UPDATE: Adecco Swings To Profit, Confirming Market Pickup

Adecco SA (ADEN.VX), the world's largest temporary employment company by sales, Wednesday said it swung to a second-quarter net profit as demand for temporary staffing jumped and because last year's figures had been hit by restructuring costs.

The company followed nearest rivals Randstad Holding NV (RAND.AE) of the Netherlands and U.S.-based Manpower Inc. (MAN) in reporting better profits. In July, Randstad said net profit in the second quarter jumped to EUR54.0 million from EUR10 million a year earlier, when it booked about EUR12.5 million in restructuring charges and costs. Manpower reported a doubling of second-quarter net profit to $32.7 million from $16.3 million.

Adecco's net profit in the second quarter was EUR97 million, compared with a net loss of EUR147 million a year earlier, as revenue rose sharply to EUR4.65 billion from EUR3.59 billion. Both figures beat analysts' expectations.

Adecco reiterated its financial guidance, saying it is making good progress in reaching its operating profit margin target of over 5.5% in the medium term.

Staffing companies were hit hard by the credit crisis and resulting economic downturn as companies cut staff as they tried to reduce their costs. This year has seen a pickup in demand, although concerns about economic growth remain. The U.S. Federal Reserve Tuesday said it would continue stimulating the U.S. company because the pace of recovery had slowed in recent months.

"Despite current concerns about the sustainability of the economic recovery, developments in the staffing industry continue to signal healthy demand and management is confident of strong revenue development near term," Adecco said. "To date there is no evidence of a slowdown of business in the third quarter of 2010."

The company said growth had been strong in its main markets in France and North America, and revenues had grown more than 10% in Germany, Italy, the Nordic countries and emerging markets. It said demand was particularly strong from industrial customers, but its professional staffing business also returned to growth.

"While keeping a tight grip on costs and pricing, we are very well positioned to take advantage of the current growth opportunities," said Chief Executive Patrick de Maeseneire.

He said Adecco may consider bolt-on acquisitions in niche or emerging markets for a total amount of up to EUR150 million if opportunities arise. "But don't expect anything big," he added.

Adeeco's recent takeovers were U.S.-based MPS Group and U.K.-based Spring, two companies focusing on the placement of employees such as engineers and IT specialists.

A year ago, the company posted impairment charges of EUR192 million in the second quarter because Germany had suffered heavily from the economic crisis and the company had scrapped its Iberia brand in Spain.

On the Swiss bourse at 0930 GMT, Adecco's shares were down 1.30 Swiss francs, or 2.3%, to CHF54.30 in a slightly lower general market. The highly cyclical stock is currently driven by investor caution regarding global economic prospects, a trader said.

-By Martin Gelnar, Dow Jones Newswires; +41 43 443 80 42; martin.gelnar@dowjones.com

Randstad NV (EU:RAND)
Historical Stock Chart
From Jun 2024 to Jul 2024