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Adecco maintains margin levels despite tough conditions


Q3 HIGHLIGHTS (Q3 08 vs. Q3 07)

* Revenues of EUR 5.1 billion, down 6% (-4% organically[1])
* Solid gross margin of 18.0%, flat on an underlying2 basis
* EBITA margin at 5.0%, down 30 bps on an underlying basis
* Acquisition of French professional staffing company Groupe Datavance

Zurich, Switzerland, Adecco S.A. (“Adecco”), the worldwide leader in HR services, today announced results for the third quarter of 2008. Revenues of EUR 5.1 billion were down 4% organically compared to Q3 2007. The gross margin was maintained at a solid 18.0% on an underlying basis, while the EBITA margin of 5.0% was down 30 bps when excluding the impact of the modified calculation of French social charges in the prior year.

Dieter Scheiff, Chief Executive Officer of the Adecco Group said: “Despite tough market conditions and declining revenues, I am pleased to report that we maintained a solid gross margin of 18.0%, equal to the underlying gross margin in Q3 2007. On the cost side, we continue to work hard to adapt to revenue developments in order to protect our EBITA margin, which still stands at a solid 5.0%. I am proud of this achievement, especially given the increasingly difficult economic environment.”

“Looking ahead, we anticipate a progressively more difficult environment in terms of revenue development. September saw the negative revenue trend accelerate in most countries, with the exception of the Emerging Markets, which continued to grow strongly.”


Group revenues for Q3 2008 were down 6% to EUR 5.1 billion compared to Q3 2007. On a constant currency basis, revenues were down 3%, while organically revenues declined by 4%. Permanent placement revenues declined by 7% in constant currency to EUR 85 million in the quarter.

Gross Profit
In Q3 2008, the gross margin was 18.0% compared to 18.5% in the same period last year. On an underlying basis, adjusted for the modified calculation of French social charges in the prior year, the gross margin remained flat compared to Q3 2007.

Selling, General and Administrative Expenses (SG&A)
In the period under review, SG&A declined by 6%. Underlying and organically, SG&A was down 1%, which, as a percentage of revenues, reflects a 20 bps increase to 13.0% compared to Q3 2007.
FTEs, on an organic basis, declined by 3% (-1,200 FTEs) when comparing to the same quarter last year. At the end of the third quarter, Adecco operated a network of over 6,700 offices with more than 36,000 FTEs.

Operating Income before Amortization of Intangible Assets (EBITA)
In the third quarter of 2008, EBITA was EUR 254 million, a decrease of 16% compared to Q3 2007 and a decline of 11% on an organic and underlying basis. The corresponding EBITA margin for Q3 2008 was 5.0%, which compares to 5.3%, on an underlying basis, in Q3 2007.

Amortisation of Intangible Assets
Amortisation increased to EUR 10 million from EUR 8 million in the same quarter last year, largely attributable to the acquisition of Tuja, which was consolidated as of August 2007.

Operating Income
Operating income in the third quarter of 2008 was EUR 244 million, a decline of 18% compared to Q3 2007 or down 12% organically and when adjusting Q3 2007 for the modified calculation of French social charges.

Interest Expense and Other Income / (Expenses), net
The interest expense amounted to EUR 15 million in the period under review, equal to Q3 2007. For the full year 2008, the interest expense is expected at approximately EUR 58 million. Other income / (expenses), net was EUR 2 million in Q3 2008 compared to EUR 4 million in Q3 2007. Lower interest income was the main reason for the difference.

Provision for Income Taxes
The effective tax rate for the third quarter of 2008 was 27% compared to 18% in the same period a year ago. Last year’s Q3 included a positive impact of EUR 28 million due to a change in the German income tax rate. For the full year 2008 Adecco expects an effective tax rate of approximately 28%, based on current operations.

Net Income and EPS
Net income was down 27% to EUR 168 million in the third quarter of 2008 (Q3 2007: EUR 230 million), reflecting a net income margin of 3.3%. Basic EPS was EUR 0.96 (EUR 1.24 in Q3 2007). When excluding the impact of the modified calculation of French social charges in the prior year, basic EPS was down 18% in Q3 2008 compared to Q3 2007.

