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Adecco SA reports Q2 results

June revenues, down 2% in local currency, show an improving trend

Chéserex, Suisse, Jul 24, 2002 

Half Year Highlights:
- Revenues of CHF 12.4 billion, down 10% in CHF and 7% in local currency

- Operating income of CHF 371 million, down 40% in CHF and 37% in local currency

- Income before amortization of intangibles of CHF 201 million, down 45% in CHF and 42% in local currency

- Strengthened network - 300 more branches - with concurrent reduction of 600 staff

- Adecco Staffing reports positive trends in June with 4,000 more clients year over year and the same number of temporary employees

- Ajilon Professional results still on low levels as the professional staffing market remains challenging

- Career Services and e-HR Services continue to report positive results

- jobpilot acquisition successfully completed end of May 2002
CHESEREX, SWITZERLAND, July 24, 2002 - Adecco SA, the worldwide leader in HR solutions, today announced its results for the six months ended June 30, 2002. The company reported revenues of CHF 12.4 billion and income before amortization of intangibles of CHF 201 million with an improving trend in the last month of the quarter. The comparables to last year are as follows: (please download financial table as pdf-file from the link at the bottom)
As indicated above, currency fluctuations had a major adverse effect on sales and profit, in particular towards the end of the second quarter. In constant currency, revenues in June were nearly the same as last year, and the gap in operating income declined. In addition, the increased tax rate in 2002 compared to 2001 had a further adverse effect on results. On a like-for-like basis, income before amortization of intangibles declined by 32% in June, 45% in the quarter, and 39% in the first half of 2002.
"As we had anticipated, the second quarter results remained below those we reported in the strong second quarter 2001. In particular the permanent placement and the Ajilon Professional business did not yet recover, and  adverse currency movements affected our overall results." said Jérôme Caille, Adecco's CEO. "On the other hand, we have seen positive trends in recent weeks. Adecco Staffing has closed the gap in temporary staff placements, the client base is above the 2001 level and sales in local currency are now only marginally below last year, while the US and French units' sales were stronger than last year. Furthermore, we have continued to build our branch network while reducing costs. By the end of June, our branch network increased year over year by 300, while we simultaneously reduced headcount by 600 . In the first half, we reduced our cost base in both Adecco Staffing and Ajilon Professional by approximately CHF 140 million in constant currency. Given the recent positive trends and the new management team now in place, I am confident of the future development of the business as the economy recovers."
Divisional Performance
Adecco Staffing posted revenues of CHF 10.8 billion, 8% below last year's figures in current currency, and 4% below in constant currency. Profit margin declined in line with management expectations, due mainly to a faster recovery of the large contracts and still low levels of permanent placement business.
Ajilon Professional revenues declined 27% to CHF 1.3 billion in the first half, a 25% drop in local currency. Profits declined more than revenues, in particular due to strong exposure to the Telecom industry last year, which heavily reduced their contractors over the last 12 months.
Career Services & e-HR Services reported again a substantial increase of revenues and profit. For the half year, revenues in Swiss Francs grew by 25% to 258 million Swiss francs, a 29% increase in local currency. The division proved again its importance as a counter-cyclical business.
"Adecco France is clearly heading towards positive territory and nearly achieved in recent weeks the high level of employment of a year ago.  Adecco North America has now more temporary workers today than a year ago.  Most of the other markets also showed a strong upward trend in June" continued Mr. Caille. "Some indicators, such as the 12 week sequential increase in our billable headcount in Ajilon, also point towards a revival of demand. These indications give us confidence that the faster revenue growth in June will continue to develop into a strong recovery path. We have been working successfully on what we can influence: our client-base, our candidate-base, the strengthening of our market positioning and the building of our internal organization. We are leveraging our many strengths across the company to maximise our potential for growth. For instance, key business units have reported very strong cross-divisional activity, especially in our main markets where Adecco has a strong presence. Although it is too early to assess the volume impact, the response from the field has been very positive on this new sales approach. This strategy will increasingly help us limit the downside, while capturing key opportunities in the market".
The positive trends identified at the end of the second quarter beyond sales seasonality reinforce Adecco management's confidence that a business acceleration could take place in the second half of 2002, although a few months later than previously anticipated.
jobpilot AG Acquisition
On February 6, Adecco SA announced a recommended cash offer to acquire all of the issued and outstanding share capital of jobpilot AG, which would create a leading European online staffing, recruiting and service company by combining jobpilot's internet platform with the physical assets of Adecco.
The process for the acquisition of jobpilot AG was successfully completed at the end of May 2002. Sales synergies between Adecco and jobpilot have started to materialize as planned.

Internet Update
Over the last month, the deployment of IT solutions in France has continued. Felix Weber, Adecco's CFO, said: "Close to 80% of our worldwide sales are now executed through state-of-the-art, web-centric systems. While these investments may in the short-term have an impact on our operating margins, we see very strong benefits once the systems are fully in place. In Italy, for example, the intranet referrals between branches account for 4% of our sales nowadays. This is equivalent to roughly CHF 50 million in annualized sales, which would not have been possible without our new IT systems. These systems will be a major competitive advantage over the next few years."
Appointment of Group Auditors
Following the resolutions of Adecco's Annual General Meeting of shareholders of April 17, 2002, Ernst & Young AG were appointed to become group auditors of Adecco SA for the fiscal year ending December 29, 2002.
US GAAP Results
For the six months ended June 30, 2002, Adecco reported under US Generally Accepted Accounting Principles (US GAAP) revenues of CHF 12.4 billion and a net income of CHF 199 million, including CHF 2 million amortisation of other intangibles.
According to Chief Financial Officer, Felix Weber, "Adecco continues to consider operating income and income before amortisation of intangibles and one-time items to be the most relevant benchmarks of the company's financial performance, as they measure our operational performance and our ability to fund growth and distribute dividends."
Effective from fiscal year 2002, Adecco has adopted SFAS No 142, which requires that goodwill and other intangibles with indefinite/infinite lives no longer be amortised, but be subject to an annual impairment test. Intangibles with definite lives however continue to be amortised over the related lifetime.
Adecco SA is a Forbes 500 company and the global leader in HR Solutions. The Adecco network connects up to 700,000 associates with business clients each day through its network of over 30,000 employees and over 6,000 offices in 60 countries around the world. Registered in Switzerland, and managed by a multinational team with expertise in markets spanning the globe, Adecco delivers an unparalleled range of flexible staffing and career resources to corporate clients and qualified associates.
The Group comprises four Divisions, Adecco Staffing, Ajilon Professional, Career Services and e-HR Services. In Adecco Staffing, the Adecco staffing network focuses on flexible staffing solutions for global industries in transition, including automotive, banking, electronics, logistics and telecommunications; Ajilon Professional offers an unrivalled range of specialised branded businesses; Career Services encompasses our portfolio of outplacement and coaching; e-HR Services focuses on online recruiting activities for the Group.
Adecco SA is registered in Switzerland and is listed on the Swiss Exchange (ADEN / trading on Virt-x: 1213860), NYSE (ADO), Euronext Premier Marché (12819).
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