Making people successful in a changing world - Annual Report 2012

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Financial reviewIn millions, except share and per share amountsThe discussion in this financial review is based on, and should beread in conjunction with the Consolidated Financial Statements andthe Notes thereto, which are prepared in accordance with UnitedStates Generally Accepted Accounting Principles (“US GAAP”) andare included elsewhere in this Annual report.OverviewDuring 2001, Adecco faced the most challenging and uncertaineconomic conditions since the merger of Adia and Ecco in 1996. Thesecond half was particularly tough, as the USA, the world's largeststaffing market, slipped into recession. Yet 2001 was also a year ofsubstantial progress. Adecco capitalised upon its global leadershipand improved its competitive position, increasing its share in nearlyevery major market.Moreover, Adecco continued to invest in industry leading serviceenhancements that moved it closer to its clients and temporaryassociates; harnessing the web; extending its branch network andglobal service capability. Adecco also reorganised its managementteam in order to increase its customer focus and enter and createnew high growth areas of business.Results for the full year of 2001 showed an increase ofconsolidated revenue to CHF 27.2 billion or 2%. This led to adecrease in consolidated operating income before amortisation ofgoodwill, restructuring costs and one-time items of 5% to CHF 1.2billion. Operating margin dropped 30 basis points to 4.3%. Adeccogenerated CHF 1.4 billion of cash from operating activities resultingin an improved debt structure.Results of Operations - Year Ended December 30, 2001compared to Year Ended December 31, 2000Currency trendsThe average exchange rates for the major currencies used totranslate the consolidated statements of operations into SwissFrancs were significantly different in 2001 compared to 2000, exceptfor the US Dollar (USD). The average rate for the Euro (EUR), BritishPound (GBP) and the Japanese Yen (JPY) depreciated against theSwiss Franc.The December 30, 2001 year end currency exchange rates for themajor currencies used in translating Adecco’s consolidated balancesheet into Swiss Francs depreciated against the Swiss Franc ascompared to December 31, 2000.Revenues increase 2%Adecco’s consolidated net service revenues from temporary andpermanent personnel and speciality outplacement and careermanagement services were CHF 27,247 in 2001, representing anincrease of 2% or CHF 619 from consolidated net service revenues ofCHF 26,628 in 2000. The revenue growth in 2001 is due to the netimpact of increased service hours provided to customers, a slightdecrease in billing rates and the movement in foreign currencies.After adjusting for the impact of the Olsten acquisition concluded inMarch 2000, contributing CHF 1.3 billion to the growth in 2001, therewas a contraction in existing operations of approximately CHF 700.The strengthening of the Swiss Franc against most currencies duringthe period had a negative impact on revenue of about 3.0%.Adecco reorganises along business lines to accelerateits growth by expanding into Human Resources andBusiness Services.In October 2001, Adecco announced with immediate effect a changein its organisational and management structure to foster furtherexpansion into human resources and business services. Threeoperating segments (divisions) have been created: Adecco Staffing,Ajilon Staffing & Managed Services and Career Services & e-Business.Adecco has changed its reporting segments to be in alignment withthe new internal reporting and management structure. The revenuesby division are summarised as follows:2001 2000 1999Adecco Staffing CHF 23,538 CHF 22,768 CHF 15,966Ajilon Staffing & Managed Services 3,271 3,571 2,285Career Services & e-Business 438 289 220Total net service revenues CHF 27,247 CHF 26,628 CHF 18,471Most geographical markets add salesAdecco posted revenue gains in three of its four regions namely inEurope, Asia Pacific and in the Rest of World, as measured in localcurrency and including the effects of acquisitions. In Europerevenues in local currency increased 8%; in Asia Pacific revenues inlocal currency increased 19% and in the Rest of World (consistingprimarily of Latin America) revenues in local currency increased30%. In the United States, revenues decreased in local currency by5%. As measured in Swiss Francs, including the effect of