Earnings call transcript: Adecco SA’s strategic focus amid 2024 revenue dip

Adecco SA reported its full-year 2024 financial results, showcasing a challenging year with revenues decreasing by 3% year-over-year to €23.1 billion. Despite the revenue decline, the company emphasized its strategic initiatives and market position, leveraging technology and partnerships to navigate a tough macroeconomic environment. Trading at $23.08, the stock currently sits near its 52-week low of $22.82, though InvestingPro analysis suggests the company is currently undervalued. With a market capitalization of $578.7 million and a P/E ratio of 11.4x, Adecco (SIX:ADEN)’s valuation metrics warrant attention from value investors.

Key Takeaways

• Revenue for 2024 was €23.1 billion, a 3% decrease from the previous year.
• Gross profit fell by 7% year-over-year, reaching nearly €4.5 billion.
• The company achieved significant G&A savings, exceeding its target by €24 million.
• Adecco is focusing on AI and digital platforms, placing 136,000 candidates digitally.
• The company aims to reduce its net debt to EBITDA ratio to 1.5x by 2027.

Company Performance

Adecco faced a challenging 2024 with a 3% decline in revenues compared to the previous year. The company attributed this downturn to a difficult macroeconomic environment, which affected temporary volumes and permanent recruitment. Despite these challenges, Adecco managed to gain 200 basis points in market share, outperforming competitors in most regions and demonstrating resilience, particularly in the SME segment.

Financial Highlights

• Revenue: €23.1 billion (-3% YoY)
• Gross Profit: €4.5 billion (-7% YoY)
• Gross Margin: 19.4% (contracted 80 basis points)
• EBITA (excluding one-offs): €790 million (-18% YoY)
• EBITA Margin: 3.1% (50 basis points lower)
• Cash Conversion Ratio: 109% (up from 63% the previous year)

Outlook & Guidance

Looking ahead, Adecco expects a sequential improvement in gross margins for Q1 2025 while maintaining stable SG&A expenses. The company has set a margin corridor target of 3-6% for its EBITA margin and plans to continue leveraging AI and digital platforms to drive growth. Adecco also updated its dividend policy, aiming for a payout ratio of 40-50% on adjusted EPS.

Executive Commentary

CEO Denis Machewel emphasized the company’s strategic focus, stating, "We are rigorously executing on our strategy." Machewel also highlighted the potential of AI, noting, "We see Gen AI much more as an opportunity than a risk." These comments reflect Adecco’s commitment to innovation and profitable growth despite current market challenges.

Risks and Challenges

• Macroeconomic pressures could continue to impact recruitment volumes.
• Regional performance variations, particularly in Northern Europe, France, Germany, and the UK, pose challenges.
• The company’s ability to maintain its market share gains amidst competitive pressures.
• Potential execution risks in achieving the targeted net debt to EBITDA ratio by 2027.
• Dependence on successful integration and utilization of AI and digital technologies.

Adecco’s strategic initiatives and market resilience position it well for future growth, despite the current economic headwinds. The company’s focus on technology and operational efficiency will be crucial as it navigates the evolving market landscape.

Full transcript - Adecco SA (ADEN) Q4 2024:

Conference Operator: Good day and welcome to Adecco Group Q4 and Full Year twenty twenty four Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. And finally, I would like to advise all participants that this call is being recorded. Thank you.

I’d now like to welcome Benita Barreto, Adecco Group AG (OTC:AHEXY) Head of Investor Relations to begin the conference. Benita, over to you.

Benita Barreto, Head of Investor Relations, Adecco Group AG: Good morning. Thank you for joining the Adecco Group’s conference call today. I’m Benita Barreto, the Group’s Head of Investor Relations and with me are the Adecco Group’s CEO, Denis Machewel and CFO, Coram Williams. Before we begin, we want to draw your attention to the disclaimer on Slide two. Today’s presentation will reference GAAP and non GAAP financial results and operating metrics.

This conference call will include forward looking statements. These statements are based on assumptions as of today and are therefore subject to risks and uncertainties. Let me now hand over to Denny for his opening remarks.

Denis Machewel, CEO, Adecco Group: Thank you, Benita, and a warm welcome to all of you who have joined the call today. Before we begin the presentation, I’d like to refocus your attention on the brief video that we just shared. By leveraging Salesforce (NYSE:CRM)’s technologies, including Agent Force and Data Cloud, we are enhancing our global talent supply chain, streamlining processes, improving fill rate and time to fill and delivering superior experiences for our job seekers. We are building a group driven by innovation where technology is a key pillar. And I will share more on our digital and IT developments later in today’s call.

And let me open with a full year financial results on Slide four. Revenues decreased by 3% year on year on an organic trading days adjusted basis to EUR 23,100,000,000.0. Gross profit of nearly EUR 4,500,000,000.0 was 7% lower year on year. Gross margin contracted 80 basis points to 19.4%, a resilient result, reflecting firm pricing and volume and mix effects. EBITA excluding one offs was EUR $7.00 9,000,000, 18 percent lower.

The EBITA margin at three point one percent and fifty basis points lower year on year was resilient, driven by substantial G and A savings and agile capacity management. Importantly, it is within the margin corridor with the group delivering a recovery ratio of 44%. Moving now to the GBUs. In Adecco, revenues were 3% lower, a resilient performance given challenging markets. The EBITA margin was solid at 3.4%.

In Acodes, revenues were 4% lower. The tech sector downturn continued to impact staffing. And the EBITA margin of 5.5% mainly reflects this headwind. And in LHH, revenues were 6% lower, weighed by challenging markets and a high comparison in career transition. LHS’s EBITA margin was 6.3%, but within its margin corridor of 7% to 10% when excluding impacts from General Assembly that we will explain shortly.

In sum, the group has delivered strong market share gains and resilient revenues and profitability in a challenging market environment. Let’s now turn to Slide five, which provides KPIs that evidence how the group has delivered on its simplified execute and grow plan set out in Q4 twenty twenty two. Our market share growth is a testament to the success of the execution of our plan. Since its introduction, we’ve achieved a relative revenue growth of nine eighty basis points with 200 basis points share gain in 2024 versus our key competitors. We are focused on further increasing our market share in the coming quarters.

We have continued to improve customer satisfaction. In the Adeco GBU, client NPS rose two points and candidate NPS rose also two points, cementing a multi year improvement trajectory. This year’s survey highlighted the speed of Adecco in selecting the right candidates’ profiles, the quantity of the candidates, the ease of the procedures and the friendliness of the people clients dealt with. And aligned with the simplification effort, the Group’s rigorous approach to overheads has now delivered EUR174 million in G and A savings, net of inflation, well ahead of the original EUR150 million run rate target. Let’s turn to Slide six, which shows in more depth the consistency in which we have delivered our stated ambitions.

And as you can see on the slide, our achievements have been multifold. Regarding key highlights, in 2023, the group adjusted incentive plans, finalized its new operating model and established its partnership with Microsoft (NASDAQ:MSFT), focused on developing the Group’s AI architecture. It began to deliver G and A savings and took seven eighty basis points of market share. In 2024, we made substantial progress. We accelerated the move to shared service centers for HR and finance and overachieved the G and S savings target.

We outgrew competitors by a further 200 basis points. Moreover, we introduced a comprehensive tech roadmap covering the next couple of years. We have enhanced our IT tools and solutions swiftly, better positioning the group to improve both recruiter efficiency and the customer experience materially. Looking ahead, our operational focus areas include expanding MSP, advancing AI tools and solutions and introducing Adjentic AI to the business. We are committed to managing capacity with agility and rigorously focused on G and A savings, deleveraging and delivering market share gains.

