HALFYEARREPORT
Introduction and Contents |
T he Ad ecco Gr oup |
Market share gains and solid revenue growth
For more information go to adeccogroup.com
In this report
Operating and financial review
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of comprehensive income
Consolidated statements of cash flows
2 |
10 |
11 |
12 |
13 |
Consolidated statements of changes in |
15 |
shareholders' equity |
|
Notes to consolidated financial statements |
16 |
Non-US GAAP information and |
33 |
financial measures |
|
1
2023 Half Year Report
Operating and financial review |
The Ad ecco Gr oup |
in millions, except share and per share information
Overview
During the first half of 2023, the Company focused on the Future@Work Reloaded plan that was launched in 2022 to drive change centred on three levers (Simplify-Execute-Grow) with a series of key actions that will simplify the organisation and deliver improved execution and market leadership. Revenues increased by 4% organically1 and 3% trading days adjusted. Excellent performance was achieved in Adecco with growth across all regions, in LHH Career Transition, and Ezra, while
Akkodis consulting posted strong growth in the period.
Gross margin was 10 bps below the first half of 2022 on a reported basis. Organically the gross margin decreased by 10 bps, reflecting current business mix.
Selling, general, and administrative expenses (SG&A) excluding one-offs2 increased 4% organically. The Company is focused on achieving significant G&A cost reduction (total target in savings of EUR 150), while driving growth and market share. FTE employees remained flat organically year-on-year.
in EUR
The EBITA3 margin excluding one-offs was 3.1%, a decrease of 30 bps year-on-year on a reported basis including unfavourable impact from growth investments and fewer non-recurring benefits when compared to the prior period as well as positive impact from Career Transition business which actively captured corporate restructuring projects resulting in record high performance levels.
Free cash flow4 in the first half of 2023 was EUR (137). This compares to EUR (114) in the first six months of last year, and was impacted by higher capital expenditures. The Company distributed EUR 422 in dividends.
Net debt5 at 30 June 2023 was EUR 3,078, representing a ratio of 3.2x net debt to EBITDA6 excluding one-offs.
Variance |
|||
HY 2023 |
HY 2022 |
Reported |
Organic |
Summary of income statement information |
||||
Revenues |
11,890 |
11,384 |
+4% |
+4% |
Gross profit |
2,494 |
2,405 |
+4% |
+5% |
EBITA excluding one-offs |
368 |
390 |
-6% |
-3% |
EBITA |
317 |
330 |
-4% |
-5% |
Net income attributable to Adecco Group shareholders |
154 |
169 |
-9% |
|
Basic EPS |
0.92 |
1.02 |
-10% |
|
Adjusted EPS7 |
1.39 |
1.61 |
-14% |
|
Gross margin |
21.0% |
21.1% |
-10 bps |
-10 bps |
EBITA margin excluding one-offs |
3.1% |
3.4% |
-30 bps |
-20 bps |
EBITA margin |
2.7% |
2.9% |
-20 bps |
-10 bps |
Summary of cash flow and net debt information |
||||
Free cash flow before interest and tax paid (FCFBIT) |
(41) |
0 |
||
Free cash flow (FCF) |
(137) |
(114) |
||
Days sales outstanding |
53 |
52 |
||
Cash conversion8 |
66% |
58% |
||
Net debt to EBITDA excluding one-offs |
3.2x |
2.8x |
Organic growth is a non-US GAAP measure and excludes the impact of currency, acquisitions and divestitures. In the first six months of 2023, SG&A included one-offs of EUR 51 in restructuring and acquisition related costs.
EBITA is a non-US GAAP measure and refers to operating income before amortisation and impairment of goodwill and intangible assets. Free cash flow is a non-US GAAP measure and comprises cash flows from operating activities less capital expenditures.
Net debt is a non-US GAAP measure and comprises short-term and long-term debt less cash and cash equivalents and short-term investments.
Net debt to EBITDA is a non-US GAAP measure and is calculated as net debt at period end divided by the last four quarters of EBITA excluding one-offs plus depreciation.
Adjusted EPS is a non-US GAAP measure and refers to Net income attributable to Adecco Group shareholders before amortisation and impairment of goodwill and intangible assets, excluding one-off costs and exceptional tax items, divided by basic weighted-average shares outstanding.
Cash conversion is a non-US GAAP measure and is calculated as the last four quarters of FCFBIT divided by the last four quarters of EBITA excluding one-offs.
