010 HIGHLIGHTS (2010 versus 2009)
• Revenues of EUR 18.7 billion, up 26% (12% organically1)
• Gross margin at 17.8%, down 10 bps (-90 bps organically and on an adjusted2 basis)
• SG&A was flat on an organic and adjusted basis, driven by strict cost control
• EBITA3 margin before integration costs at 4.1%, up 100 bps on an adjusted basis
• DSO at 54 days in 2010 compared to 53 days in 2009
• Proposed dividend of CHF 1.10 per share
 
Q4 HIGHLIGHTS (Q4 2010 versus Q4 2009)
• Revenues of EUR 5.0 billion, up 32% (17% organically)
• Gross margin of 17.9%, up 30 bps (-50 bps organically and adjusted)
• SG&A increased by 19% (before integration costs +4%, organically and adjusted)
• EBITA before integration costs of EUR 223 million (+51% organically and adjusted)
• EBITA margin before integration costs at 4.5%, up 110 bps on an adjusted basis
 
Zurich, Switzerland, March, 2011: Adecco Group, the worldwide leader in Human Resource services, today announced results for the full year and the fourth quarter of 2010. Revenues in 2010 were up 26% or 12% organically, to EUR 18.7 billion. The gross margin was 17.8%, 10 bps lower than the prior year and down 90 bps organically and adjusted. Strict cost control kept SG&A flat on an organic and
adjusted basis. The 2010 EBITA margin before integration costs was 4.1%, up 100 bps compared to the 2009 adjusted EBITA margin of 3.1%. DSO were 54 days in 2010 compared to 53 days in 2009. 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%.”
 
FY 2010 FINANCIAL PERFORMANCE
Revenues
Group revenues for 2010 were EUR 18.7 billion, an increase of 26% compared to the prior year. Organically revenues were up 12%. Permanent placement revenues amounted to EUR 288 million, an increase of 58% in constant currency (+24% organically), while outplacement revenues totalled EUR 223 million, a decline of 28% in constant currency.
 
Gross Profit
In 2010, gross profit was EUR 3.3 billion, up 26% compared to 2009. Organically and adjusted, gross profit increased by 6%. The gross margin was 17.8%, 10 bps lower than in 2009. On an organic and adjusted basis, the gross margin declined by 90 bps compared to the adjusted 2009 gross margin of 18.2%. Selling, General and Administrative Expenses (SG&A)
SG&A increased by 11% in 2010 compared to the prior year. On an adjusted basis and organically, SG&A was flat compared to 2009. Integration costs related to Spring Group and MPS Group amounted to EUR 33 million in 2010. At year end 2010 the Adecco Group had over 32,000 FTE employees worldwide, while operating a network of over 5,500 branches. Compared to year end 2009, FTE employees were up 4% on an organic basis, while branches were reduced by 4% organically.
 
EBITA
In 2010, EBITA amounted to EUR 722 million, an increase of 142% and up 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 EUR 755 million and the margin was 4.1%, up 100 bps compared to the adjusted EBITA margin of 3.1% in the prior year.
 
Amortisation and Impairment of Goodwill and Intangible Assets
Amortisation was EUR 55 million in 2010, compared to EUR 42 million in 2009. In addition, the Adecco Group booked an impairment charge of EUR 192 million on goodwill and intangible assets in 2009.
 
Operating Income
Operating income in 2010 was EUR 667 million, compared to EUR 65 million in 2009. Operating income in 2009 was negatively impacted by the impairment charges on goodwill and intangible assets and restructuring costs. Interest Expense and Other Income / (Expenses), net Interest expense was EUR 63 million in the period under review, which compares to EUR 55 million in 2009. Other income / (expenses), net was an expense of EUR 1 million in 2010, the same as in 2009. Interest expense is expected to be around EUR 65 million for the full year 2011.

Provision for Income Taxes
The effective tax rate for 2010 was 30% compared to 5% in 2009. The effective tax rate for 2010 includes the impact from the change in the French business tax law. This was partly offset by the positive impact from the successful resolution of prior years’ audits and the expiration of statutes of limitation. The 2009 effective tax rate was positively impacted by the change in the mix of earnings and the successful resolution of prior years’ audits, which was partly offset by impairment charges with no tax benefit.