Adecco Increases Sales, Margins and Profits in Q1.CHESEREX, Switzerland Switzerland (swĭt`sərlənd), Fr. Suisse, Ger. Schweiz, Ital. Svizzera, officially Swiss Confederation, federal republic (2005 est. pop. 7,489,000), 15,941 sq mi (41,287 sq km), central Europe. -- Adecco Adecco S.A. is the largest human resources company in the world, based in Glattbrugg, Switzerland. The company was formed in 1996 as a result of the merger of the French company Ecco and the Swiss Adia Interim, and currently has over 6600 offices in over 75 countries worldwide. (NYSE NYSE See: New York Stock Exchange :ADO): Q1 2005 Highlights (Q1 05 vs. Q1 04): --Revenues of EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 4.1 billion, up 8% --Operating income of EUR 108 million, up 82% --Net income of EUR 63 million, up 111%; earnings per share of EUR 0.33 (2004: EUR 0.16) --Gross margin increases by 15 bp at Adecco Staffing and 90 bp at Ajilon; Adecco US gross margin improves by 100 bp --Continuing strong performance in professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. segment, with profit up 48% at Ajilon --Motion to dismiss granted in the securities class action The Adecco Group, the worldwide leader in Human Resource services, today announces results for the first quarter 2005. Jerome Jerome St. Latin doctor of Church; preeminent biblical scholar. [Christian Hagiog.: Attwater, 185] See : Wisdom Caille, Adecco Group Chief Executive Officer, said: "In this quarter, we have delivered sales growth combined with gross margin and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improvements. I am pleased with our sales growth in some key countries, including France, Japan, the Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. and Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , where we grew faster than the market. Our gross margin was mainly enhanced by our achievements at Adecco US, our strong performance in professional staffing services, and further growth in our permanent placement business." "We delivered EUR 108 million operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. with improving profitability, while investing in the future, with 1,000 new staff and 100 additional offices in higher-margin faster-growing markets. With an expanding global presence and service offering, and a constant focus on efficiency, we are ideally positioned to support our clients in their long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. HR and productivity challenges," Caille said. Sales and Gross Margin Group sales Group sales Block sale (of large amounts) of securities to institutional investors. group sales The distribution of a new security issue to institutional clients. for the first quarter of 2005 were EUR 4.1 billion, an 8% increase compared to the first quarter of 2004. Gross margin increased year over year at our two major divisions: Adecco Staffing (14.8% vs. 14.6% in 2004) and Ajilon (24.3% vs. 23.4% in 2004). This, partly offset by the business mix effect of lower LHH LHH League for the Hard of Hearing LHH Laguna Honda Hospital (San Francisco, California) LHH L-Band HH LHH Lutheran Hospice of Hope Career Services division revenues, resulted in a 10bp improvement in group gross margin (16.6% vs. 16.5% in 2004). Operating Costs operating costs npl → gastos mpl operacionales Operating costs as a percentage of sales were reduced to 13.9% (2004: 14.9%) in the first quarter principally due to elimination of costs associated with the financial reporting delay (2004: EUR 36 million). On a like-for-like basis, Q105 operating costs increased by 7% as we increased our branch network by 85 branches and added 700 new staff to support permanent placement and the branch expansion. 23 branches and 300 staff were also added through the acquisition of PeopleOne in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. . Operating Income Operating income for the first quarter of 2005 was EUR 108 million, an increase of 82% compared to the first quarter of 2004. Operating income margin improved by 110 bp to 2.7% in the first quarter (2004: 1.6%). Last year's operating income was impacted by the costs of the 2003 financial reporting delay; excluding this impact, operating income improved by 13%. Provision for Income Taxes The effective tax rate for the first quarter was 32.5% compared with 35.5% last year. The decrease in the first quarter 2005 effective tax rate mainly reflected the absence of expenses associated with the 2003 financial reporting delay, which receive a lower tax benefit, and changes in the mix of income being taxed at higher tax rates. Net Income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Net income was up 111% to EUR 63 million (2004: EUR 30 Million) in the first quarter 2005. On an underlying basis, excluding the costs of the 2003 financial reporting delay, net income was up 13%. Earnings per share were EUR 0.33 for 2005 (EUR 0.16 for 2004). Balance Sheet, Cash-flow, and Net Debt(1) Positive cash-flows for the quarter from operations of EUR 68 million were EUR 20 million below last year, principally due to a greater reduction in payables Payables Related: Accounts payable of EUR 89 million compared to Q1 2004. This reduction was mostly due to payment timing including the effect of the 53rd accounting week in 2004. Net debt increased by EUR 62 million to EUR 361 million during the quarter mainly due to EUR 103 million to fund the acquisition of Altedia in France. Jim Fredholm, Adecco Group Chief Financial Officer, said: "The balance sheet