2
2023 Half Year Report
Operating and financial review (continued) |
T he Ad ecco Gr ou p |
in millions, except share and per share information
Group performance overview
Statements throughout this operating and financial review using the term "the Company" refer to the Adecco Group, which comprises Adecco Group AG, a Swiss corporation, its consolidated subsidiaries, as well as variable interest entities for which the Adecco Group is considered the primary beneficiary.
Selling, general, and administrative expenses (SG&A)
SG&A excluding one-offs was EUR 2,147 in the first half of 2023, 4% higher organically compared to the prior year. SG&A excluding one-offs as a percentage of revenues was 18.1%, compared to 17.8% in the previous year. Currency movements had a negligible impact on SG&A. Reported SG&A was EUR 2,198. FTE employees remained flat organically year-on-year.
Revenues
In the first half of 2023, revenues of EUR 11,890 were up 4% year-on-year on a reported basis. Currency movements had a negative impact on revenues of approximately 2% and number of working days had an impact of approximately 1%, while the M&A impact was negligible. Revenue growth was therefore 3% on an organic and trading days adjusted basis.
By Global Business Unit (GBU): revenues in Adecco were up 4%, 2% in Akkodis and flat in LHH, all compared to the prior year on an organic and trading days adjusted basis.
By service line: Flexible Placement revenues were up 3% year-on-year organically, at EUR 8,920; Permanent Placement revenues were EUR 387, down 4%; revenues from Career Transition grew by 80% to EUR 246; revenues in Training, Up-skilling & Re-skilling remained flat, at EUR 180; and Outsourcing, Consulting & Other Services revenues were EUR 2,157, up 4%.
Gross profit
The Company is focused on delivering its G&A cost reduction plan of EUR 150 in savings, which is expected to begin to flow through in the second half of 2023, while driving growth and market share.
In the first half of 2023, one-off costs amounted to EUR 51. These included restructuring and acquisition related costs of: EUR 5 in Corporate Holding, mainly related to the AKKA integration; EUR 13 in LHH; EUR 16 in Akkodis; EUR 9 in Adecco Americas; EUR 3 in Adecco Northern Europe; EUR 2 in Adecco Southern Europe & EEMENA; EUR 1 in Adecco APAC; EUR 1 in Adecco France; and EUR 1 in Adecco DACH.
Compensation expenses were EUR 1,656 in the first half of 2023, compared to EUR 1,532 in the same period of 2022, and represented 75% of total SG&A. Marketing expenses were EUR 79, compared to EUR 71 in the first half of 2022.
SG&A breakdown
HY 2023
Gross profit amounted to EUR 2,494 in the first half of 2023,
up 4% on a reported basis and up 5% organically. The gross margin was 21.0%, 10 bps below H1 2022. Compared to the prior year there was no impact from currency effects or M&A.
On an organic basis, the gross margin was down 10 bps, reflecting expansion of 90 bps in Career Transition and decrease of 20 bps in Permanent Placement, 40 bps in Flexible Placement, 30 bps in Outsourcing, Consulting & Other Services and 10 bps in Training, Upskilling & Reskilling .
Gross margin drivers YoY
in basis points |
HY 2023 |
HY 2022 |
Flexible Placement |
(40) |
20 |
Permanent Placement |
(20) |
120 |
Career Transition |
90 |
(70) |
Other |
(40) |
0 |
Organic |
(10) |
70 |
Acquisitions and divestments |
0 |
10 |
Currency |
0 |
20 |
Reported |
(10) |
100 |
F |
G |
|||
D |
E |
|||
F |
A |
|||
C |
E |
G |
||
B |
CD |
|||
B |
A
AACompensationCompensationexpe sexpensess - 75%
BBPremis Premisess expensesexpenses- 5%
COffice&administrative
C Office & administrative expenses - 7%
- expenses
D Depreciation - 3%
DDepreciation
EEMarketing - 4%
Marketing
FFBad Baddebtdebtexpenseexpense- 1% •
GGOtherOther- 5%
3
2023 Half Year Report
Operating and financial review (continued) |
T he Ad ecco Gr ou p |
in millions, except share and per share information
EBITA
EBITA excluding one-offs was EUR 368 in the first half of 2023, down 6% on a reported basis year-on-year, and down 3% organically. The EBITA margin excluding one-offs was 3.1%, down 30 bps year-on-year on a reported basis and down 20 bps organically.
