Q3 HIGHLIGHTS (Q3 07 vs. Q3 06)
* Revenues of EUR 5.4 billion, up 2% (2% organically)
* Reported operating income of EUR 296 million, up 22%
* Reported net income of EUR 230 million, up 40%
* Underlying gross margin improvement of 80 bps to 18.0%
* Underlying operating income margin improvement of 50 bps to
* Up to EUR 400 million share buy back
Q3 2007 KEY FIGURES (reported vs. underlying)
| In EUR million | Q3 2007 | Q3 2007 | Q3 underlying |
| | Reported | underlying | organic growth |
| Revenues | 5,442 | 5,442 | 2% |
| Gross profit | 1,007 | 981 | 6% |
| EBITA | 304 | 286 | 11% |
| Operating | 296 | 278 | 11% |
| income | | | |
| Net income | 230 | 218 | n.a. |
Zurich, Switzerland, November 2, 2007: The Adecco Group, the
worldwide leader in Human Resource services, today announced results
for the third quarter of 2007. For the third quarter net income
increased by 40% to EUR 230 million compared to EUR 164 million a
year earlier, positively impacted by EUR 12 million French social
charge benefits and EUR 28 million lower income taxes. Revenues were
up 2% organically to EUR 5.4 billion compared with EUR 5.3 billion in
2006. Underlying operating income margin improved 50 bps to 5.1%.
Dieter Scheiff, Chief Executive Officer, Adecco Group said: "I'm
pleased with the performance of Adecco in the third quarter. We are
focused on shareholder value generation through profitable revenue
growth, which has resulted in another strong underlying operating
margin expansion of 50 bps to 5.1%. We maintained good pricing
discipline particularly in our main markets, France and the US, while
carefully managing cost efficiency. We are well on track to reach
over 5% EBITA margin by 2009."
"We continue to see solid growth rates in the European and Asian
staffing markets, while demand in the US remains weak. Given our
value based management approach we expect to continue to see growth
rates below the market in France."
Q3 2007 FINANCIAL PERFORMANCE
Group revenues for Q3 2007 were EUR 5.4 billion, a 2% increase
compared with Q3 2006. On an organic basis, when excluding the impact
of currency and acquisitions, Adecco grew revenues by 2%. Permanent
placement revenues were EUR 98 million in the quarter, which is an
increase of 15% in constant currency compared to the same quarter
Gross margin improved 130 bps to 18.5% compared to the third quarter
of 2006. On an underlying basis, when excluding the modification
of the calculation of French social charges, gross margin improved 80
bps to 18.0% as a result of higher gross margin in the temporary
staffing business and the growing contribution of permanent
placement. The acquisition of Tuja added 10 bps to the Group's gross
Selling, General and Administrative Expenses (SG&A)
SG&A increased 5% in the period under review. Underlying organic
SG&A grew 4%, reflecting an increase in SG&A as a percentage of
revenues of 20 bps to 12.8%. Organically, Adecco grew the office
network by 3% (+200 offices) and FTEs by 3% (+900 FTEs) compared to
the same quarter last year. At the end of September 2007, Adecco had
over 37,000 FTEs and over 7,000 offices.
Amortisation of Intangible Assets
Amortisation increased to EUR 8 million from EUR 4 million in the
same quarter last year due to the acquisition of Tuja, which was
consolidated as of August 2007. For the fourth quarter the
amortisation is expected to be EUR 10 million.
Operating income for the third quarter 2007 was EUR 296 million, an
increase of 22% (11% on an underlying2 organic basis) compared with
Q3 2006. The modification of the calculation of French social charges
added EUR 18 million to operating income. Operating margin improved
to 5.4% versus 4.6% for the same period last year. Underlying
operating margin increased by 50 bps to 5.1%.
Interest Expense and Other Income / (Expenses), net
Interest expense was EUR 15 million in the period under review, which
compares to EUR 14 million in Q3 2006. For the full year 2007,
interest expense is expected to be approximately EUR 56 million.
Other income / (expense), net was EUR 4 million (Q3 2006 EUR 5
Provision for Income Taxes
The effective tax rate for the third quarter of 2007 was 18% compared
with 29% in the same period last year. The current quarter includes a
positive impact of EUR 28 million due to the German income tax rate
change effective January 1, 2008, which led to a revaluation of the
deferred tax liability mainly in connection with the Tuja
acquisition. For the fourth quarter Adecco continues to expect an
underlying effective tax rate of approximately 29%.
