Annual Report 2011

Our results
Review of operational results

Revenues  In 2011, our revenues increased by 10% to EUR 20,545 million, or by 10% organically. Temporary hours sold were up 9% to 1,261 million. Permanent placement revenues amounted to EUR 344 million, an increase of 19% or 18% organically when compared with the prior year. Career transition (outplacement) revenues totalled EUR 206 million, a decline of 8% or 16% organically. Acquisitions had a positive impact of 1% on 2011 revenues. From a business line perspective, revenues in the General Staffing business (Office & Industrial) were up 12%, also in constant currency, while Professional Staffing revenues increased by 5% or also 5% organically. Revenues in Solutions were flat, or down by 6% organically. Whereas the counter-cyclical career transition (outplacement) business was down, revenues in MSP, RPO and VMS were up in solid double digits.

Gross Profit  was up 7% to EUR 3,566 million, and by 6% organically. The gross margin was 17.4%, 40 bps lower than in 2010. Organically, the decline in the gross margin was 60 bps. While pricing continued to be rational overall and we continued to practice strict price discipline based on our EVA (Economic Value Added) approach, we were confronted with a declining gross margin largely due to the strong growth in the lower margin Industrial staffing segment, which negatively impacted the business mix. The temporary staffing business had a negative impact of 50 bps organically on the gross margin, whereof a negligible impact related to the French payroll tax subsidy cut. The outplacement business negatively impacted the gross margin by 20 bps organically. The permanent placement business had a positive impact on the gross margin of 10 bps organically.

Selling, general and administrative expenses (SG&A)  Strict cost discipline was maintained during 2011 with selective investments in growth markets and segments only after careful evaluation. SG&A increased by 6% or by 4% organically. Integration costs for MPS and DBM amounted to EUR 20 million in 2011 (EUR 33 million for MPS and Spring in 2010). The average number of FTE employees increased by 5% or by 4% organically when comparing 2011 with 2010. Hirings were mostly concentrated in the Emerging Markets, Germany and North America. The average branch network was up 2% or by 1% on an organic basis when comparing 2011 with 2010. Personnel expenses, which comprised 71% of total SG&A, increased 7% in constant currency to EUR 1,954 million. On December 31, 2011, the number of branches and FTE employees exceeded 5,500 and 33,000 respectively.

EBITA  In 2011, EBITA increased by 13% to EUR 814 million. On an organic basis, EBITA increased by 14%. The EBITA margin before integration costs was 4.1%, flat when compared with the EBITA margin before integration costs in the prior year. We were able to defend our EBITA margin, despite facing headwinds from a gross margin perspective. The unfavourable business mix, due to the strong growth in lower-margin businesses, was largely compensated by very tight cost control.

Operating income  In 2011, operating income increased 14% to EUR 763 million.

Net income attributable to Adecco shareholders and EPS  Net Income attributable to Adecco shareholders in 2011 was EUR 519 million, compared to EUR 423 million in 2010. Basic EPS was EUR 2.72 (EUR 2.20 in 2010).

Cash flow, net debt and DSO  Operating cash flow amounted to EUR 524 million in 2011. The Group paid EUR 148 million, net of cash acquired, for the acquisition of DBM, and spent EUR 109 million in capital expenditure. Dividends paid were EUR 149 million in 2011. Net debt [1] at the end of December 2011 was EUR 892 million, compared with EUR 751 million at year-end 2010. In 2011, DSO was at 55 days, compared to 54 days in 2010.

Outlook and priorities in 2012
Year-on-year revenue growth continued to soften during Q4 2011, albeit compared against a strong fourth quarter in 2010. In January 2012, Adecco Group revenues were down 1% compared to the prior year, on an organic basis and adjusted for trading days. Within Europe, revenue growth in Germany & Austria remained double-digit in January 2012. Most other countries slowed further going into the new year. In North America, revenues were up slightly year-on-year in January 2012, adjusted for trading days, while revenue growth in the Emerging Markets continued to be healthy.

The Adecco Group is solidly positioned for the future. In an environment of economic uncertainty we will continue to build on our strengths – our leading global position and the diversity of our service offerings. We will continue to take advantage of growth opportunities, with a strong focus on disciplined pricing and cost control to optimise profitability and value creation. Besides the structural changes and related investments of EUR 45 million in France, which would mainly be incurred in the second half of 2012, management expects additional costs of EUR 10 million in the first half of 2012, to further optimise the cost base in other European countries and to protect profitability. We are committed to our strategic priorities and we have the right offering to achieve our EBITA margin target of above 5.5% mid-term.


[1]Net debt is a non-U.S. GAAP measure and comprises short-term and long-term debt, less cash and cash equivalents and short-term investments.