The EBITA conversion ratio excluding one-offs (EBITA excluding one-offs divided by gross profit) was 14.7% in the first half of 2023 compared to 18.7% in the prior period.
One-offs amounted to EUR 51 in the first half of 2023 and EUR 60 in the prior period. EBITA was EUR 317 in the first half of 2023 compared to EUR 330 in the prior period, a decrease of 4% reported and flat organically. The EBITA margin was 2.7% in the first half of 2023 versus 2.9% in the prior period.
Amortisation of intangible assets
Amortisation of intangible assets was EUR 56 versus EUR 60 in the same period of 2022.
Operating income
Operating income was EUR 261 in the first half of 2023 and EUR 270 in the first half of 2022.
Interest expense and other income/(expenses), net
Interest expense was EUR 37 in the first half of 2023 compared to EUR 22 in the first half of 2022. In the first half of 2023, other income/(expenses), net amounted to an expense of EUR 10 compared to an expense of EUR 19 in the same period of 2022.
Provision for income taxes
Provision for income taxes was EUR 59 in the first half of 2023, same amount as in the first half of 2022. The 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. It is also affected by discrete items which may occur in any given year, but are not consistent from year to year. In the first half of 2023, the effective tax rate was 28% including discrete events. Discrete events increased the effective tax rate by approximately 1%. In the first half of 2022, the effective tax rate was 26% with discrete events decreasing the effective tax rate by approximately 2%.
Net income attributable to Adecco Group shareholders and EPS
Net income attributable to Adecco Group shareholders was EUR 154 in the first half of 2023, compared to EUR 169 in the prior period. Basic earnings per share was EUR 0.92 in the first half of 2023 compared to EUR 1.02 in the first half of 2022. Adjusted earnings per share was EUR 1.39 in the first half of 2023 compared to EUR 1.61 in the prior year period.
Cash flow statement and net debt
Analysis of cash flow statements
The following table illustrates cash flows used in operating, investing, and financing activities:
in EUR |
HY 2023 |
HY 2022 |
Summary of cash flow information |
||
Cash used in operating activities |
(36) |
(26) |
Cash used in investing activities |
(140) |
(1,271) |
Cash used in financing activities |
(257) |
(1,357) |
Cash used in operating activities increased to EUR (36) in the first
half of 2023 from EUR (26) in the same period of 2022, with the increase driven by less favourable net working capital. DSO was 53 days for the first half of 2023 and 52 days in the first half of 2022.
Cash used in investing activities totalled EUR 140 compared to EUR 1,271 in the first half of 2022. 2023 cash outflow has been mainly driven by capital expenditures that amounted to EUR 101 in the first half of 2023 and EUR 88 in the same period of 2022. 2022 cash outflow has been mainly driven by the acquisition of AKKA.
Cash used in financing activities totalled EUR 257, compared to EUR 1,357 in the prior period. In the first half of 2023, the net increase of short-term debt totalled EUR 172 whereas in the same period of 2022 the net decrease of short-term debt totalled EUR 182. The Company paid dividends of EUR 422 and EUR 409 in the first half of 2023 and the first half of 2022, respectively. In 2022, the Company repaid long-term debt for EUR 731.
Net debt
Net debt was EUR 3,078 as of 30 June 2023, compared to EUR 2,455 as of 31 December 2022. The increase in net debt reflected the usual seasonal trends and was impacted by the payment of the dividend in April 2023. At 30 June 2023, the ratio of net debt to EBITDA excluding one- offs was 3.2x, compared to 2.5x (adjusted for the acquisition of AKKA, Proforma) at 31 December 2022. The following table presents the calculation of net debt based upon financial measures in accordance with US GAAP.
30 June |
31 December |
|
in EUR |
2023 |
2022 |
Net debt |
||
Short-term debt and current maturities |
||
of long-term debt |
317 |
138 |
Long-term debt, less current maturities |
3,100 |
3,099 |
Total debt |
3,417 |
3,237 |
Less: |
||
Cash and cash equivalents |
339 |
782 |
Short-term investments |
- |
- |
Net debt |
3,078 |
2,455 |
4
2023 Half Year Report
Attachments
Disclaimer
Adecco Group AG published this content on 03 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2023 04:50:31 UTC.