On Slide seven, we provide client wins from across RGVUs that encapsulate how the group is driving market share gains and growth. First, as part of a consortium, Adecco and Accordis won a significant multi year contract for the armed forces in The UK. The team will develop a digital first and comprehensive recruitment solution. The client valued Adecco’s unrivaled workforce management expertise and Acotis’ strength in systems integration and development. Second, Pontoon won a large MSP contract with a leading technology company to manage its IT workforce across The U.

S, Canada and India. The client required a reliable solution to address regulatory compliance, workforce feasibility and operational efficiency. Ducan particularly valued Acodesys’ IT staffing expertise and Adecco staffing know how at scale. Finally, in LHH, Esroix expanded its collaboration with Microsoft to develop a leadership training program for co pilot adoption that supports organizational transformation. The client values Ezra’s technologies, which provide real time feedback and are proven to make a measurable impact at scale.

Moving now to Slide eight. As we’ve highlighted, the Group is steadfastly executing its strategy and is firmly committed to delivering on its financial targets. The balance sheet and financial structure remain sound, and leverage has not constrained the execution of the group’s strategy. Notwithstanding, the macroeconomic and the geopolitical environment has been unfavorable for longer than we had expected, which has prevented the Group from deleveraging under the current dividend policy. The group’s dividend policy was based on a 40% to 50% payout ratio on adjusted EPS with a commitment to hold the dividend per share at least in line with the prior year period.

Moving forward, the Group’s updated dividend policy will be based on a 40% to 50% payout ratio on adjusted EPS with no floor. The group reiterates its commitment to distributing excess capital to shareholders when leverage is below 1x. The updated dividend policy will accelerate deleveraging and increase financial flexibility. It is well suited to a strongly cash generative yet cyclical business, and it achieves a better balance between growth investment to support the group’s strategic shift towards higher growth and margin markets with direct distributions to shareholders. The immediate capital allocation priority is for the group to delever.

And we target a net debt to EBITDA ratio at or below 1.5x by end twenty twenty seven. Accordingly, the Board proposes to distribute a dividend per share of CHF 1. This represents a payout of 42% within the group’s 40% to 50% pay range. Let me now hand over to Cor, who will provide insights into this quarter’s results. Thank you,

Coram Williams, CFO, Adecco Group: Denis, and a warm welcome to all of you who have joined the call today. Let’s begin with Slide 10 and the group’s Q4 results. Like the full year achievements, quarterly revenues and profit levels were resilient. The group delivered billion in revenues, 4.6% lower year on year on an organic trading days adjusted basis and 3% lower on an organic basis. The gross margin at 19.2% was healthy, reflecting firm pricing, volume and mix effect.

Productivity improved 1% year on year and G and A costs were reduced strongly by 14% year on year, supporting an EBITA margin of 3.2%. Cash generation was notably strong. Cash flow from operating activities was million, an increase of million year on year as the timing effects we noted in Q3 unwound and the last twelve months cash conversion ratio was high at 109%. Turning now to the GBUs and Slide 11. Adecco’s performance was good in tough markets.

Revenues were billion, five % lower year on year on an organic trading days adjusted basis and 3% lower on an organic basis. By service line, flexible placement revenues were 3.5% lower, permanent placement was 1% lower and outsourcing activities were up five percent. Although enterprise demand remained soft, SMEs grew 2% year on year. In sector terms, autos and IT tech was subdued, while manufacturing and logistics were soft. In contrast, growth was solid in retail and strong in food and beverages.

Gross profits were 3% lower and the gross margin was stable reflecting firm pricing. The EBITA margin at 3.4% mainly reflects volumes and business mix, partly offset with good cost mitigation efforts and higher FESCO income. Adecco continues to manage its capacity with Agility, reflecting market share opportunities and rebound potential. Slide 12 shows Adecco at the segment level. In France, revenues were 10% lower in a tough market and weighed by lower demand from a handful of key clients.

In sector terms, logistics and healthcare were notably pressured. France’s EBITA margin of 4.2% mainly reflects unfavorable operating leverage. Given the market backdrop, management has taken rightsizing action with headcount reduced by a high single digit amount. Revenues were 11% lower in Northern Europe, performing better than the market. Within the region, revenues were 19% lower in The UK and Ireland, Ten Percent lower in The Nordics and four percent higher in Belux.

1 time items weighed the segment’s margin. Excluding these, the underlying EBITA margin was 0.6%. Revenues in DACH were 11% lower and ahead of competitors. Germany was 14% lower and Switzerland Six Percent lower. Manufacturing, logistics and IT tech were challenged and autos remained weak.

Southern Europe and EEMINA revenues were 3% higher. Iberia was up 10% and EEMINA up 13% outpacing the market, while Italy was 3% lower. Logistics, food and beverages and retail were strong. The Americas revenues were 5% lower. LatAm was up 8% with most countries growing in double digit terms.

In North America, although SMEs grew moderately, revenues were 12% lower reflecting the continued downturn in flexible placement demand and specific client headwinds. In APAC, revenue growth was solid, up 5%. Japan was up 7%. India up 24% and Asia up 8%. In Australia and New Zealand, revenues were 10% lower on a high comparison base.

Let’s move to Slide 13 under Codis. This was a quarter of solid execution given market headwinds. Revenues were 6% lower year on year on an organic trading days adjusted basis. Consulting and Solutions revenues were 3% lower, while Tech Staffing revenues were 11% lower. Revenues in EMEA were weak.

France was 6% lower reflecting subdued demand from autos and aerospace clients. Germany was 15% lower with the business facing strong headwinds from autos with many projects postponed or canceled due to budget freezes and pressure on utilization rates. Revenues in North America were 9% lower, weighed by the ongoing downturn in tech staffing, albeit sequentially improved. Consulting and Solutions rose 31%. In APAC, revenues were solid, up four percent with Japan and China up 9%, reflecting strength in consulting, while Australia was 8% lower due to continued headwinds in tech staffing.

The 6.1% EBITA margin mainly reflects lower volumes and utilization, partly offset by G and A cost savings. Last year’s Q4 EBITA margin was flattered by one time items, which we highlighted at the time. The underlying margin development was 100 basis points lower. The Consulting and Solutions margin was strong at 7.6%, rising to over 10% when excluding the German operations, which are currently in turnaround. Now to slide 14 and LHH.

Revenues in LHH were 3% lower year on year on an organic trading days adjusted basis. Recruitment Solutions revenues were 8% lower ahead of the market if reflecting continued headwinds in professional talent markets. Gross profits were 8% lower improved from H1’s minus 15% and Q3’s minus 9%. Career transition was strong in the context of a high comparison with revenues 1% lower. Sequentially, revenues improved and the pipeline remains solid.

Learning and development revenues were 5% lower. Ezra performed well with revenues up 15% on a high comparison and a healthy order book. GA made good progress against its strategy. It is progressively exiting B2C while growing its B2B business, where revenues were up 48%. Revenues in Pontoon were up 6% led by 17% growth in Direct Sourcing.

While MSP and RPO revenues remained soft, they have improved quarter on quarter throughout 2024 and the pipeline is healthy. The EBITA margin of 4.4% was impacted by charges for student loans in GA as we wind down the B2C activities. Excluding this, the underlying EBITA margin was 7.4%, reflecting lower volumes, strong G and A savings and moderated investment in ventures. Let’s return now to the group results on slide 15. On the left, we review the quarter’s gross margin drivers.