theacquisitions, revenues in Europe grew by 5%, in North Americarevenues decreased by 5%; in Asia Pacific revenues grew by 6% andrevenues grew in Rest of Europe by 22%. During 2001, Adeccogenerated 60% of its revenues from Europe, 28% in North America(primarily the United States), 9% in Asia Pacific and 3% in Rest ofWorld. For 2000, the comparable percentages were 59%, 30%, 9%,and 2%.Gross margin remains stable at approximately 18.8%Consolidated costs of services provided, which consists principallyof payroll and payroll-related benefits, increased 2% or CHF 490 toCHF 22,127 in 2001, from CHF 21,637 in 2000. Gross margin in 2001increased slightly from 18.7% to 18.8 %, as a percentage ofconsolidated net service revenues, due to a combination of offsettingfactors such as lower prices, greater slowdown in the informationtechnology staffing and services businesses which are higher marginspecialty services, slightly lower permanent placement andincreased revenues from outplacement.4
Financial reviewIn millions, except share and per share amountsConsolidated selling, general and administrativeexpenses increase as Adecco maintains branchnetworkSelling, general and administrative expenses for the group, whichconsists principally of personnel costs, office administration, rentand marketing increased 5% or CHF 187 in 2001 to CHF 3,941 fromCHF 3,754 in 2000. As a percentage of sales, selling, general andadministrative expenses increased to 14.5% in 2001 compared with14.1% in 2000. In 2001, personnel costs increased by 8%, officeadministration by 7%, premises expenses by 18%, and marketingwas down by 1%. To ensure that Adecco responds to marketconditions, management has continued to implement sensible costcontrol measures. However, management remains committed tomaintaining the branch network. This year, Adecco added 12% morebranches. Adecco now has nearly 6,000 branches in total, spanning58 countries.Amortisation of goodwill for the group remainsconstantGoodwill amortisation decreased in 2001 by CHF 3 to CHF 1,106,compared to CHF 1,109 in 2000. The decrease was primarily due tothe net impact of 3 additional months of goodwill amortisationresulting from the acquisition of Olsten Corporation, for which theamortisation period began in March 2000 and the fact that thegoodwill resulting from the Adia-Ecco merger was fully amortised inJune 2001. As of December 30, 2001, the remaining amount ofunamortised goodwill was CHF 2,292.Effective on the first day of fiscal year 2002 Adecco will no longeramortise any goodwill to earnings, but instead will be required toreview its recoverability annually for impairment. Other identifiableintangibles will continue to be amortised to earnings over theirestimated useful lives. As a result Adecco will no longer amortisegoodwill, thereby reducing estimated annual goodwill amortisationbefore any tax effect by approximately CHF 850 for 2002.Amortisation of goodwill before any tax effect was CHF 1,106.Intangible assets acquired prior to July 1, 2001 that have beenreported together with goodwill will be reported separately in 2002,however, the amount presented in the balance sheet and relatedamortisation is not viewed as material.Treasury managementAdecco conducts business and funds its subsidiaries in variouscountries and currencies, and therefore, is exposed to effects ofchange in foreign currency exchange rates mainly the US Dollar, theEuro, the British Pound and the Japanese Yen. Adecco also issuesbonds and short and long-term notes in various currencies. Adecco,in accordance with its written risk management policy, continues tomonitor its currency exposures and where appropriate enters intohedging transactions to minimise its overall exposure to volatility inits earnings.The interest expense line includes mainly interest on externaldebt, amortisation of capitalised financing costs and hedging costs.Interest expense decreased by CHF 21 in 2001 to CHF 242 comparedto CHF 263 in 2000, primarily due to the reduction in net debt ofCHF 739 during the year. Adecco recorded an expense of CHF 20 andCHF 26 in 2001 and 2000 respectively as net of foreign exchangegains and losses and net hedging expenses in interest expenses. Theincrease of other expense of CHF 27 million related mainly towrite-downs on investments.Effective January 1, 2001, Adecco adopted the FinancialStandards Board (FASB) Statement of Financial Accounting (SFAS)No. 133, “Accounting for Derivative Instruments and HedgingActivities” and