Annual Report 2014 Visit annualreport2014.adecco.com 14 Contents Company Report 2 About us 3 2014 in brief 4 Letter from the Chairman & CEO 6 Interview with the CEO 8 The HR services industry 14 Our strategy 18 Our services and business lines 21 Our people 25 Our corporate social responsibility 29 Enterprise risk management 32 Investor Relations Financial Review Adecco Group 39 Operating and financial review and prospects 58 Selected financial information 59 Consolidated financial statements 104 Report of the Statutory Auditor on the Consolidated Financial Statements Financial Review Adecco S.A. (Holding Company) 106 Financial statements 115 Major consolidated subsidiaries 116 Proposed appropriation of available earnings 118 Report of the Statutory Auditor on the Financial Statements Corporate Governance 122 Applicable Corporate Governance standards 123 Structure, shareholders, and capital 128 Board of Directors, Executive Committee, and compensation 141 Further information Remuneration Report 148 The Company‘s compensation philosophy and determination of remuneration principles and compensation 150 Remuneration 2014 156 Remuneration outlook 159 Details of compensation elements 167 Report of the Statutory Auditor on the Remuneration Report 168 History 170 Addresses 171 Key figures better work, better life We inspire individuals and organisations to work more effectively and efficiently, and create greater choice in the domain of work, for the benefit of all concerned. Our business has a positive impact on millions of people every day. Helping people to ‘better work, better life‘ is our common purpose and the way in which we contribute to society. This is what we do, this is what we know about, this is what we care about, this is what we are all about. 31,000+ 650,000+ 5,100~ FULL-TIME EQUIVALENT ASSOCIATES ON BRANCHES IN OVER 60 EMPLOYEES 1 ASSIGNMENT DAILY 2 COUNTRIES & TERRITORIES 1 1 Year end 2014. 2 Average 2014. About us THE SERVICES WE OFFER THE PROFILES OF OUR CANDIDATES Gross profit split by service line Revenue split by business line 9% 24% 74% 8% 51% 5% 12% 4% 9% 2% 2% Temporary 74% Industrial 51% Finance & Legal 4% Permanent 9% Office 24% Medical & Science 2% Career Transition 8% Information Technology 12% Solutions 2% Outsourcing, Talent Development Engineering & Technical 5% and other services 9% OUR GEOGRAPHIC PRESENCE In over 60 countries Revenue split by segment & territories France 23% North America 19% UK & Ireland 10% Germany & Austria 8% Japan 5% Italy 6% Benelux 5% Nordics 4% Iberia 4% Australia & New Zealand 2% Switzerland 2% Emerging Markets 10% LHH 2% 2 Adecco Group Company Report 2014 2014 in brief REVENUES UP 4% 17% EPS GROWTH FURTHER SHARE IN CONSTANT BUYBACK CURRENCY Basic earnings per share increased to New programme of Revenues increased EUR 3.62. up to EUR 250 million to EUR 20.0 billion, launched in driven by the on- November 2014. going recovery in STRONG CASH the USA, a strong GENERATION rebound in southern ACQUISITION Europe, and contin- Cash flow from ued growth in the operating activities Adecco acquired emerging markets. increased signifi- OnForce to expand cantly to EUR 785 its Beeline VMS million. service offering. EBITA MARGIN INCREASED BY 40 BPS 2 MILLION KM DIVIDEND FOR WIN4YOUTH INCREASED AGAIN EBITA margin excluding restructur- Over 29,500 Adecco Dividend per share ing costs increased colleagues cycled of CHF 2.10 1, up 5% to 4.8%. over 2 million km to compared to last ensure a Group year. donation to 5 foun- dations supporting youth development. 1 As proposed by the Board of Directors. Note: For key data 2010–2014, refer to inside back cover. Adecco Group Company Report 2014 3 Dear shareholder, Even against the clouds of uncertainty that were forecast, 2014 At the next Annual General Meeting, the Board of Directors proved an unpredictable and challenging year, surprising will make a dividend proposal of CHF 2.10, which is an on both the economic and geopolitical fronts. That trend is set increase of 5% compared to the prior year. This proposed to continue as cyclical differences remain between a fast dividend is equal to a pay-out ratio of 49% of adjusted net recovering USA, a still struggling Europe, and a growing China. earnings. The total amount of the dividend distribution for Such profoundly heterogeneous conditions will accentuate 2014 is intended to be allocated from Adecco S.A.’s reserve the employment challenges facing organisations to stay com- from capital contributions to the free reserves and subse- petitive. Whatever their circumstances, Adecco will be there quently distributed to shareholders, and is therefore expected to select the best talents and continue helping the millions of to be exempt from Swiss withholding tax. people we place on the first rung of the employment ladder and advise at every further step until retirement. Following the divestment of Adecco shares by Jacobs Holding AG, Andreas Jacobs has decided not to stand for re-election For Adecco, 