Balance Sheet, Cash-flow and Net Debt[3]
In the first nine months of 2008, the Group generated EUR 669 million of operating cash flow, paid dividends of EUR 163 million, invested EUR 71 million in capex and purchased treasury shares for EUR 274 million. The net debt position declined to EUR 800 million at the end of September 2008 compared to EUR 866 million at year end 2007. In the third quarter of 2008, DSO improved by 0.6 to 58.8 days compared to the third quarter last year.

Currency Impact
In Q3 2008, currency fluctuations had a negative impact of approximately 3% on revenues and 2% on operating income, mainly due to the weakness of the US dollar and the British pound.


In France, Q3 2008 revenues declined by 2% to EUR 1.7 billion, compared to the same period a year ago. The underlying gross margin remained flat compared to the prior year. Operating income, excluding the French social tax benefit in 2007, declined by 13% to EUR 69 million compared to Q3 2007, reflecting an underlying operating income margin decline of 50 bps to 4.0%. SG&A as a percentage of sales increased by 50 bps compared to Q3 2007. Costs associated with headcount reductions, prior to the announced social plan, amounted to EUR 6 million in the quarter.

In the USA & Canada, Adecco’s revenues declined by 9% in constant currency to EUR 651 million in Q3 2008. Organically, revenues were down 8%. The decline was most pronounced in the Office and Industrial business, while revenues in Human Capital Solutions continued to grow strongly. Operating income declined by 18% in constant currency, while the operating income margin was lower by 50 bps to 4.4%. Costs associated with the investments to improve customer mix and efficiency amounted to EUR 3 million in the quarter.

In Germany, revenues grew 12%, to EUR 404 million in Q3 2008, but were down 2% organically compared to Q3 2007. On the operating income level, Germany grew 8% (-4% organically) compared to Q3 2007, corresponding to an operating income margin of 13.2% (Q3 2007: 13.6%).

In the UK & Ireland, revenues in Q3 2008 declined by 16% in constant currency. Operating income fell by 58% in constant currency, which reflects an operating income margin decline of 140 bps to 1.4%, compared to the same quarter a year ago.

In Japan, third quarter revenues grew by 1% in constant currency. Continued strong management on the cost side led to a 5% higher operating income in constant currency and an improvement on the operating margin side of 30 bps to 7.5% compared to Q3 2007.

In Italy revenues declined by 5% in Q3 2008 and in Iberia by 12%, while revenues in the Benelux declined by 2%. In the Nordics, revenues were down by 3% on a constant currency basis.

Emerging Markets revenues continued to grow strongly by 16% in constant currency, while the operating income margin was raised by 40 bps to 4.1% compared to Q3 2007.


In Q3 2008, Adecco’s revenues in the Office and Industrial businesses declined by 4% in constant currency to EUR 4.0 billion (-6% organically) while the underlying gross margin declined by 20 bps to 16.2%. Revenues in the Industrial business declined by 3% in constant currency (-5% organically). In Germany, revenues were down 4% organically, France declined by 3%, Italy by 7%, Iberia by 17% and in the USA & Canada revenues decreased by 12% in constant currency. The Office business saw a decline of 6% both organically and in constant currency. While Japan grew 1% in constant currency, revenues declined in the Nordics by 5%, in the UK & Ireland by 13% and in USA & Canada by 17%, all in constant currency. In France revenue development was flat.

In constant currency, revenues in the Professional Business[4] declined by 3%. The underlying gross margin in the Professional Business improved by 110 bps to 27.7%, which was mainly driven by Human Capital Solutions and the Engineering & Technical business.

In Information Technology (IT), Adecco’s revenues decreased 9% in constant currency. Continued weak developments in the UK & Ireland led to a revenue decline in constant currency of 15%. Revenues in the USA & Canada declined by 5% in constant currency when compared to Q3 2007.

Adecco’s Engineering & Technical (E&T) business was down 5% in constant currency. Germany saw healthy demand with revenues up 8% in Q3 2008. USA & Canada, faced a revenue decline of 3% and UK & Ireland declined by 36%, both in constant currency.

In Finance & Legal (F&L), revenues declined by 3% in constant currency in the third quarter of 2008. Declining demand in USA & Canada was only partially offset by good growth in Continental Europe.