SFAS No. 138,” Accounting for certain DerivativesInstruments and Certain Hedging Activities an amendment of FASBStatement No. 133”, which replaces existing pronouncements andpractices for derivatives and hedging activities with a single,integrated accounting framework. Upon adoption of thesestatements, Adecco recorded a net transition adjustment after tax ofCHF 8 in net earnings.Effective tax rateThe provision for income taxes decreased by CHF 11 to CHF 254 in2001 from CHF 265 in 2000. Adecco’s income tax provision differsfrom the expected tax benefit of CHF 119 for 2001 and expected taxbenefit of CHF 64 in 2000, calculated by totalling the products ofpre-tax income (loss) in each country multiplied by that country’sstatutory income tax rate, principally as a result of non-deductiblegoodwill amortisation in certain jurisdictions of CHF 231 in 2001and CHF 297 in 2000.Liquidity and Capital ResourcesAs of December 30, 2001, Adecco had cash and cash equivalents ofCHF 552 and short-term and long-term debt totalling CHF 3,042,compared to CHF 487 and CHF 3,736 as of December 31, 2000.Net cash flow from operating activities in 2001 was CHF 1,390.Net cash expended in investing activities for 2001 was CHF 528,related primarily to the addition to fixed assets of CHF 297 and thepurchase of the minority interest of Olsten Norway of CHF 184. Netcash used in financing activities for 2001 was CHF 780, primarilyrelated to changes in debt and the payment of dividends. Net debtdecreased primarily due to the free cash flow generated fromoperations.In the ordinary course of business, Adecco’s principal fundingrequirements are associated with financing working capital andcapital expenditures. Working capital requirements are primarily inthe form of accounts receivable and are offset by accounts payableand accrued expenses, all of which increase as revenues increase.Net working capital in 2001, excluding cash and short-termfinancing, decreased by approximately CHF 702, primarily relating toa greater decrease in receivables than payables. The level of workingcapital financing is primarily dependent upon accounts receivableturnover, which varies by location, and capital expenditures whichprimarily relates to new branch openings and expenditures forinformation systems. Cash disbursement activity is predominantlyassociated with scheduled payroll payments for its temporarypersonnel, and Adecco has limited flexibility to adjust itsdisbursement schedule. Conversely, collection or related accountsreceivable from customers may be considerably delayed, resulting insteeply rising working capital requirements during periods ofgrowth. As of December 30, 2001, accounts receivable had beenoutstanding for an average of 64 compared to 63 days as ofDecember 31, 2000. To finance working capital requirements Adeccouses multicurrency credit facilities, credit line facilities and bankoverdrafts. As of December 30, 2001, the consolidated short-term5
Page 1 and 2: ANNUAL REPORT 2001Operational Revie
Page 3 and 4: Table of ContentsAdecco at a Glance
Page 5 and 6: RevenuesProfitsGeographical Distrib
Page 7 and 8: Klaus J. JacobsChairmanPhilippe For
Page 9: For all those people seeking to fin
Page 12 and 13: Strong management delivers resultsR
Page 15 and 16: Adecco: 30,000 entrepreneursseizing
Page 17 and 18: Patrick DeMaeseneire, AjilonStaffin
Page 19 and 20: Social change and the fitness of th
Page 21 and 22: The Agenda for ChangeLength of Assi
Page 23 and 24: Drivers inTechnologyPeople, Bricks
Page 25 and 26: And to ensure that all Adecco and s
Page 27 and 28: Hewlett Packard in South Korea -Mob
Page 29 and 30: Adecco Learning CentresAdecco UK op
Page 31 and 32: Drivers inEmerging MarketsThe appet
Page 33 and 34: Ajilon Staffing &Adecco Staffing Di
Page 35 and 36: Directors, Management and AuditorsB
Page 37 and 38: ANNUAL REPORT 2001Financial ReviewM
Page 39: Table of ContentsFinancial Review 4
Page 43 and 44: Selected Financial Information - Un
Page 45 and 46: Consolidated Statements of Operatio
Page 47 and 48: Consolidated Statements of Changes
Page 49 and 50: Notes to Consolidated Financial Sta
Page 61 and 62: Report of the Group Auditors to the
Page 63 and 64: Statements of Operations (Holding C
Page 65 and 66: Notes to Financial Statements (Hold
Page 67 and 68: Major Consolidated SubsidiariesGrou
Page 69 and 70: Investor InformationStock Price Per
Page 71 and 72: Directors, Management and AuditorsB

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