Annual Report 2015

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

Overview

 

 

 

Variance %

in EUR

2015

2014

EUR

Constant
currency

 

 

 

 

 

Revenues

22,010

20,000

10

4

Gross profit

4,179

3,703

13

6

Gross margin

19.0%

18.5%

 

 

EBITA

1,081

928

17

11

EBITA margin

4.9%

4.6%

 

 

Operating income

300

891

(66)

(68)

Net income attributable to Adecco shareholders

8

638

(99)

 

Basic EPS

0.05

3.62

(99)

 

 

Revenues
Revenues in 2015 amounted to EUR 22,010. Compared to the same period last year, revenues increased by 10% or by 4% in constant currency. This was mainly due to an increase of 4% in the temporary staffing volume as temporary hours sold increased to 1,214 million. Permanent placement revenues were EUR 433 in 2015, an increase of 25% or 13% organically.
Revenues from career transition amounted to EUR 344 in 2015, an increase of 16% or 2% organically.

Gross profit
Gross profit amounted to EUR 4,179 in 2015, an increase of 13% or 6% in constant currency compared to 2014. The gross margin was 19.0%, up 50 basis points (“bps”) year-on-year. Currency effects accounted for 20 bps of the increase, acquisitions had a positive effect of 10 bps and the organic increase was 20 bps. On an organic basis, temporary staffing and permanent placement each added 10 bps to the gross margin.

Selling, general, and administrative expenses
During 2015, the Company maintained its emphasis on cost control. Selling, general, and administrative expenses (“SG&A”) were EUR 3,098 in 2015 and increased by 12% or by 4% in constant currency compared to 2014. SG&A as a percentage of revenues increased by 20 bps to 14.1% in 2015. Included in 2015 are integration costs of EUR 11 in Lee Hecht Harrison related to the acquired Knightsbridge business, costs for contractual obligations related to changes in the Executive Committee of EUR 10 and the write-down of capitalised software of EUR 45, of which EUR 33 was in Corporate and EUR 12 in Japan. 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.

Compensation expenses comprised 73% of total SG&A and increased by 4% in constant currency to EUR 2,260 in 2015. Marketing expenses were EUR 80 in 2015, compared to EUR 76 in 2014. Bad debt expense increased by 2% in constant currency to EUR 10 in 2015.

FTE employees and branches
During 2015, the average number of FTE employees increased by 2% and the average branch network by 1%.

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

 

FTE employees

Branches

Segment breakdown (yearly average)

2015

Variance %

2015

Variance %

 

 

 

 

 

France

4,648

1

1,021

1

North America

7,092

5

850

2

UK & Ireland

2,619

(1)

352

(1)

Germany & Austria

2,238

(5)

403

(10)

Japan

1,809

1

141

1

Italy

1,615

6

376

0

Benelux

1,429

2

349

(2)

Nordics

954

4

170

(2)

Iberia

1,531

12

384

7

Australia & New Zealand

446

7

60

(2)

Switzerland

440

1

102

3

Emerging Markets

5,188

(1)

626

3

Lee Hecht Harrison

1,868

9

275

5

Corporate

389

10

 

 

Adecco Group

32,266

2

5,109

1


EBITA

EBITA was EUR 1,081 in 2015, and increased by 17% or by 11% in constant currency compared to 2014. The EBITA margin was 4.9% in 2015 and 4.6% in 2014. EBITA includes in 2015 integration costs of EUR 11 in Lee Hecht Harrison, contractual obligations of EUR 10 related to changes in the Executive Committee, and the write-down of capitalised software of EUR 45, of which EUR 33 was in Corporate and EUR 12 in Japan, and in 2014 restructuring costs of EUR 37. Excluding these items, the EBITA margin was 5.2% in 2015, up 40 bps compared to 4.8% in 2014.

Amortisation of intangible assets and impairment of goodwill
Amortisation of intangible assets increased by EUR 4 to EUR 41 in 2015.

In 2015, the Company recorded a goodwill impairment charge of EUR 740 due to recent and proposed regulatory changes in Germany and the weaker macroeconomic outlook in certain markets. Of the total amount, EUR 648 relates to Germany & Austria, EUR 82 to Australia & New Zealand and EUR 10 to India.

Operating income
Operating income amounted to EUR 300 in 2015 compared to EUR 891 in 2014. The 2015 operating income was negatively impacted by an impairment charge to goodwill of EUR 740.

Interest expense
Interest expense was EUR 67 in 2015 compared to EUR 69 in 2014.

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 13 in 2015 compared to an income of EUR 5 in 2014.

Provision for income taxes
Provision for income taxes was EUR 236 in 2015 compared to EUR 187 in 2014. The effective tax rate excluding the impairment of goodwill, which is not tax deductible, was 24% in 2015, and 23% in 2014.

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 4% in 2015 and 5% in 2014.

Net income attributable to Adecco shareholders and basic EPS
Net income attributable to Adecco shareholders was EUR 8 in 2015 including an impairment charge to goodwill of EUR 740 compared to EUR 638 in 2014. Basic earnings per share (“EPS”) was EUR 0.05 in 2015 compared to EUR 3.62 in 2014.