Net Income and EPS
Net income was up 40% to EUR 230 million in the third quarter of 2007
(Q3 2006: EUR 164 million), which represents a net income margin of
4.2%. Basic EPS was EUR 1.24 (EUR 0.88 for Q3 2006). The modified
calculation of French social charges had a positive EPS impact of EUR
Balance Sheet, Cash-flow, and Net Debt
The Group generated EUR 766 million of operating cash flow in the
first nine months of 2007 and invested EUR 980 million in the
acquisition of Tuja and the minority holdings in DIS AG. As a result
the net debt position increased to EUR 951 million at the end of
September 2007 compared to EUR 556 million at the year end of 2006.
In the third quarter of 2007 DSO improved 1 day to 59 days compared
with Q3 2006.
Currency fluctuations had a negative impact of 2% on revenues and 1%
on operating income in the third quarter of 2007, mainly due to the
weakness of the US dollar and the Japanese yen.
In France, due to Adecco's focus on value generation revenues
decreased by 2% to EUR 1.8 billion in the third quarter of 2007.
Operating income grew 30% to EUR 98 million, which reflects an
operating margin improvement of 140 bps to 5.5%. Underlying gross
margin improved 60 bps, while underlying2 operating margin expanded
by 40 bps to 4.5%. Good pricing discipline in temporary staffing is
the main reason behind this underlying2 improvement.
In Germany revenue growth was 54% in the third quarter of 2007 and
14% organically. Tuja has been consolidated as of August 2007. Adecco
Germany experienced 17% revenue growth, while DIS grew 12% in the
period under review. Operating income grew 51% compared to Q3 2006,
corresponding to an operating margin of 13.6% versus 13.9% in the
same period last year. Compared to Q3 2006 there were 1% fewer
trading days in the period under review, which had a negative impact
In USA & Canada, Adecco's revenues declined by 8% in constant
currency to EUR 0.8 billion in Q3 2007. The decline was most
significant in the Industrial business, while only moderate in the
Office business. Favourable workers' compensation development, a
better customer mix and the recovery of the outplacement business led
to a 90 bps improvement in gross margin, which, combined with a
decline in SG&A, resulted in an operating income growth of 2% in
constant currency. Operating margin increased by 50 bps to 4.9%.
In the UK & Ireland, revenues remained flat in constant currency.
Rigorous restructuring, particularly in the Industrial and
Information Technology business lines, led to a declining business,
which was compensated by good revenue growth in Finance & Legal. As
expected operating income declined 23% in constant currency mainly
due to a EUR 2 million restructuring charge. Operating margin was
In Japan, revenues in constant currency grew 7% in the third quarter
of 2007. A more favourable customer mix and a healthy pricing
environment led to a 120 bps gross margin improvement, while
operating margin expanded to 7.2% from 5.8% in the same period last
Nordics' revenues increased by 16% in constant currency. Italy,
Iberia and Benelux grew revenues by 9%, 7% and 1% respectively in Q3
2007. In the Emerging Markets revenues increased 20% in constant
currency, organically 15%.
BUSINESS LINE PERFORMANCE
Q2 2007 Revenues in percent
Q2 2007 Underlying gross profit in percent
(The pie charts are visable in the PDF version of the report)
Adecco grew revenues of the Office and Industrial businesses by 3% in
constant currency to
EUR 4.2 billion in Q3 2007 (0% organically) and increased gross
margin by 160 bps to 17.2%. Underlying gross margin improved 90
bps to 16.5%. The Industrial business increased revenues by 3% in
constant currency (0% organically) driven by strong demand in Italy
and Germany. France's revenues declined 1%, USA & Canada decreased
15% in constant currency. In the Office business, the increase in
revenues was 2% in constant currency with solid revenue additions in
Japan and Nordics, while declining in France in the USA & Canada
In the third quarter of 2007, revenues in the Professional
Business grew 5% in constant currency and 4% on an organic basis.
Gross margin in the Professional Business increased 20 bps to 25.8%.
In Information Technology (IT), Adecco's revenues remained flat in
constant currency and declined 2% on an organic basis. Continued
focus on value based management led to a sales decrease in the UK &
Ireland, while revenues in the USA & Canada further declined due to
general market conditions.