On a year on year basis and under the group’s accounting policies effective 01/01/2024, currency translation and portfolio scope had a neutral impact. Flexible placement had a negative impact of 30 basis points, mainly due to current geographic mix. Permanent placement had a 10 basis point negative impact, reflecting lower volumes, while outsourcing, consulting and other had a 10 basis point negative impact, mainly reflecting lower utilization in Acodis. Training, upskilling and reskilling had a 10 basis point positive impact, while the Korea transition impact was neutral. In total, the gross margin was 40 basis points lower on an organic and reported basis.

At 19.2%, it is a healthy result reflecting firm pricing, volumes and mix effects. On the right, we review this quarter’s year on year drivers of the group’s EBITA margin. Q4 twenty twenty three’s margin of 4.3% was flattered by one time items that we highlighted at the time, totaling around 30 basis points, giving us an underlying development of minus 80 basis points year on year. Gross margin developments were accompanied by a 90 basis point negative impact from operating leverage as we selectively protect capacity, partly mitigated by a strong 50 basis point positive impact from G and A savings. Moving now to slide 16, which shows the group’s strong cash generation and solid financing structure.

On a full year basis, cash flow from operating activities of million and free cash flow of million were both very strong. Net working capital developments reflect favorable customer collections with DSO at fifty two point eight days, improving zero point one days year on year and favorable payables balances. Q4’s operating cash flow was million, while free cash flow was million. Net working capital development was supported by an approximately million reversal of Q3’s negative timing impacts and favorable payables balances. DSO was best in class at fifty two point two days, improving zero point four days year on year.

Finally, the full year cash conversion ratio was 109%, a significant improvement from 63% in the prior year. Management has rigorously focused on improving cash generation through disciplined networking capital management and by lowering CapEx and one off costs. The chart evidences the delivery of these efforts. For example, CapEx in 2024 was million, down from over million. 1 off charges in 2024 were million, meaningfully below 2022 and 2023 levels and we expect a further significant reduction in 2025.

Turning to the balance sheet. In net debt to EBITDA terms, excluding one offs, the group’s leverage was 2.8 times at year end. End Q4 net debt was million, million lower year on year and ahead of management expectations. Gross debts reduced by million in 2024, supported by the repayment of a million bond that procured in Q4. The group has a solid financial structure with fixed interest rates on 79% of its outstanding debts, no financial covenants on any of its outstanding debts and strong liquidity, including access to an undrawn million revolving credit facility.

The updated dividend policy will help accelerate deleveraging and increase financial flexibility. We remain firmly committed to deleveraging and now target bringing the net debt to EBITDA ratio to 1.5 times or below by the end of twenty twenty seven absent any major macroeconomic or geopolitical disruption. Let’s turn to slide 17. Strong progress de layering and simplifying the group structure and our relentless focus on growth and market share are driving changes in how the company manages and allocates its resources. Consequently, effective 01/01/2025, a new reporting structure has been implemented.

Given the close alignment of services and the group’s strategic focus on MSP expansion, Pontoon’s MSP and direct sourcing activities have been re homed under the Adecco GBU President. Pontoon’s RPO activities have been combined with LHH recruitment solutions to realize synergies and scale the RPO business. The move in Pontoon’s reporting structures will increase Adecco’s revenues by approximately million and lower LHH’s revenues by the equivalent amount. The EBITA margin impact is not material for Adecco, but LHH’s margin will rise by around 100 basis points. Finally, Adecco’s segments have been streamlined into four regions: France, EMEA, Americas and APAC.

Before the Q1 results, the group will provide re reported GBU and segment disclosure that reflects these changes. Let’s turn now to Slide 18 and the group’s outlook. Volumes were stabilizing throughout Q4 and have shown improving momentum in early twenty twenty five. For Q1, the group expects gross margin to be higher sequentially, in line with normal seasonality, and SG and A expenses, excluding one ots, to be broadly flat sequentially. We are continuing to focus on G and A savings whilst positioning sales and delivery capacity to capture market share and accelerate into recovery.

And with that, I’ll hand back to Denis.

Denis Machewel, CEO, Adecco Group: Thank you, Coram. And on our next few slides, we’ll focus on some of the key priorities that are driving improved financial performance. We first focus on how we drive performance across our GBUs starting with Slide 20 and a deep dive on Adecco U. S. Management has stayed the course with its turnaround strategy despite challenging markets.

This slide sets out some of the many achievements made in 2024 across three key focus areas: branch revitalization, customer expansion and cost optimization. The team have improved the profitability of 96 branches and the branch network delivered a strengthened average fill rate of 80%. As proof of progress, in a down market, our SME revenues were up through the H2 period. Overall, twenty twenty four revenues grew three ninety basis points ahead of the American Staffing Association Market Index. And the sales pipeline now stands at very high levels.

Moreover, Adecco U. S. Made over 1,400 client wins on a net basis in 2024, including substantial wins, particularly in the Food and Beverages sector. There’s still much work to be done, but the turnaround has good traction. And looking forward, we anticipate that Adecco U.

S. Will return to year on year revenue growth in the first half of twenty twenty five. Moving to Slide 21, where we take a closer look at Acodes. We have selected a new leader for the GBU and Jan Gupta will step down from his role in the group’s Executive Committee. We want to acknowledge the key role that Jan played in shaping MODIS and in the successful integration of AKA and Modus, creating a world leader in ER and D technology consulting.

In 2024, Consulting and Solutions revenues were €2,600,000,000 showing a growing 1% year on year, in line with competitors. And the Consulting and Solutions EBITA margin was 6.1%, weighed by Germany, which is currently in turnaround. But excluding Germany, the segment delivered a healthy margin of around 8%. Acodes has very strong foundations. And under new leadership, we’ll accelerate the implementation of Acodes’ consulting and solutions strategy with a focus on key levers: operational excellence, strengthening the business technology practices, significantly expanding offshore capabilities, delivering the German turnaround and increasing our consulting footprint in key geographies, such as The U.

S. And China. Small bolt on acquisitions will support this strategy. Acodis recently acquired RAN compliance partners in The U. S.

To bolster its life sciences and health care capabilities. It also acquired Barhead Solutions in Australia to enhance its Microsoft Technology Solutions expertise. In accelerating performance, we expect Acodes to deliver higher growth and bring EBITA margins into the 7% to 10% GBU corridor. Let’s turn to Slide 22 and an update on how the group is building a GenAI powered business. The group is upgrading its IT foundation by consolidating and simplifying its technology landscape.

We will leverage this foundation to accelerate investment in innovation to support the profitable growth of the Adecco Group. In particular, the group is building an ultra efficient talent supply chain. Processes are being automated end to end with Gen AI technologies and Adecco AI to improve efficiency further. The group plans to fully leverage local and global delivery assets, such as existing branches and carrier centers and meaningfully expand its on and offshore recruiting and delivery hubs. Progress has been substantial during 2024.

We have equipped 25,000 recruiters with our recruiter Gen AI suite. 136,000 candidates were placed through the Adecco’s digital platform globally. Supported by higher fill rates, revenues from clients serviced by our digital platform were 9% higher than revenues from our global accounts. And 19,000 candidates have benefited from Eletech’s AI powered career canvas. Our swift progress is supported by key strategic partnerships with Salesforce, Bullhorn and Microsoft, as the video played earlier today shows.

In summary, the group’s AR strategy will drive efficiencies, productivity and competitive edge. It will create a differentiated experience for customers with enhanced human centricity. And let me now wrap up today’s presentation with Slide 23 and our key takeaways. The group achieved relative revenue growth of plus 200 basis points in 2024, demonstrating its ability to gain market share despite challenging market conditions. We exceeded our G and A savings target, delivering EUR174 million net of inflation by year end, while selectively protecting sales and their recapacity to capture market share and accelerate into recovery.