position continues to be strong, with cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of EUR 1.1 billion and we achieved a one day improvement in DSO See CSO. (days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). ) this quarter. Both Standard & Poor's and Moody's Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. rate Adecco's debt as investment grade, with a positive outlook and stable outlook, respectively." Currency Impact(2) Currency fluctuations in the first quarter reduced reported sales growth by 1%, principally due to the strengthening of the Euro against the US Dollar, and operating income growth by 6%, principally due to the strengthening of the Euro against the Swiss Franc Noun 1. Swiss franc - the basic unit of money in Switzerland franc - the basic monetary unit in many countries; equal to 100 centimes centime - a fractional monetary unit of several countries: France and Algeria and Belgium and Burkina Faso and Burundi and and US Dollar. Divisional performance Adecco Staffing During the quarter the division accounted for EUR 3.6 billion or 88% of group revenue and 80% of total operating income generated by operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon . The 10 geographical regions discussed below account for over 90% of the division's revenues. Overall, Adecco Staffing achieved revenue growth of 7% for the quarter. The division's operating income rose 17% and operating margins for the year increased by 20 bp to 3.0%. Q105 sales and sales growth at constant currency rates (CR) for key Adecco Staffing business units were as follows:
Sales
-----
(EUR million) (% variance at CR)
Adecco France 1,383 6%
Adecco North America 617 -1%
Adecco Japan 317 23%
Adecco Italy 239 10%
Adecco UK 180 5%
Adecco Benelux 177 13%
Adecco Iberia 160 11%
Adecco Nordics 104 27%
Adecco Germany 76 19%
Adecco Switzerland 70 12%
Flat sales in the US were offset by strong gross margin improvement of 100 bp in line with performance improvement goals. Ajilon Professional Ajilon Professional Services, which represents 11% of group revenues and 16% of total operating income generated by operating units, increased sales for the quarter by 13% to EUR 0.5 billion with a 48% increase in operating income reflecting improving gross margins and operational gearing. Q105 sales and sales growth in constant currency rates (CR) for key Ajilon Professional business units were as follows:
Sales
-----
(EUR million) (% variance at CR)
Ajilon North America 185 20%
Ajilon UK 173 12%
LHH Career Services LHH Career Services which represents 1% of group sales and 4% of total operating income generated by operating units experienced a further revenue decline of 14% in the quarter reflecting general market conditions. Operating margins at 13.2% remained the highest in the Group. The acquisition of Altedia in France is proceeding as planned, supporting the extension of the LHH business in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and Regulatory matters; motion to dismiss granted in the securities class action As previously announced the pending consolidated class action complaint filed against the company and certain of its directors and officers in the United States District Court for the Southern District of California The United States District Court for the Southern District of California is the federal district court whose jurisdiction comprises the following counties in California: Imperial and San Diego. has been dismissed. The Court's order dismisses the complaint without prejudice Without any loss or waiver of rights or privileges. When a lawsuit is dismissed, the court may enter a judgment against the plaintiff with or without prejudice. When a lawsuit is dismissed without prejudice and grants plaintiffs leave to amend the complaint within 45 days. The previously announced US state unemployment tax reviews and French antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. investigation are ongoing. As previously stated, there can be no assurance that the resolution of these matters will not have a material adverse effect on Adecco's consolidated financial position, results of operations, or cash flows. In addition, Adecco's previously announced appeal against a reprimand REPRIMAND, punishment. The censure which in some cases a public office pronounces against an offender. 2. This species of punishment is used by legislative bodies to punish their members or others who have been guilty of some impropriety of conduct towards them. without monetary sanction sanction, in law and ethics, any inducement to individuals or groups to follow or refrain from following a particular course of conduct. All societies impose sanctions on their members in order to encourage approved behavior. by the SWX SWX Swiss Exchange (trademark of SWX Swiss Exchange) SWX SolidWorks (3D solid modeling CAD software) SWX Splitter / Wave Division Multiplexer for an alleged violation of ad hoc For this purpose. Meaning "to this" in Latin, it refers to dealing with special situations as they occur rather than functions that are repeated on a regular basis. See ad hoc query and ad hoc mode. publicity rules is still pending. Outlook The key drivers for the industry are global GDP GDP (guanosine diphosphate): see guanine. trends in developed and emerging markets, labour market flexibility Labour market flexibility refers to the degree in which labour markets quickly adapt to fluctuations and changes in society as well as in the economy or production. In the past, the most common definition of labour market flexibility was the neo-liberal definition. as a result of more favourable regulation, and extension of products and services. These indicators are expected to remain favourable for the staffing services market in 2005. With our continuing focus on profitable sales growth through the expansion of our branch network and extension of our service lines, we look for further organic sales growth and margin improvements at or above market levels over the course of the year. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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. (the "Company") as of the date of this release, and we assume no duty to update any such forward-looking statements. 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 US state unemployment tax reviews; the resolution of a French anti-trust anti-trust adj (COMM): anti-trust legislation → legislazione f antitrust inv investigation; the resolution of the US class action litigation and remaining regulatory inquiries relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the 2003 financial reporting delay; and any adverse developments in existing commercial relationships, disputes or legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. . 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. Please refer to the Company's most recent Annual Report on Form 20-F and other reports filed with or submitted to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange Commission from time to time, for a further discussion of the factors and risks associated with our business. About Adecco Adecco S.A. is a Fortune Global 500 company and the global leader in HR services. The Adecco Group network connects up to 700,000 associates with business clients each day through its network of 30,000 employees and over 6,000 offices in 70 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 corporate clients and qualified associates. The Adecco Group comprises three Divisions: Adecco Staffing, Ajilon Professional and LHH Career Services. In Adecco Staffing, the Adecco network focuses on flexible staffing solutions for global industries, including automotive, banking, electronics, logistics and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. ; Ajilon Professional offers an unrivalled range of specialised Adj. 1. specialised - developed or designed for a special activity or function; "a specialized tool" specialized specific - (sometimes followed by `to') applying to or characterized by or distinguishing something particular or special or unique; "rules with branded businesses; and LHH Career Services encompasses our portfolio of outplacement out·place·ment n. The process of facilitating a terminated employee's search for a new job by provision of professional services, such as counseling, paid for by the former employer. and coaching consultancy businesses. Adecco S.A. is registered in Switzerland (ISIN Isin (ĭs`ĭn), capital of an ancient Semitic kingdom of N Babylonia. The city became important after the third dynasty of Ur fell to the Elamites and the Amorites (c.2025 B.C.). The phase from c.2025–c.1763 B.C. : CH0012138605) and listed on the Swiss Stock Exchange with trading on Virt-x (SWX/VIRT-X:ADEN), the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (NYSE:ADO) and Euronext Paris Euronext Paris is France's securities market, formerly known as the Paris Bourse, which merged with the Amsterdam and Brussels exchanges in September 2000 to form Euronext NV, which is the second largest exchange in Europe behind the London Stock Exchange. - Premier Marche Marche, region, Italy Marche (mär`kā) or the Marches, region (1991 pop. 1,429,205), 3,742 sq mi (9,692 sq km), E central Italy, extending from the eastern slopes of the Apennines to the Adriatic Sea. (EURONEXT  Euronext N.V. is a pan-European stock exchange based in Paris[1] : ADE).There will be an audio webcast of the analyst teleconference at 1000 CET CET abbr. Central European Time CET Central European Time CET n abbr (= Central European Time) → hora de Europa central CET abbr , details of which can be found at our Investor Relations Investor relations The process by which the corporation communicates with its investors. section at http://webcast.adecco.com. (1)Net debt is a non-US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure and comprises short-term and long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. less cash and cash equivalents and short-term investments. (2)All percentage comparisons are expressed in Euro unless stated otherwise
Consolidated Statements of Operations
EUR millions Three months ended
---------------------------------------
April 3, March 28, % change
2005 2004 --------------
EUR Constant
----------- ---------- ----- --------
Revenues 4,086 3,800 8% 9%
Direct costs of services (3,409) (3,173)
----------- ----------
Gross margin 677 627 8% 10%
16.6% 16.5%
Selling, general &
administrative expenses (569) (567)
Amortisation of intangibles - -
----------- ----------
Operating income 108 60 82% 88%
% 2.7% 1.6%
Interest and other expenses (15) (14)
Provision for income taxes (30) (16)
----------- ----------
Income from continuing
operations 63 30 112%
1.5% 0.8%
Income (loss) from discontinued
operations - -
----------- ----------
Net income 63 30 111%
=========== ==========
1.5% 0.8%
-------------------------------
Basic earnings per share:
Continuing operations 0.33 0.16
Discontinued operations - -
------------ ---------
Basic earnings per share 0.33 0.16
Diluted earnings per share:
Continuing operations 0.33 0.16
Discontinued operations - -
------------ ---------
Diluted earnings per share 0.33 0.16
Basic weighted-average shares 187,332,372 186,985,582
Diluted weighted-average
shares 197,418,787 187,621,398
Revenues and Operating Income by Division & Geographical Segment
Q1 2005 Revenues Operating Income(1)
----------------------- ----------------------
EUR millions 2005 2004 Variance % 2005 2004 Variance %
----------- -----------
EUR Constant EUR Constant
======================= ======================
Adecco Staffing
Europe 2,435 2,242 9 8 89 82 8 8
North America 617 648 -5 -1 1 2 -29 -29
Asia Pacific 426 364 17 19 15 6 154 155
Rest of World 103 91 14 18 3 3 40 48
----------------------- ----------------------- ----------------------
Total 3,581 3,345 7 8 108 93 17 17
======================= ----------------------- ----------------------
Ajilon Professional
Europe 226 201 12 13 8 7 9 11
North America 184 159 16 20 12 6 102 109
Asia Pacific 58 52 11 14 2 2 8 11
Rest of World
----------------------- ----------------------- ----------------------
Total 468 412 13 16 22 15 48 51
======================= ----------------------- ----------------------
LHH Career Services
Europe 6 7 -10 -10 0 1 -116 -116
North America 31 36 -15 -11 5 10 -49 -47
Asia Pacific
Rest of World
----------------------- ----------------------- ----------------------
Total 37 43 -14 -11 5 11 -54 -52
======================= ----------------------- ----------------------
----------------------- ----------------------- ----------------------
Total Operating Units 4,086 3,800 8 9 135 119 14 15
======================= ----------------------- ----------------------
Adecco Group Summary
By Division
Adecco Staffing 3,581 3,345 7 8 108 93 17 17
Ajilon Professional 468 412 13 16 22 15 48 51
LHH Career Services 37 43 -14 -11 5 11 -54 -52
By Region
Europe 2,667 2,450 9 9 97 90 7 7
North America 832 843 -1 3 18 18 4 8
Asia Pacific 484 416 16 19 17 8 117 120
Rest of World 103 91 14 18 3 3 40 48
Corporate Expenses -27 -59
Amortisation of
Intangibles - -
----------------------- ----------------------- ----------------------
Adecco Group 4,086 3,800 8 9 108 60 82 88
======================= ----------------------- ----------------------
1) Contribution (Operating income before amortisation) on the division
level
Consolidated Balance Sheets
April 3, January 2,
EUR millions 2005 2005
------------ -------------
ASSETS
Current Assets
Cash and cash equivalents 574 879
Short-term investments 518 324
Trade accounts receivable, net 3,060 3,149
Other current assets 390 260
------------ -------------
Total current assets 4,542 4,612
Property, equipment and leasehold
improvements, net 255 261
Other assets 353 364
Intangibles, net 9 8
Goodwill, net 1,233 1,196
------------ -------------
Total assets 6,392 6,441
============ =============
LIABILITIES
Current liabilities
Short-term debt and current
maturities of long-term debt 734 230
Accounts payable and accrued expenses 2,925 3,025
------------ -------------
Total current liabilities 3,659 3,255
Long-term debt, less current maturities 719 1,272
Other liabilities 140 139
------------ -------------
Total liabilities 4,518 4,666
------------ -------------
Minority interests 19 2
------------ -------------
SHAREHOLDERS' EQUITY
Common shares 117 116
Additional paid-in capital 2,029 2,026
Accumulated deficit (294) (356)
Accumulated other comprehensive
income/(loss), net 4 (12)
------------ -------------
1,856 1,774
Less: Treasury stock, at cost (1) (1)
------------ -------------
Total shareholders' equity 1,855 1,773
------------ -------------
Total liabilities and shareholders'
equity 6,392 6,441
============ =============
Consolidated Statements of Cash Flows
EUR millions Three months ended
--------------------
April 3, March 28,
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES OF
CONTINUING OPERATIONS
Net income 63 30
Adjustments to reconcile net income to cash
flows from operating activities of
continuing operations:
(Income)/loss from discontinued
operations - -
Depreciation and amortisation 26 30
Other charges 16 14
Changes in operating assets and
liabilities, net of acquisitions:
Trade accounts receivable 116 98
Accounts payable and accrued expenses (154) (65)
Other assets and liabilities 1 (19)
------------ ------------
Cash flows from operating activities of
continuing operations 68 88
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES OF
CONTINUING OPERATIONS
Capital expenditures, net of proceeds (14) (12)
Acquisition (49% in Altedia) (40) -
Increase of restricted cash (tender offer
for remaining 51% in Altedia) (63) -
Purchase of short-term investments (280) -
Proceeds from sale of short-term
investments 85 51
Cash settlements on derivative instruments - 8
Other acquisition and investing activities,
net (4) (1)
------------ ------------
Cash flows from/(used in) investing
activities of continuing operations (316) 46
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES OF
CONTINUING OPERATIONS
Net increase/(decrease) in short-term debt 10 13
Repayment of long-term debt (65) (2)
Cash settlements on derivative instruments (10) 7
------------ ------------
Cash flows from/(used in) financing
activities of continuing operations (65) 18
------------ ------------
Effect of exchange rate changes on cash 8 3
Net increase/(decrease) in cash and cash
equivalents (305) 155
Cash and cash equivalents:
Beginning of period 879 565
------------ ------------
End of period 574 720
============ ============
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