2014 was a year of continuing progress. In spite to the Board of Directors. Since Andreas Jacobs joined the of a difficult environment in many markets, notably in Europe, Board in May 2006 he has made a major contribution to the we made further steps towards our ambitious target of success of the Adecco Group. The Board of Directors and achieving an EBITA margin of at least 5.5% in 2015. While the Executive Committee would like to thank Andreas Jacobs top-line growth remained challenging, we were able to report and the Jacobs family for their long-standing and personal encouraging progress in earnings. In 2014 Group revenues engagement to the success of the Adecco Group. grew by 4% in constant currency to EUR 20 billion. We further improved our leading profitability through price discipline and Challenging economic conditions and an increasingly complex cost control. Our operating income increased by 14% from operating environment deepened the interest of many of EUR 779 million in 2013 to EUR 891 million in 2014. Net income our clients in strategic human resources solutions from a trust- attributable to Adecco shareholders increased by 14% to ed partner. The continuing trend towards flexible labour will EUR 638 million. see a reinforcement also beyond 2014. We continue to be very focused on reaching our EBITA margin target of above 5.5% in Our regions and countries performed solidly, despite the highly 2015. A pick-up of GDP growth is expected for 2015 and the divergent economic conditions in the more than 60 countries start of the year suggests this is already beginning to happen. and territories in which we operate. Europe continued to send Given this outlook and based on the good progress on our six very mixed messages, with rising demand for flexible labour strategic priorities and our continued price and cost discipline, in Spain, Italy, and Eastern Europe where we outperformed the we remain convinced we will achieve our target. market. In France, with still limp economic growth, Adecco was able to increase profitability. In Germany our growth was in line with the market. North America witnessed a convincing reinforcement of the encouraging signs of 2013, with demand for labour rising on the back of the rapidly recovering US economy. In China, the revenues of our joint venture FESCO Adecco increased threefold. 4 Adecco Group Company Report 2014 Rolf Dörig Patrick De Maeseneire Chairman Chief Executive Officer In 2013, we launched the first Global Talent Competitiveness Boosting talent also involves inclusion and openness – central Index (GTCI), a thorough annual study of talent and ways components of talent competitiveness. Here too Adecco plays of fostering skills, conducted with our partners INSEAD and a key role in helping to find jobs for groups that sometimes Singapore’s Human Capital Leadership Institute. The 2014 face difficulties entering the labour market, such as older GTCI suggested long-term ways to address looming skills defi- workers, women, and ethnic minorities. And, within the con- cits, by focusing on: the urgent need to gear education sys- fines of national immigration policies, we endeavour to help tems ever more closely to the changing demands of the balance international skills deficits and surpluses through labour market; the importance of vocational training, both schemes such as Adecco’s Candidate International Mobility at the start of and throughout a career; and, less obviously, programme, allowing candidates with specific skills, like engi- the value of growth opportunities linked to experience. neers and technicians, to find the best job placement abroad. We continued with our focus on a generation facing the risk of ‘better work, better life’ is what our more than 31,000 col- exclusion from the labour market. In more than 50 countries leagues around the world live up to every day as they help we took our Adecco Way to Work programme to a new level. over 650,000 people into work. Work that supports people to Young people were offered one-month work placements achieve their full potential, irrespective of ethnicity, ability, in large companies across the world, providing the chance to gender, or age. ‘better work, better life’ – this is what Adecco learn workplace skills in a range of roles across sectors. In is all about. France and Italy, two countries suffering persistently high un- employment, especially among the young, we launched highly Dear shareholders, we thank you for your continued support, successful additional campaigns. as we thank our clients and our associates and colleagues who work for Adecco worldwide. Rolf Dörig Patrick De Maeseneire Chairman Chief Executive Officer Adecco Group Company Report 2014 5 Reinforcing our leadership in a changing world Interview with Patrick De Maeseneire, CEO You achieved strong growth and profitability in North America. The penetration rate in the USA was back to the previous How did your business develop in the major regions in 2014? peak.