Dear shareholder,

Patrick De Maeseneire
Chief Executive Officer

Rolf Dörig
Chairman of the Board of Directors

In a year of generally improved economic conditions, the Adecco Group achieved strong results and profited from previous measures to structurally optimise the business. We are proud to report solid profitable growth and an industry leading performance. The value of flexibility in Human Resources has increased in the recent downturn and is becoming an essential part of our customers’ competitiveness. Equally, individuals increasingly value a partner in the quest for on-going employment, rewarding work and careers.

Demand for our services recovered strongly throughout 2010. Our revenues increased by 26% (12% organically [1]) to EUR 18,656 million. Thanks to our price discipline and the support of the higher-margin Professional Staffing acquisition of MPS Group, included in our results as of February, 2010, we achieved a gross margin of 17.8%. The combination of solid top-line growth, strict price discipline and tight cost control, resulted in strong operational leverage. Consequently, our EBITA [2] rose to EUR 722 million, an increase of 142% or 34% adjusted [3] and organically. The EBITA margin increased to 3.9%, from 2.0% in the prior year. Operating income amounted to EUR 667 million and net income attributable to Adecco shareholders was EUR 423 million. We generated operating cash flow of EUR 455 million, a good result when considering the increased working capital needs to fund the strong growth in revenues.

In the light of this solid performance and the sound financial position, the Board of Directors proposes an increased dividend of CHF 1.10 per share for 2010.

The 2010 results reflect a Group-wide commitment to a clear strategy geared towards achieving our mid-term EBITA margin target of above 5.5%. Our increased exposure to Professional Staffing, the leaner branch network and optimised delivery channels are paying off. The integration of MPS Group progressed well during the course of 2010 and the business performed above our initial expectations, both in terms of revenues and profitability. We are well on track to complete the integration in 2011 and will even exceed the initially targeted synergies of EUR 25 million. The integration of Spring Group, which we acquired in October 2009, was successfully completed at year end 2010 and the targeted synergies of EUR 13 million were slightly exceeded.

We also strengthened our operations in important Emerging Markets. In India we crossed the threshold of providing more than 100,000 associates with work on a daily basis. In China, we established a joint venture with Beijing Foreign Enterprise Human Resources Service Co. Ltd (FESCO), one of the leading HR service companies in a market with huge growth potential. The Shanghai-based joint venture, FESCO Adecco, operational since January 2011, already has over 100,000 associates on assignment every day and gives us access to a network of more than 100 branches throughout China with an established local and multinational client base.

Most notably our strategic commitment to a distinct dual market approach in General Staffing and Professional Staffing is proving rewarding. The acquisition of MPS Group made us the worldwide leader in Professional Staffing. On the other hand, our General Staffing business showed strong performance, especially the industrial segment with revenues growing 22% in 2010. We will continue to develop our General Staffing business in 2011, maintaining cost leadership and optimising the delivery models. At the same time, we now have a solid platform to further grow the Professional Staffing business also on an organic basis. Our focus on value creation through the systematic application of the EVA concept within the Adecco Group remains a key strategic pillar and should enable us to continue delivering strong cash flows in the future.

Continued commitment to our strategy will pay off in a market set for significant growth. The downturn instigated a structural shift towards temporary staffing in office, industrial and professional segments and proved the value of a more flexible workforce. Companies with a higher share of temporary employees were better able to respond to the sudden drop in demand. We believe that penetration of temporary staffing will increase and reach new peaks in many mature and emerging markets. HR flexibility is becoming pivotal, not least in the manufacturing sector where a more ‘made to order’ low inventory level has become prevalent. Also, on-going regulatory changes, such as the opening of the construction, the healthcare and public sectors to temporary work in Spain, create growth opportunities. Above all, in mature markets with ageing populations and mismatches between education systems and labour markets, skills shortages will become commonplace, despite high unemployment.

As a Group we are united behind our strategy. We have six strategic priorities to ensure our continued profitable progress: improving retention of talents; continuing to invest in standardising IT systems to improve efficiency and operational effectiveness; strengthening our lead in the higher-growth Professional Staffing segment; further segmenting our General Staffing business with specialised delivery models addressing different skill groups; strengthening the lead in Managed Services Provider and Recruitment Process Outsourcing services; and enhancing our leading market development in the Emerging Markets that have enormous growth potential.

We are a disciplined, growth-oriented Group with a strong focus on profitability that is well positioned for the future. And we are on course to achieve a mid-term EBITA margin of above 5.5%.

Thank you to every employee for their continued commitment, to you, our shareholders for your loyalty, and to all of our valued clients and associates for their trust in the Adecco Group.

 

Rolf Dörig
Chairman of the Board of Directors

        Patrick De Maeseneire
        Chief Executive Officer

 

 

[1]Organic growth is a non-U.S. GAAP measure and excludes the impact of currency, acquisitions and divestitures.

[2]EBITA is a non-U.S. GAAP measure and refers to operating income before amortisation and impairment of goodwill and intangible assets.

[3]Adjusted is a non-U.S. GAAP measure excluding in 2009, for better comparison purposes, the French business tax of EUR 60 million in costs of services and EUR 4 million in SG&A as those business tax components are shown as income tax as of 2010. It also excludes in 2009 the positive impact on gross profit of EUR 25 million due to favourable developments in France resulting in the reassessment of existing accruals and the negative impact of EUR 7 million on gross profit due to a sales tax accrual in the UK related to prior years, as well as the negative impact on SG&A of EUR 121 million associated with restructuring costs.