We delivered very strong cash generation, reflected in a 109 cash conversion ratio. And we are accelerating the adoption of AI technologies to revolutionize the recruitment process and build a competitive edge. The group has updated its dividend policy to accelerate deleveraging and increase financial flexibility. And management remain focused on delivering our strategic priorities with rigorous execution and a commitment to achieving our financial targets. Thank you for your attention and look forward to answering your questions.

Operator, we can have the first questions.

Conference Operator: And your first question comes from the line of Alfonso Azario from Barclays (LON:BARC). Your line is open.

Alfonso Azario, Analyst, Barclays: Yes. Thank you for taking my questions. Good morning. A few from me, please. The first one, obviously, on this dividend decision.

Can you expand a little bit on that? And what made you conclude that this was the right level for the dividend this year? And how should we think about next year and the year after in terms of progression for the dividend? And then secondly, in The U. S, can you also expand a little bit on your assumptions for growth in the country in the first half?

I suppose you’re planning to grow positively in the first half. So your assumptions there are quite helpful. Is that broadly of market share gains or is it a function of the broader market to recover in the first half twenty five? And then just lastly on France, I mean, I believe you reported loss of market share in the country for a few quarters now. So just wondering if the what are the drivers of that?

And how are you thinking about growth in France going forward? Thank you.

Denis Machewel, CEO, Adecco Group: Thank you, Alfonso. And I’ll start with the dividend. So in a nutshell, we have a solid strategy. We are rigorously executing on it. We’re focused on profitable growth.

We have a solid financial structure. However, clearly, the macroeconomic environment, the geopolitical environment haven’t helped and haven’t have prevented us to deliver as the speed at which we wanted under the current dividend policy. So this was the right time to adjust the policy to help us accelerate deleveraging, to bring additional financial flexibility and to have a better balance between profitable growth investments into higher growth markets, into higher margin markets and, of course, the distribution to our shareholders. We are a strong cash generative business and also a cyclical business. So the adjustment of this policy comes at the right moment.

Coram Williams, CFO, Adecco Group: And let me just pick up this is Coram. Good morning, Alfonso. Let me just pick up on the point about how we landed on the amount. I I mean, as Denis said, this updated dividend policy strikes a good balance between shareholder returns, deleveraging and growth investment. And obviously, our short term priority is deleveraging.

This frees up $250,000,000 of cash to help us delever. The policy itself is based on 40% to 50% of adjusted EPS. That means it moves in line with earnings. And clearly, we are at the lower end of our margin corridor right now. And we are absolutely confident that we can drive margins, profitability and earnings up over time.

And obviously, the dividend will move up in line with that.

Denis Machewel, CEO, Adecco Group: Now turning to The U. S, We are pleased with what we see from our turnaround plan. There has been sequential improvement, particularly in Adecco U. S. I mean, the big ticket item there is Adecco U.

S. The rest of the business, career transition is solid and it’s second highest revenue in its history. Recruitment solutions in NHH is still like performing ahead of the market, but still down. And Acodis staffing is still in line with a market which is down. Consulting is growing 30%, which is very encouraging.

It has good traction. Now Adecco U. S, which was the problem side, if I may say so, we see an improvement quarter on quarter on our performance. We still had some large client impact in the quarter that has that have weighed on our performance. However, we are very positive about the impact of our turnaround plan on our results.

We’ve seen an improvement in our branch profitability, and we have now almost 100 branches that have improved their profitability. At the end of twenty twenty five, we will have nearly more than plus 40% in number of branches versus two years ago. So we are investing there and it shows because the small and medium markets has grown 1% this quarter. It’s the second quarter in a row where we grow versus starting the year at minus 7%. So we see traction there and this will continue.

The large clients’ losses are behind us, and we have some large wins through MSPs or directly with Adecco that will support growth moving forward. On top of that, the Spontoon spend with Adecco has increased 13%. So Spontoon is driving more volumes to Adecco. We’ve also built a strong nearshore delivery engine. We’ve seen productivity GP per selling FTE improving 3%.

And a good sign of how our clients appreciate what we do, we have an NPS strongly improving. At the end of the day, when we look at the performance versus the American Staffing Association market index, we have we are in Q4 ’4 hundred basis points ahead of that index. So that shows positive traction. On the market side now, we have seen in The U. S.

Temp volumes since the beginning of the year improving slightly improving week after week. We are much more cautious about perm, permanent recruitment, which is still very soft. So we see better traction in temp, soft in perm, which gives some, let’s say, some ideas of a possible positive momentum moving forward. However, as I said, given what our traction in SMEs, what we do in large clients, we are positive that over the H1, we will achieve growth in revenue year on year. Now, France, France is, let me clear, France is still a tough market.

And of course, there are difficult economic and political situations. There is still uncertainty there. And we’ve been facing headwinds, particularly with our top three clients that are still in negative territories. However, and we also had a change in legislative environment on healthcare that have impacted our Q4. However, we’ve seen a good traction in the next 20 clients, not the top three, but the next 20, where we are positive year on year.

So we are closing the gap with the market. We’re getting market share in construction. Our perm business is up 5%, which is positively surprising, I would say. And we had some large wins in Q4. So France will remain a market or a difficult market, let’s be clear.

We are protecting margins. We’re protecting bottom line. We are executing a restructuring plan as we speak with a high single digit in percentage of people reduction. We are adjusting selling FTEs. And we have also put a new leader in place to improve performance.

He will focus on branch productivity, execution of our TAM supply chain, speed of delivery and the MSP development. So French will remain a somehow difficult market, but I’m positive in the footprint that we’re going to have in this country.

Alfonso Azario, Analyst, Barclays: That’s very clear. Thank you very much.

Conference Operator: Your next question comes from the line of Raymond (NSE:RYMD) Grunu from Morgan Stanley (NYSE:MS). Your line is open.

Raymond Grunu, Analyst, Morgan Stanley: Yes, morning and thanks for taking my question. So the first one is to come back on the comments you’re making on the outlook. Can you help us reconcile a little bit that comment on improving momentum and the weak data we have seen so far for staffing markets like France, Germany and The U. K? Is that improvement you’re referring to driven by any specific regions?

And should we assume that the divergence between Northern And Southern Europe continues from here? So that would be the first question. The second one is on working capital. So clearly, better DSO, but also significant inflow on payables. So I know you flagged that you had $60,000,000 of timing positive timing effect on payable, but can you help us understand what are the drivers for the remaining payable inflow?

And if it means that we could see any offsetting impact in Q1, any payments falling into Q1 rather than Q4? And then the third one is on deleveraging. Helpful to get a little bit more visibility. Can you elaborate a little bit on the assumptions you’ve made regarding the timing or the timing for the infection and the pace at which the volume are going to improve from here, not really as a guidance, but much more as a way for us to assess going forward whether you are ahead or slightly below on that pace for deleveraging the balance sheet?

Coram Williams, CFO, Adecco Group: Thank you, Remi. I will take all three of those. So on your question to begin with about the outlook, I absolutely understand the point you’re making. To be clear, the shape of the business that we’ve seen in Q1 is similar to what we saw in 2024. In other words, we are seeing markets in LatAm, APAC, Southern Europe continue to grow.

Whereas, for example, in Northern Europe, in France, in The UK, in Germany, they continue to be down and they continue to be challenging markets overall. The point that we’re making about momentum is around the weekly volumes. And what we have seen from the beginning of the year is a very modest improvement every week on volumes across a broad number of countries. It’s not changing the overall shape of where the pressure is and where the growth is, but it is interesting to see that every week we see a modest improvement in volumes across a significant number of countries. And that’s the point that I think we’re trying to make about momentum.

