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Q1 2000 Adecco SA Reports 49 % Operating Profit Increase in First Quarter 2000


The worldwide leader in personnel services starts the year with sales growth of 38%

 

Chéserex, Suisse, Apr 19, 2000 

Adecco SA, the world's leading provider of personnel services today announced another set of excellent results for its first quarter 2000, highlighting the continuing success of its global growth strategy.

Adecco's first quarter 2000 unaudited results included net service revenues of CHF 5.1 billion, a 38% increase over the CHF 3.7 billion reported in the first quarter of 1999. Apart from a strong organic growth, the first quarter 2000 results benefited from an 8% currency translation impact in revenues, as a result of the appreciation of the US dollar, the British pound, and the Australian dollar against the Swiss franc. At constant rates, first quarter revenues increased 30% compared to last year's first quarter. Adecco posted strong operating income growth of 49% rising from CHF 134 million in the first quarter last year to CHF 200 million during the same period this year. Operating margins increased substantially by approximately 30 basis points from 3.6% in the first quarter of 1999 to 3.9% in 2000. Income before amortization of goodwill for the quarter was CHF 124 million, a 54% improvement over the CHF 80 million earned in first quarter of 1999.

After eliminating the currency translation impact, organic revenue growth was 19% and organic operating income growth was 24%.

"We have started the year 2000 with an extremely strong performance", said John Bowmer, Adecco's CEO. "This result was not only due to the contribution of our 1999 acquisitions, which are now fully integrated adding about 11% to our top line growth and 15% to the operating profit growth, but also as a result of substantial organic growth in this first quarter. Operating margins jumped around 30 basis points in response to our cost and account management strategy worldwide. We continue to move towards our medium term goal of a 5% operating margin. Despite the recent downturn in IT, we are optimistic that the IT staffing and service business, which, on a like-for-like basis, is now growing month on month, will end the year comfortably above 1999. These are symptoms of a healthy year ahead".

Olsten Merger 

As previously announced the Olsten acquisition was completed on March 15. Olsten results of operations will be consolidated starting April 3rd, 2000.

Commenting on the merger with Olsten, Mr. Bowmer stated, "The integration of Olsten will be our greatest challenge in the year 2000. I truly believe our management team is very well prepared to succeed using the experience of our earlier major successful integrations. The management teams are in place and our plans are well advanced. As in the Adia/ECCO and TAD mergers, we will incur integration costs and some synergies this year. The full benefits will thus be seen in the year 2001."

Progress Across the Globe 

Adecco's first quarter results reflect the company's continuing leadership position and growth in the major employment market countries that collectively account for over 90% of industry revenues. A local currency comparison of first quarter 2000 to first quarter 1999 shows revenue increases of 24% in France, 10% in the USA, and double-digit growth above 20% in Switzerland and Spain, and above 30% in Belgium and the UK.

Very pleased with country performance, Mr Bowmer stated, "In these first three months we have witnessed substantial growth throughout Europe: France posted excellent results capitalizing on the strong economy, and Italy presented further exceptional results, nearly fivefold last year's first quarter revenues. In Spain we achieved significant cost savings following the deployment of new technology that increased back and front-office productivity. In North America, volume increases remain much the same as last year. In this year of exciting changes our first quarter results show that we remain focused on delivering value to our stakeholders".

Dividends 

As previously announced, Adecco shareholders are expected to approve the proposed dividend of CHF 8.40 per share (CHF 1.68 per participation certificate), payable on May 2nd, 2000.

US GAAP Results 


For the quarter ended April 2, 2000 Adecco reported under US Generally Accepted Accounting Principles (GAAP) revenues of CHF 5.1 billion and a net loss of CHF 68 million after charging goodwill amortization of CHF 192 million.

According to Chief Financial Officer, Felix Weber, "This net result reflects the accounting principles of US GAAP and Adecco's chosen goodwill amortization schedule of five years. Adecco considers operating income and income before amortization of goodwill 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 to distribute dividends. It is important to note that the acquisitions integrated last year have created a positive operating income, thus having contributed positively already in the first year."

 

ADECCO SA
Financial Highlights
In CHF Millions
3 Months Ended
April 2, 2000
3 Months Ended
April 4, 1999
Change
Net Service Revenues
5,150
3,736
38 %
Operating Income
200
134
49 %
Income Before
Amortization of Goodwill
124
80
54%
Amortization of Goodwill
192
151
 
Net Loss
68
71
 
Net Service Revenues by Region
In CHF Billions
3 Months Ended
April 2, 2000
3 Months Ended
April 4, 1999
Change
Change at Constant Rates
France
1,835
1,469
25 %
24 %
North America
1,386
1,108
25 %
9 %
UK
474
315
51 %
34 %
Rest of Europe
849
591
44 %
43 %
Rest of the World
606
253
140 %
109 %
 
5,150
3,736
38 %
30 %
Specialist/Career Services Brands(included in geographic regions.)
746
481
55 %
37 %
Income before amortization of goodwill is not meant to portray net income or cash flow in accordance with U.S. generally accepted accounting principles. Goodwill amortization is a non-cash charge to operating income; however, income before amortization of goodwill does not represent cash available to shareholders. This may not be comparable to similarly entitled items reported by other companies. Adecco amortizes goodwill over its estimated life of five years. Further, statements made in this press release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. The Company's actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors as set forth in the Company's reports on Form 20-F made pursuant to the Securities Exchange Act of 1934. For instance, the Company's results of operations may differ materially from those anticipated in the forward-looking statements due to, among other things: management's ability to effectively integrate Olsten Corporation into the Company's existing operations; the Company's ability to continue to mitigate the effects of legislation in France upon gross margins; increased price competition, the general level of economic health and activity in the markets and countries in which the Company operates; the impact of changes in foreign currency exchange rates; changes in interest rates; and the continued availability of qualified personnel. In addition, the market price of the Company's stock may be volatile from time to time as a result of, among other things: the Company's operating results, the operating results of other staffing service providers, and changes in the performance of global stock markets in general.

Adecco SA is the global leader in personnel services. With the addition of Olsten, the Adecco network connects up to 600,000 associates with business clients each day through its network of over 25,000 employees and over 5,000 offices in 57 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.

Adecco provides clients with staffing services and solutions covering all major industries as well as specific professions. The worldwide Adecco Brand network focuses on global industries in transition, including automotive, banking, electronics, logistics, and telecommunications. Adecco is also positioned as a worldwide leader in each of the major professional staffing segments with several world-class business lines: aoc (Accountants on Call) and Jonathan Wren for Finance, Banking and Accounting; Ajilon and Computer People for high-end Information Technology, TAD and Roevin for Engineering and Technical. These Adecco businesses provide their clients with a broad range of staffing solutions, from temporary work to permanent placement, to consulting and managed services. Adecco also offers a range of HR solutions with Econova/Lee Hecht Harrison, delivering outplacement and career management services. Adecco clients retain this unique range of services through local, national and multinational contracts.

Adecco SA is listed on The Swiss Exchange [ADECCO N (ADEN 700'939)], NYSE [ADO], the Bourse de Paris [RM 12819]. Further information can be found at www.adecco.com.
 
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