In the third quarter of 2008 revenues in Sales, Marketing & Events (SM&E) were up by 1% on a constant currency basis, whereas Medical & Science (M&S) grew 13%. Revenues in Human Capital Solutions (HCS) increased 10% in constant currency.


Adecco remains committed to value based management and, in today’s particularly tough market environment, places utmost importance on aligning costs to revenue developments. Investments continue to be considered with strict financial discipline and with the focus on professional and specialized business fields, aim to place Adecco in a sound strategic position.

For the remainder of the year, management anticipates difficult market conditions, leading to even more pronounced pressure on revenues in most countries, albeit by varying magnitude. The target to reach an EBITA margin in excess of 5.0% was initially set in 2006 to be achieved under favourable economic conditions in 2009. In the last two quarters, the company reported an EBITA margin of 5.0%. Given the difficult economic developments, it is unlikely that Adecco will be in a position to achieve or exceed a 5.0% EBITA margin in the quarters to come, and consequently not in 2009. The company remains however fully committed to reach this target in the medium term, while management continues to be strongly focussed on margin protection in the current economic downturn.

As announced in mid October, Adecco plans to structurally improve the French business and to align the cost base to market conditions. This investment is expected to amount to approximately EUR 35 million and the majority of this is expected to be accrued in the fourth quarter of 2008. In order to align the cost base to trading conditions, Adecco will invest an additional EUR 10 million in Q4 2008 in various European countries.

Professional staffing acquisition in France

Adecco strengthens its French professional staffing business with the acquisition of Groupe Datavance. This company is specialized in the IT field and achieved sales of EUR 66 million in 2007/2008.

Management changes

Andreas Dinges (49), will be taking over the role of Country Manager of Adecco in Germany as of January 1, 2009. In this function, he will be a member of Group Management and report directly to the Group CEO, Dieter Scheiff. In addition to his new function as Country Manager of Adecco in Germany, Andreas Dinges will remain CEO of DIS AG. Having successfully managed the transition of Tuja into the Adecco Group, Peter Jackwerth, the current country manager, will pursue other interests.

On January 1, 2009, Federico Vione (36), takes over as Country Manager of Adecco Italy. In his new role, he will also report directly to Dieter Scheiff and will be part of the Adecco Group Management. Federico has been with Adecco since 1999 in various leading positions. Since 2005 he has been the Head of Eastern Europe. Sergio Picarelli (41), the current Country Manager, after having successfully developed Adecco’s operations in Italy, is taking on the role of Chief International Sales Officer, in order to coordinate the most important global accounts for the Adecco Group. He will continue to report to the Group CEO.

Financial Agenda 2009

Q4 & FY 2008 results

March 4, 2009
Q1 2009 results

May 6, 2009
Annual General Meeting

May 13, 2009
Q2 2009 results

August 11, 2009
Q3 2009 results

November 4, 2009

Forward-looking statements
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 procedure and any adverse developments in existing commercial relationships, disputes or legal and tax proceedings.

About Adecco
Adecco S.A. is a Fortune Global 500 company and the global leader in HR services. The Adecco Group network connects about 700,000 associates with clients each day through its network of over 36,000 employees (FTEs) and over 6,700 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: CH0012138605) and listed on the Swiss Stock Exchange with trading on SWX Europe (SWX: ADEN) and the Euronext Paris (EURONEXT: ADE).

There will be a media conference call at 9 am CET as well as an analyst conference call at 11 am CET, details of which can be found on our website in the Investor Relations section at

[1] Organic growth is a non US GAAP measure and excludes the impact of currency, acquisitions and divestures.
[2] Underlying is a non US GAAP measure and excludes the impact of the modified calculation of French social charges for Q3 2007 which positively impacted Q3 2007 with EUR 26 million on gross profit, EUR 18 million on operating income and EUR 12 million on net income. For further analysis see page 13.
[3] Net debt is a non US GAAP measure and comprises short-term and long-term debt less cash and cash equivalents and short-term investments
[4] Professional business refers to Adecco’s Information Technology, Engineering & Technical, Finance & Legal, Medical & Science, Sales, Marketing & Events and Human Capital Solutions businesses.


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