It is relatively broad based. On working capital and cash, obviously, we were very pleased with the Q4 performance, which is million up on Q3. And we’re obviously also very pleased about the 109% cash conversion ratio that we delivered for the full year. There’s really three drivers of the cash performance. So in Q4, the positive reversal of the million of timing effects that we flagged in Q3, part of that was AR, a bigger chunk of it was accounts payable.

And just to be clear on this accounts payable, in 2023, the timing of that AP was very heavily weighted towards Q4. We had something of a backlog that had built up on payables. And that means that in comp terms, it hurt us in Q3 twenty twenty four, but it benefited us in Q4 twenty twenty four. I think there are two other things that are driving the cash performance for the full year. The first is really, really strong management of DSA.

We are zero point four days improved in Q4, up 52.2 days. And that is despite pressure in the market on terms. I think we’re all seeing that, but we’ve done a really good job of managing this. And we are now clearly best in class in terms of DSO. And I think the third thing you should factor in on the full year cash is that obviously with a top line that has declined, you know the working capital profile of this business, we tend to see a working capital release.

So I think when you put all three of those together, that explains both the Q4 and the full year cash performance. What’s it going to look like in 2025? Well, we will continue to focus on net working capital, particularly around DSO and payables. Obviously, it depends on the shape of the year and in particular on growth because if we see a little bit of growth, then that will absorb working capital. But the other thing I’d remind you is that on free cash flow, we’ve done a good job of managing CapEx.

We’d expect it to be about million in 2025. And our one offs drop considerably from 87,000,000 in 2024 to around 30,000,000 is what we’re forecasting in 2025. So I would expect solid cash generation in the year. Obviously, the conversion will depend on growth and we will deleverage year on year in 2025 as a result of the pieces that I’ve just described plus the $250,000,000 benefit from the updated dividend policy. I’m not going to make a prediction on Q1.

It is typically a seasonal outflow. It’s one of our least cash generative quarters and there’s always timing effects on some quite big balances on both receivables and payables. So but we are expecting solid cash generation in 2025 and clearly deleveraging. On the question around how to get to at or below 1.5 times net debt to EBITDA, obviously, there’s a variety of factors that affect this. So what happens to the top line, what we do on costs and therefore margin and also cash conversion.

If I were to boil it down, then I think you should think of this in one of two ways. Either modest top line recovery, and I’m talking low single digits here, which drive operating leverage and productivity and therefore margin or margin expansion into the middle of the 3% to 6% margin corridor. And if we did not see top line growth, then you’d expect us to adjust capacity and take cost out and drive margin. Either of those will get us to the 1.5 times net debt to EBITDA target. Both of them would get us there faster.

So I hope that gives you a sense on how to think about this given that there are a variety of different drivers.

Raymond Grunu, Analyst, Morgan Stanley: Yes. Thanks so much. And just one housekeeping question on what’s the level of leverage at which you would consider returning excess cash? Is it still 1.5 or maybe I think I heard Denis mentioning one time?

Coram Williams, CFO, Adecco Group: It’s actually always been one. So we’ve not changed that aspect of the capital allocation policy. Our target for leverage is to be at or below 1.5 times and we have a clear commitment that if we’re below one times that we will distribute excess capital and we normally do that via buybacks.

Raymond Grunu, Analyst, Morgan Stanley: Okay. Thanks for the clarification. Thanks.

Conference Operator: Your next question comes from the line of Samir (CSE:SAM) Nasali from Bank of America. Your line is open.

Samir Nasali, Analyst, Bank of America: Yes, good morning and thanks for taking my question. I have just one left. If you could please elaborate a little bit more on your guidance of SG and A sequentially flat in Q1. So if I consider seasonality, it should actually be down sequentially. So is that an element of being conservative here or what are the moving parts?

Thank you.

Denis Machewel, CEO, Adecco Group: I think Coram would be very happy to answer this one.

Coram Williams, CFO, Adecco Group: I’ll take that one. Actually, Simone, if you look at what’s happened to SG and A typically from Q4 to Q1, there’s usually a seasonal uplift in absolute terms. It’s usually $10,000,000 to $15,000,000 Now we do have as we flagged some charges in GA in Q4 which went through SG and A and that’s why we’re guiding to broadly flat sequentially. Longer term, obviously, we adjust capacity on an agile basis around selling depending on what we see in the markets. And we continue to focus on making sure that we are keeping our G and A savings firmly under control below 3.5% of revenues And there are still some pockets that we can go after.

I’m not flagging another program along the same lines that you saw us deliver the $174,000,000 but there are a couple of pockets that we can go after in certain territories and we will continue to do that. Obviously, that will come later in the year. That doesn’t affect our Q1 guidance.

Conference Operator: Your next question comes from the line of Andy Grobler from BNP Paribas (OTC:BNPQY). Your line is open.

Andy Grobler, Analyst, BNP Paribas: Hi, good morning. Just a couple from me, if I may. Firstly, just on Germany, you talked around or talked about the turnaround within the Acodis business. What assumptions are you making about the automotive industry as you plan that turnaround in terms of how bad that could be over the next one, two or three years? And then secondly, just on AI, sorry to bring that one up again.

You talked about the opportunities. It was interesting to see that one of your peers put AI as a material risk. What are your thoughts about some of the headwinds that may come from AI as well as some of the opportunities? Thank you.

Denis Machewel, CEO, Adecco Group: Thank you very much, Andy. Nice to talk to you. So on Germany, definitely, this kind of overall, the Akodesk business is solid. The pain point at the moment is Germany mainly due to two things. One, the auto business, as you rightly mentioned.

We had project that got stalled, some were stopped, some were delayed. This has created a lower due to the send rate, bench management, etcetera. That’s one thing. There was also to just further clarify, we were in Germany too much exposed to legacy technologies. And we talked in the past about this move from legacy technology into smart industry.

And this what we were executing moving into digital engineering and AI, but that piece is still a bit too small. And as we were shifting, the auto crisis hit us. So we have a turnaround action plan. It’s in progress. We’ve brought an additional new leader to help us accelerate.

We have we are optimizing a center of excellence. We have a new organization being in place being put in place, which is going to be more client centric. So, all these things are good. However, we will need, given the exposure that we have to autos, a bit of a more supportive environment. So, difficult to say exactly at which moment things are going to pick up.

What we know, what we hear from our clients and let me be clear, we still have excellent relationship with our clients. I mean, the likes of the BMW (ETR:BMWG) and Mercedes and VW are, I mean, key clients, they really appreciate what we do. Just as you know, they are in a difficult situation. What they’re moving forward, what we see, it’s probably more into 2026 onwards, is they will do more outsourcing. They need to reduce their workforce and they’re doing it as you know.

And they’ve been very clear that we would expect partners like us to really accompany them with efficiency and outsourcing of larger projects. So, I don’t expect any move any positive move in 2025. But moving forward, I am really strongly positive in how we can develop further partnership. At the same time, we are also diversifying. We see good traction on the defense sector.

The aerospace also is promising. Life science is also getting some traction. So we are all hands on deck, adjusting the bench, diversifying and staying very, very close to the auto sector to be seen as the partner that will help them on their efficiency program. And that’s what they’re asking us, and it’s an opportunity for us. Now on AI, we’ve been we started all our Gen AI initiatives very early on.

We learned a lot. We streamlined a lot of things, thanks to Gen AI. Internally, we see we have four pillars to our Gen AI action plan. We’ve from this initial sort of discovery two years ago, we’re now much more focused. We go deep and we scale, which means that helps us streamline our processes and automate.

