2nd UPDATE: Adecco Swings To Profit As US, France Job Markets Grow

Adecco SA (ADEN.VX) Wednesday said it swung to a fourth quarter net profit on cost cutting and pricing discipline amid a gradual improvement of job markets in the U.S. and France, which registered growth for the first time in months during the first few weeks in 2010.

Given the improvement in two of the world's largest economies as well as continued strength in emerging economies such as India, the Zurich-based firm was confident for the months ahead, expecting a broader recovery in the employment sector which was among the hardest hit during the downturn, prompting companies such as Adecco to slash costs as sales fell by more than 30%.

"The year 2009 has been exceptionally tough" said Chief Executive Patrick De Maeseneire, adding, though, that, "we made the necessary cost reductions". Thanks to these revamp efforts--which also include a renewed focus on the placement of highly educated or professional staff, Adecco will "profit from the upturn", he said.

The world's largest employment firm in terms of sales ahead of Netherlands-based Randstad Holding NV (RAND.AE) and Manpower Inc (MAN) of the U.S., said net profit for the three months to the end of December rose to EUR42 million, after a year-earlier net loss of EUR22 million. That beat forecasts for a EUR35 million profit.

While fourth quarter sales still fell another 18% to EUR3.79 billion from EUR4.63 billion a year-earlier, Adecco said that markets in the U.S., France, as well as in Italy, the Nordics and Iberia have improved in the "recent weeks", boding well for the months ahead. Also, business is thriving in South America, Eastern Europe and India, areas on which Adecco wants to focus in future. "In France and the U.S., the markets are improving and growing again", said Chief Financial Officer Dominik de Daniel. "We've seen improvement in the U.S. automotive sector and in France we have seen more demand in the chemical and IT consulting sector." Adecco generates about half of its revenue in the U.S. and France.

On the back of this market improvement and the recent takeovers of professional staffing firms MPS Group and Spring, Adecco now aims to achieve an operating margin of more than 5.5% in the mid-term, up from 2.9% in the fourth quarter, CFO de Daniel said.

"The visibility is still low given the fact that we come out of the strongest downturn our industry has faced", de Daniel said. "But the direction is clear and with our new business mix, we expect to achieve this goal over the next few years".

Including its recent takeovers, Adecco generates--on a pro-forma 2009 basis--about 28% of its overall sales through the placement of highly-educated staff such as lawyers, consultants and engineers, a business that promises higher margins than the mass placement of blue-collar workers.

Meanwhile, Adecco's CEO De Maeseneire said the company will focus on organic growth after its recent takeover spree. "We will now focus on the integration of MPS Group and Spring to achieve the planned synergies. Therefore we will focus on organic growth over the next few years", he said.

Shares of Adecco, which have gained more than 65% over the past year on recovery hopes, continued to gain ground as analysts welcomed the company's confident outlook. At 0903 GMT the shares were up 3%, or CHF1.65, at CHF56.15 while the overall Swiss stock market was lower.