Adecco SA CEO Discusses Q3 2010 Results - Earnings Call Transcript
Adecco SA (
)
Q3 2010 Earnings Call
November 09, 2010 05:00 am ET
Executives
Patrick De Maeseneire - CEO
Dominik de Daniel - CFO
Analysts
Kean Marden - RBS
Laurent Brunelle - Exane BNP Paribas
Mario Montenare - NZB
Teun Teeuwisse - ABN Amro
Tom Sykes - Deutsche Bank
Marc Zwartsenburg - ING
Jaime Brandwood - UBS London
Toby Reeks - Bank of America/Merrill Lynch
Presentation
Operator
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Good morning ladies and gentlemen and welcome to Adecco's third quarter 2010 results conference call. Patrick, Group CEO and Dominik Group CFO will lead you through the presentation today followed by Q&A session. Before we start, please have a quick look at the forward-looking segment in this presentation.
Let me give you a quick overview of today's agenda. Patrick will present the operational highlights of the third quarter to you and then Dominik reviews the financials after which Patrick will give you an outlook on our business before we open the line for your questions. With that Patrick, I hand over to you.
Patrick De Maeseneire
Thank you Karen. Good morning ladies and gentlemen, welcome. I'll start with the highlights of the third quarter. We continue to see very good demand for our services across most markets and year-on-year organic revenue growth even increased in the third quarter. Our revenues were up 17% organically in Q3 again driven by robust trading conditions in our main markets France and North America. We increase the base in Germany, Benelux, Italy, Nordics and Switzerland where we delivered round double digits revenue growth and good profitability. Growth in the investment business segment continued to be very strong, but also our office business returned to organic growth during the quarter. Also, the growth in the professional staffing business clearly accelerated.
The gross margin in Q3 was 17.8%, same as in the previous quarter. As we said in the past, pricing in the temporary staffing business stabilized and we benefited from the increased exposures to professional staffing. We achieved strong profitability in Q3. EBITDA before integration costs was EUR 239 million and the margin was strong 4.7%, up 90 basis points compared to the adjusted prior year's third quarter. Revenues in September were up 17% organically and adjusted for business days. In October revenues developed similar to September with no signs of a slowdown.
Based on the recent encouraging trends and accelerating growth in the higher margin professional staffing business, we are confident of continued goods revenue development near term.
I'll now go through the key figures in more detail. As in the previous quarter we adjusted for the French business tax and for exceptional items in 2009. Dominik will discuss the adjustments in his part of the presentation.
Revenues in the third quarter of 2010 were up 36% to EUR 5.1 billion, organically revenues increased by 17%. Gross profit amounted to EUR 898 million. Our gross margin was 17.8% equal to (inaudible) and down (inaudible) year-on-year organically and adjusted.
SG&A increased by 28% or was up 5% organically and adjusted compared to Q3 last year. Sequentially in constant currency SG&A was actually down 1%. In the third quarter EBITDA before integration costs was EUR 239 million and the margin was 4.7%, up 90 basis points year-on-year. Net income was EUR 128 million in the quarter under review.
We'll now go through the organic revenue development by region. Compared to the second quarter of this year, all regions accelerated in terms of organic growth. North America achieved 20% organic revenue growth in Q3, driven by strong growth in general staffing business but also the professional staffing business clearly accelerated.
When excluding the counter-cyclical outplacement business, revenues in North America were up to 25% organically. In Europe revenues in Q3 were up 18%. The revenue momentum accelerated in most countries. Whereas growth in France remained robust, Germany, Italy and the Nordics further bit accelerated their double-digit growth rates and Benelux and Switzerland further improved return to double-digit growth.
The European region was still held back by UK and Ireland. Net revenues were down 1% organically and by Iberia where the growth rates was 7%. Rest of Europe was up 9%, revenue growth in Q3 was still held back by Japan but revenues were down 7%. On the other hand growth in Australia and New Zealand accelerated to 25% and the emerging markets also continued to deliver strong growth with revenues up 26%.
The group's gross margin was 17.8% assets in Q3 flat year-on-year and down 70 basis points organically and adjusted. For easier comparisons we adjusted Q3, '09 to reflect the French business tax law impact which was 40 basis points as well as the reassessment of accruals in France in the third quarter of last year which had a positive impact of 30 basis points then.
The temporary staffing business had a negative impact of 50 basis points on the group's gross margin in Q3. The permanent placement business positively contributes to the group's gross margin with 20 basis points in Q3. Our perm revenues were up 83% in constant currency and 35% organically in the quarter and [review].
The outplacement business had a negative impact of 50 basis points in this quarter. Note that our placement negatively impacted Q2, '10 by 70 basis points. Acquisitions had a positive impact of 70 basis points in the third quarter same as in Q2.
As stated previously, pricing in temp business stabilized are increased exposure to professional staffing through the MPS acquisition together with our disciplined pricing approach clearly contributed to this quarter's good performance.
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