And we’ve chosen a few battles: recruiter efficiencies and candidate experience, LHH, Curry, Canvas, as we mentioned, Ezra coaching and a few others. But we go really we don’t spread our effort. We focus it and we scale. We have great strategic partnerships with Salesforce on AgenTek AI and Data Cloud, with Bullhorn on Search and Match, with Microsoft on the infrastructure and on Copilot. We train our people and we also have a jewel, which is Acodes Research, which is really a day very advanced in how they help us progress on GenAI.

We’ve been working with our agents in Acodes since spring twenty twenty three. So this is very solid. Now on the market, very, very hard to know which direction it’s going to take. Of course, there’s going to be disruption as we had with when digital came in. What I must say is because of the effort and the focus that we have, I think we are very well placed to capture every single opportunity.

I’m very confident in our general strategy. It would also is disrupting the job organization in our clients. That’s an opportunity for us because they will need to train, they will need to upscale, they will need to do internal moves, etcetera, and we are here to help. We see great traction in how we train, thanks to our Acodis Academy into GA. Acodis Academy focuses on training engineers, General Assembly focuses in the B2B side on non engineers.

So we are very focused offering when to train lawyers, for example, to train accountants on how they have to embark into Gen AI. So I see Gen AI much more as an opportunity than a risk. The risk exists, of course, but we are embarking boldly on that revolution, as we call it.

Andy Grobler, Analyst, BNP Paribas: Great. Thank you very much.

Conference Operator: Your next question comes from the line of Shusani Farafani from Goldman Sachs. Your line is open.

Shusani Farafani, Analyst, Goldman Sachs: One left for me please. You’ve discussed gross margins which can be sequentially higher in 1Q versus 4Q. But I think it was a bit of a disappointment versus your in Q4 versus your initial guidance which you had given at the time of Q3 results. So can you maybe help us understand what’s going to drive this improvement sequentially, especially given perm is still a little bit weak? Thank you.

Coram Williams, CFO, Adecco Group: So just to be clear, the gross margin right now we think is healthy given the environment in which we’re operating. Pricing has remained firm. Our spread between bill rate and pay rate is up in the G12. The multiplier is positive. And so we are protecting pricing whilst still as you’ve seen gaining share pretty consistently.

The impact on gross margin is really twofold. It’s the ongoing pressure in perm and it’s the particular mix of where the growth is coming from in the Adecco business. Neither of those is structural. Both of those are really driven by the market conditions that we see. And in terms of what drives the sequential improvement, there is always a small sequential improvement between Q4 and Q1 gross margin.

It’s usually around 10 basis points and it’s simply about the weight of the business. It’s that the seasonality particularly in the Deco business means it’s the softest quarter. So it has an impact on the group gross margin. In terms of the trends that we would expect to see, very similar to Q4. So in Q1, no real impact from FX or M and A.

We’d expect to see perm broadly flat because that has been going for a number of quarters and so the comp effect is unwinding. We’d expect to see maybe 10 basis points of year on year pressure from Korea transition just because it’s coming off a record year, it’s still strong. OCS about another 10 basis points year on year simply because of the pressures on utilization rates. Although, let’s also flag that our utilization rates in the consulting and solutions business are good still. They’re at 91%.

So we’re protecting those. And then Flex (NASDAQ:FLEX), I think, will be about minus 30 to minus 40 year on year. And however you triangulate it, whether you look at the plus 10 bps seasonal effect or you take those trends and apply them Q1 twenty twenty four to Q1 twenty twenty five, you’ll get to around 19.3%, nineteen point four % and that’s where we’re guiding to.

Shusani Farafani, Analyst, Goldman Sachs: Thank you.

Conference Operator: Your next question comes from the line of Rory McKenzie from UBS. Your line is open.

Rory McKenzie, Analyst, UBS: Good morning. It’s Rory here. First question on the cost base. Can you give more detail on the savings actions in Q4 and where you’ve landed ahead of plan on the G and A savings? And also are there any other Q4 cost movements that we should be aware of like lower bonus accruals or TME restrictions perhaps?

And then related to that, do you think you can stay within your target 3% to 6% margin corridor for FY 2025? Just this year landed at 3.1% and given the profit growth rate, I guess, deteriorates over the year, you kind of face a weak exit rate. So I was interested to hear you don’t think there are many more large programs to come? Thank you.

Coram Williams, CFO, Adecco Group: Let me take those, Rory. I mean on G and A, as I think we’ve talked about previously, we’ve been very effective in driving that G and A savings program, $174,000,000 of savings versus a target of $150,000,000 very broad based. All of the GBUs contributed. There were significant savings at corporate and it’s really about making sure that we’re de layering and streamlining the organization. So all parts of the business contributed to that.

And our G and A expenses at the end of the year were at 3.4% of revenues, which is very lean. G and A FTE is down 8% in Q4. In terms of notable cost movements in Q4, I mean, we have flagged the one item which is unusual, which is the costs of the wind down of the B2C business in General Assembly. We took that above the line. And just to spend a moment on that, we are exiting the B2C business, as part of our strategic focus on B2B which is growing very nicely.

As we’ve seen across the industry in B2C education, there have been challenges in collecting some of the loans that were made to students in previous models to pay for the education. And we’ve taken a very thorough look at that loan book. We’ve cleaned it up. And that is a cost that was in Q4 that won’t repeat in Q1. And that really brings me back to the answer I gave earlier about the sequential movement on SG and A because normally you see SG and A rise by $10,000,000 to $15,000,000 between Q4 and Q1.

The reason we’re broadly flat is obviously ongoing discipline around G and A, capacity management and then the absence of those GA costs. And then on the 3% to 6%, I mean, I think it’s important the exit rate is not weak. It is stabilizing in Q4. And as we flagged, we are seeing improving momentum in our weekly volumes in the first two months of twenty twenty five. Overall shape hasn’t changed, but every week there’s a modest improvement in volumes in across a number of different countries.

We are very focused on making sure that our G and A savings stick. And as I said earlier, there are a couple of pockets where we can go for further G and A. Denis has mentioned some of the turnarounds, for example, in France and The U. S. There are opportunities in both of those territories for further G and A reductions and they will come later in the year.

We’re very focused on delivering that. So we are very confident that we will stay within our 3% to 6% margin corridor. And one final point that I will make, our recovery ratio in 2024 was 44%. Now that’s a good recovery, but it’s not quite at the 50% that we’ve targeted previously and that’s because we have protected capacity in our sales organization so that we can make the most of a recovery when it comes. And I think that’s important because that means you’ll get good operating leverage on the way up.

Rory McKenzie, Analyst, UBS: Yes. Thanks. It was definitely getting at that drop through ratio question. So thanks for anticipating that. Thank you.

Coram Williams, CFO, Adecco Group: No problem. I figured that’s where you were going.

Conference Operator: Your next question comes from the line of Konrad Zomer from ABN AMROAD ODDO. Your line is open.

Denis Machewel, CEO, Adecco Group: Hi, good morning. Thanks for taking my questions. The first one is on your new organizational structure. Can you give us a few specific advantages or synergies that you’d likely achieve from moving Pontoon RPO into LHH please? And my second question, you sound quite a bit more optimistic in today’s call and in today’s press release than in the previous few quarters.

So, having said that, can you tell us what you think will happen to your headcount into 2025? Because I think you did an excellent job in 2024 by reducing costs, partly by reducing headcount. Is this the time to protect headcount? Is this the time to further share people, given that you expect markets seem to have stabilized quite a few different regions? Thank you.

