Adecco achieves record results in 2007

The Adecco Group, the worldwide leader in Human Resource services, today announced results for the full year of 2007 as well as for the fourth quarter.

For the full year net income increased by 20% to EUR 735 million compared to EUR’611 million a year earlier.

Revenues were up 4% organically to EUR 21.1 billion compared with EUR 20.4 billion in 2006.

Operating income margin improved 100 bps to 5.0%, positively impacted by French social charge benefits.

Dieter Scheiff, Chief Executive Officer, Adecco Group said: “I’m very pleased with the progress Adecco has made in 2007. Our focus on shareholder value generation has proven to be a success: we continued to improve gross margins through good pricing discipline and higher growth rates in the professional business lines, while carefully managing cost efficiency and invested capital. These efforts resulted in a 140 bps higher return on capital employed (ROCE) of 21.7%. We are well on target to reach over 5% EBITA margin by 2009.”

“We continue to see solid growth rates in the European and Asian staffing markets, while demand patterns in the US remain weak. Short-term we expect to see growth rates below the market in France and the UK as our focus on profitable growth continues.”


2007 FINANCIAL PERFORMANCE

Revenues
Group revenues for 2007 were EUR 21.1 billion, a 3% increase compared with 2006.

On an organic basis, when excluding the impact of currency and acquisitions, Adecco grew revenues by 4%.

Permanent placement revenues were EUR 387 million, which is an increase of 17% in constant currency compared to 2006.

Gross Profit
Gross margin improved 120 bps to 18.6% compared to 2006.

The modification of the calculation of French social charges as well as higher gross margin in the temporary staffing business and the growing contribution of permanent placement are the main drivers behind this improvement. 

Acquisitions added 10 bps to the Group’s gross margin.

Selling, General and Administrative Expenses (SG&A)
SG&A increased 5% and 6% on an organic basis compared with 2006, reflecting an increase in SG&A as a percentage of revenues of 20 bps to 13.5%.

At the end of December 2007, Adecco had over 37,000 FTEs and over 7,000 offices, which are respectively 4% and 6% more than at the end of 2006.

Amortisation of Intangible Assets
Amortisation increased to EUR 27 million from EUR 12 million last year, mainly due to the acquisition of Tuja, which was consolidated as of August 2007.

Operating Income
Operating income in 2007 was EUR 1,054 million, an increase of 29% compared with 2006 (28% organically).

The modification of the calculation of French social charges had a significant positive impact on operating income. Operating margin improved 100 bps to 5.0% compared to 2006.

Interest Expense and Other Income / (Expenses), net
Interest expense was EUR 56 million in the period under review, which compares to EUR 51 million in 2006.

Other income / (expenses), net were EUR 30 million compared to EUR 20 million in 2006 due to higher interest income.

Provision for Income Taxes
The effective tax rate for 2007 was 28% compared with 21% in 2006. In 2006 the effective tax rate benefited from the release of a valuation allowance on deferred tax assets in the US in the amount of EUR 64 million.

For 2008 Adecco expects an underlying effective tax rate of approximately 28%.

Net Income and EPS
Net income was up 20% to EUR 735 million in 2007 (2006: EUR 611 million), which represents a net income margin of 3.5%. Basic EPS was EUR 3.97 (EUR 3.28 for 2006).

Balance Sheet, Cash-flow, and Net Debt
The Group generated EUR 1,062 million of operating cash flow in 2007, invested EUR 1,006 million in the acquisition of Tuja as well as the minority holdings in DIS AG.

Additionally the Group spent EUR 90 million in capex, paid dividends of EUR 135 million and purchased treasury shares for EUR 124 million.

As a result the net debt position increased to EUR 866 million at the end of December 2007 compared to EUR 556 million at the year end of 2006. In 2007 DSO improved 1 day to 58 days compared with 2006.

Return on capital employed reached 21.7% versus 20.3% in 2006.

Currency Impact
Currency fluctuations had a negative impact of 3% on revenues and on operating income in 2007, mainly due to the weakness of the US dollar and the Japa

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