Adecco's Engineering & Technical (E&T) business grew revenues by 2%
in constant currency. In USA & Canada, Adecco increased revenues in
single digit growth rates in constant currency, while revenues in the
UK & Ireland declined slightly. Demand in Germany continued to be
In Finance & Legal (F&L), Adecco increased revenues by 12% in
constant currency in the third quarter of 2007. The declining
business in USA & Canada was compensated by strong revenue growth in
UK & Ireland.
In the third quarter of 2007, revenues in Human Capital Solutions
(HCS) increased 12% in constant currency. In Sales, Marketing &
Events (SM&E) and Medical & Science (M&S) revenues grew 11% and 10%
(8% organically) in constant currency, respectively.
The Group remains committed to its objective of revenue growth of at
least 7-9% per annum on average for the coming years, providing no
material changes to the macroeconomic environment. At the same time
management continues to be confident that the focus on value based
management and professional and specialized business fields will
allow Adecco to continuously improve 2009 operating margin to over 5%
and 2009 return on capital employed (ROCE) to above 25%, which
compares to 20.3% in 2006.
For the remainder of the year management continues to expect below
market growth in France as the focus on shareholder value and
profitable growth continues. The market in the USA & Canada is
anticipated to remain weak, while solid growth in Europe and ongoing
good demand in Japan should continue.
Adecco's Board of Directors decided to purchase Adecco shares for up
to EUR 400 million by the end of 2008. The shares are intended to be
used for future acquisitions or to minimize potential dilution
related to the outstanding convertible bond.
Financial Agenda 2007 and 2008
* Q4 & FY 2007 results March 4, 2008
* Q1 2008 results May 5, 2008
* Annual general meeting May 6, 2008
* Q2 2008 results August 12, 2008
* Q3 2008 results November 4, 2008
Information in this release may involve guidance, expectations,
beliefs, plans, intentions or strategies regarding the future. These
forward-looking statements involve risks and uncertainties. All
forward-looking statements included in this release are based on
information available to Adecco S.A. as of the date of this release,
and we assume no duty to update any such forward-looking statements.
The forward-looking statements in this release are not guarantees of
future performance and actual results could differ materially from
our current expectations. Numerous factors could cause or contribute
to such differences. Factors that could affect the Company's
forward-looking statements include, among other things: global GDP
trends and the demand for temporary work; changes in regulation of
temporary work; intense competition in the markets in which the
Company competes; changes in the Company's ability to attract and
retain qualified temporary personnel; the resolution of the French
anti-trust investigation and the resolution of the US class action;
and any adverse developments in existing commercial relationships,
disputes or legal and tax proceedings.
Adecco S.A. is a Fortune Global 500 company and the global leader in
HR services. The Adecco Group network connects over 700,000
associates with clients each day through its network of over 37,000
employees (FTEs) and over 7,000 offices in over 60 countries and
territories around the world. Registered in Switzerland, and managed
by a multinational team with expertise in markets spanning the globe,
the Adecco Group delivers an unparalleled range of flexible staffing
and career resources to clients and associates.
Adecco S.A. is registered in Switzerland (ISIN: CH001213860) and
listed on the Swiss Stock Exchange with trading on Virt-x
(SWX/VIRT-X: ADEN) and the Eurolist of Euronext Paris (EURONEXT:
Adecco Corporate Investor Relations Adecco Corporate Press Office
Investor.firstname.lastname@example.org or +41 Press.email@example.com or +41
(0) 44 878 8925 (0) 44 878 8832
There will be an audiocast of the media conference at 9 am CET as
well as a webcast of the analyst presentation at 11 am CET, details
of which can be found at our Investor Relations section at
 Organic growth is a non US GAAP measure and excludes the impact
of currency and acquisitions.
 Underlying is a non US GAAP measure and excludes the impact of
the modified calculation of French social charges as announced by the
French government for the period Q3 2007 of EUR 26 million on gross
profit, EUR 18 million on operating income and EUR 12 million on net
 Net debt is a non-US GAAP measure and comprises short-term and
long-term debt less cash and cash equivalents and short-term
 Professional business refers to Adecco's Information Technology,
Engineering & Technical, Finance & Legal, Medical & Science, Sales,
Marketing & Events and Human Capital Solutions businesses.
The full report (in English) including tables can be downloaded from
the following link:
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