I’ll take the first one, Konrad, and thanks for your questions. And Coram will take the second one. On Pontoon, Pontoon had two had really two components, a recruitment component and a MSP component, managed service provider. And if you look at that, there was not so much synergies between the two. And we believe that hosting the recruitment business, the RPO business in LHH makes more sense because LHH has this sort of advisory positioning on workforce management, particularly for white quarter and managers, etcetera.

So deals directly with CHROs on topics like your strategy, how you can accelerate. So putting the recruitment process outsourcing is much more strategic decisions that CHROs too much, I would say, of a disconnect between what MSPs, too much, I would say, of a disconnect between what we do with MSP and the way MSP can feed the Adecco business. So we yes, they’re still run as separate because some of the MSP business is run as vendor neutral. So we have to keep it separate. But there’s one leader and that one leader Christophe who runs the overall Adecco and Pontoon business is there to make sure that wherever we can we know the MSPB piece really brings all these the best of Adecco.

And so those synergies, this collaboration between the two is very efficient. So and we’ve already seen traction. We’ve won some very large contracts, thanks to a perfect alignment and collaboration between the two. So rather than having two separate entities, one leadership, one direction, great synergies, great collaboration, and this is already getting traction. As I was mentioning, I think in The U.

S, we already seen the MSP, the pontoon business, driving 13% more business into Adecco in its spend. So more to come on this, but that was a logical thing to do.

Coram Williams, CFO, Adecco Group: And, Conrad, let me pick up on your point about headcount. I mean, if I look at Q4, then year on year our headcount was down 6%, down 2% sequentially. Within that as you rightly identified there is there has been more headcount reduction in G and A. So that was down 8% year on year while our selling headcount was down 5%. So to deliver those savings, we have very deliberately targeted headcount reductions in G and A.

And I think as you say, we’ve been very effective at over delivering versus our target. And in terms of what I’d expect going forward, obviously, there continues to be a focus on relentlessly managing our G and A costs. Again, I’m not flagging another big program, but as I’ve mentioned, we do think there are further pockets that we can go after. So I would expect later in the year for there to be modest reductions in G and A headcount. And then on the selling side, we’re really managing this on a country by country basis.

We have taken headcount out in some of the more difficult markets. We protected headcount where we can see signs of a recovery and we’ve added headcount where we can see signs of growth that we can go after and we will continue to do that. It’s the reason why as I mentioned to Rory the recovery ratio is at 44%, a little bit lower than the 50 we normally guide to because we’re very deliberately protecting capacity and it means we will get good operating leverage in a recovery. So I think you should expect us to continue to manage selling headcount on a very dynamic basis.

Conference Operator: Your next question comes from the line of Simon Leshapuri from Jefferies. Your line is open.

Benita Barreto, Head of Investor Relations, Adecco Group AG0: Yes, good morning. Three questions please. First of all, just on your Q1 outlook, I mean, in which extent this is conservative enough in case trends turn softer again in the coming weeks? Secondly, just a follow-up on your comment around further adjustment of FTE. I mean, how can we reconcile this with your comment around like consistent volume improvements across the board?

I mean, yes, some color would be helpful. And lastly, just on France and what kind of impact can we expect from the exceptional tax contribution in 2025? And any color on the cash impact? Thank

Denis Machewel, CEO, Adecco Group: you. Thank you, Simon. And I’ll take the first one and Coram take the next two. Let’s be clear. We have seen volume stabilizing in Q4.

We still have a growing and we will continue to see growth momentum in APAC and LATAM and probably Southern Europe. But Europe will remain a difficult piece. We have some large businesses like France, like Germany, UK, Nordics that are in a difficult position from a macroeconomic perspective. So we have, as we said, and we’ve been we just tell you what we see. And we see that the temp volumes have been trending positively in a variety of countries, including The U.

S. What’s interesting, while the temp business is softly growing, the perm business is very soft, okay? In The U. S, the perm business is minus 8%. We are still ahead of competitors, but it’s very soft, okay?

So that says something probably around companies being a bit more positive when you see some little bit of improvement and you bring in 10 people, you don’t dare yet to recruit permanently. So that’s where we’ve got to be cautious about what we say. We believe that there is a bit of momentum. We remain cautious, but this momentum is encouraging. Back to The U.

S, we’ve seen job order volumes increasing in Acodes U. S. We’ve in Acodes, so we’ve seen some temp improvement and across several others. So we’re not done. We are not calling it a recovery, but we see some sort of a little bit of

Coram Williams, CFO, Adecco Group: a positive trend. And picking up on your other two questions. I don’t see an inconsistency between modest volume improvement and the dynamic approach that we take to managing our sales capacity. So we manage sales headcount according to what we see in the markets. Clearly, if this momentum continues, then as we’ve said, we protected a degree of capacity to help us capture it.

And if it becomes a strong recovery, then obviously, we would invest where we see opportunities to capture growth. So there’s an inconsistency in any of that. On France, so there are two components to the French tax changes. There is a corporate tax surcharge and there is effectively the reversal of the planned reduction in business tax. We have built that into our tax guidance.

So it’s about 150 basis points on the group ETR and it is incorporated within the 34% guidance range. It is not a big driver of cash. I mean in absolute terms this is less than million. So I don’t think it has a big impact on cash.

Benita Barreto, Head of Investor Relations, Adecco Group AG0: Okay. Just a quick follow-up on The U. S. Your exposure in terms of group revenue, it’s like bigger than 15%. Is it a fair assumption?

Coram Williams, CFO, Adecco Group: In terms of revenue percentage for The U. S?

Andy Grobler, Analyst, BNP Paribas: Yes.

Coram Williams, CFO, Adecco Group: Yes, that’s about right. It’s about right.

Benita Barreto, Head of Investor Relations, Adecco Group AG0: Okay. Thank you.

Conference Operator: Your next question comes from the line of Gianmarco Ferrer from ZK Bank. Your line is open.

Benita Barreto, Head of Investor Relations, Adecco Group AG1: And a leaf of Jan Gupta, despite the probably weak top line that we saw for our colleagues over the last two years, what are some other key reasons for him leaving? And why did you not mention a replacement of him already today? And second question is, you mentioned also with your dividend cut now that you want to keep financial flexibility. Of course, I see the key reason is to deleverage. But is it also possible that you are keeping some dry power for some near term M and A?

Denis Machewel, CEO, Adecco Group: So regarding Acrotis and Jan Gupta, first of all, we love that business. It has an immense potential. We have great assets. And as you heard in the call, we are extremely positive in the way Consulting and Solutions is developing. We’ve been growing 1% this year.

We have healthy margins. And the tech staffing will is ready for a rebound. So we love that business. And as far as Jan’s departure, I think it was a very logical moment. Jan has been absolutely instrumental into sort of creating modus out of a variety of businesses in the group, putting it together, then strategically moving ahead and accelerating the ER and D positioning, thanks to the acquisition of AKA and then integrating AKA successfully.

So we’re very grateful for what Jan has done. It was time for the both of us to move to the next phase. And we have recruited a great leader who has an extensive experience in running large businesses in the IT sector, in the digital engineering sector, and with a large also experience in running offshore operations. So he’s a great guy, highly energetic, great background. We cannot announce his name because of constraints on where he is at the moment.

We will announce very shortly, but we respect, of course, his current environment. So, we will announce his name very shortly.

Coram Williams, CFO, Adecco Group: And then on the second question, obviously,

Alfonso Azario, Analyst, Barclays: moving

Coram Williams, CFO, Adecco Group: to the updated policy of a payout ratio of 40% to 50% of adjusted EPS with no floor does give a better balance between growth investment and shareholder returns. It does give greater financial flexibility, but the immediate priority is deleveraging. And that’s why we have confidently put the target of at or below 1.5 times net debt to EBITDA by the end of twenty twenty seven. You would expect us to continue to do small bolt on deals. You saw two of them announced in Q4.

