Annual Report 2014

Review of operating results
in millions, except share and per share information

Overview

 

 

 

Variance %

in EUR millions (except per share information)

2014

2013

EUR

Constant currency

 

 

 

 

 

Revenues

20,000

19,503

3

4

Gross profit

3,703

3,560

4

5

Gross margin

18.5%

18.3%

 

 

EBITA

928

821

13

15

EBITA margin

4.6%

4.2%

 

 

Operating income

891

779

14

16

Net income attributable to Adecco shareholders

638

557

14

 

Basic EPS

3.62

3.09

17

 

 

Revenues
Revenues in 2014 amounted to EUR 20,000. Compared to the same period last year, revenues increased by 3% or by 4% in constant currency. This was mainly due to an increase of 2% in the temporary staffing volume as temporary hours sold increased to 1,166 million. Permanent placement revenues were EUR 348 in 2014, an increase of 9% or 11% in constant currency. Revenues from career transition amounted to EUR 297 in 2014, an increase of 6% or 7% in constant currency.

Gross profit
Gross profit amounted to EUR 3,703 in 2014, an increase of 4% or 5% in constant currency compared to 2013. The gross margin was 18.5%, up 20 basis points (“bps”) year-on-year. Temporary staffing had a 20 bps positive impact on the gross margin, driven by our continued strict approach to pricing as well as the effect of the French CICE (tax credit for competitiveness and employment). Permanent Placement added 10 bps to the gross margin and the outplacement business added 5 bps, while other activities had a 15 bps negative impact.

Selling, general, and administrative expenses
During 2014, the Company maintained its emphasis on cost control. Selling, general, and administrative expenses (“SG&A”) were EUR 2,775 in 2014 and increased by 1% or by 3% in constant currency compared to 2013. SG&A as a percentage of revenues decreased by 10 bps to 13.9% in 2014. Included in 2014 are restructuring expenses of EUR 37 mainly related to the move to a single headquarters in North America and to further structurally improve our profitability in Germany. In 2013, restructuring expenses were EUR 33 mainly related to France and the consolidation of several data centres in North America.

Compensation expenses comprised 73% of total SG&A and increased by 3% in constant currency to EUR 2,020 in 2014. Marketing expenses were EUR 76 in 2014, compared to EUR 71 in 2013. Bad debt expense increased by EUR 1 to EUR 9 in 2014.

FTE employees and branches
The average FTE employees during 2014 increased by 1% and the average branch network during 2014 decreased by 2%.

The following table shows the average FTE employees and the average branches by segment:

 

FTE employees

Branches

Segment breakdown (yearly average)

2014

Variance %

2014

Variance %

 

 

 

 

 

France

4,622

(2)

1,006

(4)

North America

6,781

1

832

(1)

UK & Ireland

2,636

1

357

(2)

Germany & Austria

2,356

(2)

446

(3)

Japan

1,796

(6)

139

6

Italy

1,519

17

375

(1)

Benelux

1,405

1

355

1

Nordics

918

(5)

173

(3)

Iberia

1,367

0

360

(5)

Australia & New Zealand

418

(4)

62

(1)

Switzerland

434

4

99

1

Emerging Markets

5,251

1

607

0

LHH

1,721

7

263

(6)

Corporate

352

23

 

 

Adecco Group

31,576

1

5,074

(2)


EBITA
EBITA was EUR 928 in 2014, and increased by 13% or by 15% in constant currency compared to 2013. The EBITA margin was 4.6% in 2014 and 4.2% in 2013. The EBITA margin excluding restructuring costs of EUR 37 in 2014 and EUR 33 in 2013 was 4.8% in 2014, up 40 bps compared to 4.4% in 2013.

Amortisation of intangible assets
Amortisation of intangible assets decreased by EUR 5 to EUR 37 in 2014.

Operating income
Operating income amounted to EUR 891 in 2014 compared to EUR 779 in 2013.

Interest expense
Interest expense was EUR 69 in 2014 compared to EUR 79 in 2013.

Other income/(expenses), net
Other income/(expenses), net, which includes interest income, foreign exchange gains and losses, proportionate net income of investee companies, and other non-operating income/(expenses), net amounted to an income of EUR 5 in 2014 compared to an expense of EUR 2 in 2013.

Provision for income taxes
Provision for income taxes was EUR 187 in 2014 compared to EUR 140 in 2013. The effective tax rate was 23% in 2014, and 20% in 2013.

The Company’s effective tax rate is impacted by recurring items, such as tax rates in the different jurisdictions where the Company operates, and the income mix within jurisdictions. Furthermore, it is also affected by discrete items which may occur in any given year, but are not consistent from year to year.

The effective tax rate in both years includes the positive impact from the successful resolution of prior years’ audits and disputes, the expiration of the statutes of limitations, and other permanent items primarily related to intercompany provisions and write-offs that are deductible for tax purposes but have no impact on the consolidated financial statements.

Discrete events had a positive impact on the tax rate of approximately 5% in 2014 and 8% in 2013.

Net income attributable to Adecco shareholders and basic EPS
Net income attributable to Adecco shareholders increased to EUR 638 in 2014 compared to EUR 557 in 2013. Basic earnings per share (“EPS”) was EUR 3.62 in 2014 compared to EUR 3.09 in 2013.