These do not fundamentally change the balance sheet, but they’re good deals where we get swift returns and we will continue to do those. But the immediate priority is delevering the balance sheet and achieving our target.

Conference Operator: Your next question comes from the line of Simon van Open from Kepler Cheuvreux. Your line is open.

Benita Barreto, Head of Investor Relations, Adecco Group AG2: Thank you and good morning. Thanks for taking my questions. First of all, congratulations on the strong cash flow performance in Q4. First of all, thank you for the additional disclosure on the Acodis Consulting and Solutions business. Will this also be reported on a quarterly basis going forward?

We would highlight and we will highly encourage this. Secondly, could you provide some long term insights in what you expect in terms of net improvement in your EBITDA margins coming from AI? And lastly, what are your expectations for the outplacement business going forward?

Denis Machewel, CEO, Adecco Group: So I think on the disclosure on the Codis column and then I’ll take the

Coram Williams, CFO, Adecco Group: Yes. So I mean obviously the segment that we report on is a Codis And that’s the way that it’s set up because of the way that we manage the business. We have, as you know, Simon, typically given good color into what’s happening on the tech staffing business, what’s happening on the consulting and solutions business, how that varies by country and also the sort of profitability characteristics. So I’m glad that you appreciate it. It’s building on what we’ve already been doing and we will continue to do so.

And just one other point for me, thank you for your comments about the cash flow because that’s appreciated.

Denis Machewel, CEO, Adecco Group: And as Corum, I mean, we really love that Acodes business. Great asset, great perspective, very strong client portfolio. So this is very, very promising. So as far as AI is concerned, definitely, we believe that this will help us accelerate our trajectory to contribute to getting to our the top of our margin corridor. Definitely, we see two things.

There is the way it’s going to bring efficiency into our operations. We’ve already brought Gena, as I said, in several things with our recruiters, but also with our lawyers. We use a tool to really help our lawyers be more efficient. So, there’s much more things to come there. And we also believe that this will help us take a different angle with our clients.

The strategic workforce management question is going to be more and more live into our clients’ organization. And because of the power that we have with the massive data that we have. We capture data at scale every day. We interview an immense number of candidates every day. We connect with our clients constantly.

So that massive amount of data will help us create progressively additional business model or different angles in terms of how we create value for our clients. So I am very positive that this will contribute to a margin improvement. On the CT business, we are let’s be clear, we’re very pleased with the performance. It’s a very strong team. They have incredible momentum.

And despite the little decrease in revenue, as I said earlier, it’s the second highest revenue in history coming from a very, very high top line last year in 2023. So we have a very solid pipeline. We see some layoffs still coming in Europe, still in The U. S. And we are also expanding, particularly in The U.

S, on the small and medium enterprise segment, which is which was not really explored and we have for the moment a great traction. So we are positive on the way that things are going in CT. We still believe we have reasonable levels of revenue. We also are improving the customer experience, both on the client side and also on the people that are that benefit from the outplacement experience. We’ve digitalized, we’ve put generative AI, CareerCanvas is core to our offer now.

It helps really scale the offer, but also provide the people with a different experience, broader understanding of the opportunities that they have ahead of us, career guidance at scale. So that’s a promising business moving forward.

Benita Barreto, Head of Investor Relations, Adecco Group AG2: Thank you. So on the just coming back on the EBITDA margins, you are targeting a long term EBITDA margin of 5% to 6%. Am I correct?

Coram Williams, CFO, Adecco Group: So we have been very clear that we operate in a corridor of 3% to 6% and we would expect to be in the upper half of that range in a supportive economic environment. And to be clear, it’s EBITA margin, not EBITDA. Obviously, EBITDA is higher than that. And I think to emphasize Denis’ point, longer term, these tools will drive productivity both in the back office and the front office. So it is one of the tools in the toolkit for driving the margin up.

Conference Operator: Your next question comes from the line of Karen Soe from JPMorgan. Your line is open.

Benita Barreto, Head of Investor Relations, Adecco Group AG3: Good morning. Thank you for taking my questions. Just two left on my side. The first one is on your new reporting structure. Could you maybe talk a little bit about the rationale behind the change, especially around, the formation of EMEA, so combining Northern Southern Europe and DAC into the segment, and your thoughts around providing details around kind of the key markets going forward?

And then the second question is on Slide five, where you highlighted that you are 200 basis points, ahead of competitors around the market share gains. I think this was two ninety basis points in the first nine months for 2024 at your Q3 results, if I understood it correctly. So I was wondering if you could clarify what the driver of the change here is for Q4? Thank you.

Coram Williams, CFO, Adecco Group: Let me take the reporting structure question, Karen. I mean, the ultimately our segmental reporting is driven by the way that we manage the business. So we have to mirror the segments for the management structure. And as you know, we have been streamlining GBU structures. We’ve been making sure that we are as lean as we can be in terms of the managerial structure.

So Adecco has now moved to effectively four key leadership segments that sit underneath the main GBU. And therefore, we have to report in this way. In terms of color and disclosure going forward, I mean, I think you can see from the way that we present existing segments like Northern Europe, for example, we always do try to unpack what’s happening within those broader segments. We try to give you the color by country in terms of growth and margins and we’ll continue to do that. So the structure is driven by the way that we manage the business, but we will continue to give you the color that you need to understand what’s happening within those groups.

On in terms of the calculation of the market share and then I think Denis will pick up.

Denis Machewel, CEO, Adecco Group: Yes. First of all, we are pleased on the market share gains that we’ve done over the year, 200 basis points, which was on top of seven ninety in last year. So of course, the bar was higher this year and particularly towards the end of the year where we had a very high comp base. The way we calculate it is we do a simple average with the two main competitors. So it is the 200 basis is a full year calculation.

In Q4, we were ahead of one competitor, but behind another and it’s better than Q3 where we’re behind both. So that’s where we are.

Benita Barreto, Head of Investor Relations, Adecco Group AG3: Okay. That’s very helpful. Thank you.

Conference Operator: Your next question comes from the line of Sethi Luen from Kepler. Your line is open.

Denis Machewel, CEO, Adecco Group: All my questions have been asked, so there’s no need to. I just want to highlight that we really welcome the delevering efforts and as Simon said, the good cash flow. So give you the good work. Thank you very much.

Rory McKenzie, Analyst, UBS: Thank you. We really appreciate that.

Coram Williams, CFO, Adecco Group: Thank you. We are very focused on this.

Denis Machewel, CEO, Adecco Group: Absolutely. So I understand there are no more questions. So, it’s time to wrap up this call. I would like to thank you again for attending. In a nutshell, we are rigorously executing on our strategy.

We believe the strategy is the right one, and we are rigorously executing on it. We are committed to deleveraging, and this will be supported by our new adjusted dividend policy. I am very confident in our future perspectives given the proven capacity to execute, given our unique positioning with this great portfolio of GBUs, Adecco, Acodes with a new leader, LHH, great portfolio of services, really resonating well with our clients and the portfolio of countries, We are on a path of growth. We believe in profitable growth, of course. A supportive economic environment will help, but we are building a great future for our group.

Thank you again for attending this call and looking forward to our interactions to come and of course to our next results call. Thank you very much. Have a great day.

Conference Operator: That does conclude our conference for today.

Samir Nasali, Analyst, Bank of America: Thank you

Conference Operator: for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.