The Adecco Group ((ADEN:VTX), reported revenue of €5.64 billion for the first quarter ended 31 March 2019. Revenue declined by 2% organically and trading days adjusted.

Revenue was slightly below the Q4 2018 decline of 1%.

Adecco claimed that trends stabilised in the majority of European markets during Q1 2019 and highlighted that trends in March and April were similar. Despite weakness in a number of the company’s major markets, Adecco reported accelerating growth in Japan and the Rest of World region which, to some degree, helped offset slowdowns elsewhere.

Permanent placement revenues were up 5% organically year-on-year, following very strong growth during 2018, but temporary staffing revenue declined by 3%.

Currency movements had a positive impact on revenues of approximately 1% and M&A had a positive impact of around 0.5%, while the number of working days had a negative impact of around 1%.

Gross profit was €1,080 million in Q1 2019 which was flat compared to the prior year period. However, gross margin was 19.1%, up 60 bps organically compared to Q1 2018 of which 40 bps comprised a positive contribution from temporary staffing.

SG&A was down 1% organically (lower headcount and fewer offices) which led to an 8% organic improvement in EBITA (excluding one offs).

“The group delivered a strong performance in Q1 2019, improving the EBITA margin by 20 bps (basis points) even as our digital investments increased,” Alain Dehaze, CEO, said. “We continue to make good progress with our GrowTogether transformation programme, which underpinned another quarter of robust productivity growth. And a focus on pricing discipline and improving the business mix with higher-value solutions supported further gross margin improvement.”

Revenue by geography

Growth as described below is on an organic basis unless otherwise noted.

In France, the company’s largest market (responsible for 23% of total revenue) revenue declined by 2%. Revenue decreased by 3% in General Staffing, which accounts for over 90% of French revenue in Q1, but grew by 11% in Professional Staffing. By industry, declines in manufacturing, logistics and retail were partially offset by growth in automotive and construction.

Within North America, UK & Ireland General Staffing, North America General Staffing, which accounted for approximately 75% of the region’s revenue, was flat, or up 2% trading days adjusted. The slower growth compared to Q4 2018 was mainly related to strong seasonal demand in the previous quarter, which did not benefit Q1 2019. UK & Ireland General Staffing represented approximately 25% of the region’s revenues and was up 3%, with market conditions remaining muted. Permanent placement revenues were down 2% in North America General Staffing, with growth in the US offset by a decline in Canada, and down 6% in UK & Ireland General Staffing.

North America, UK & Ireland Professional Staffing was down 8%, or 6% trading days adjusted. Continued strong growth in Medical & Science was offset by declines in IT, Finance & Legal, and Engineering & Technical. Growth in Legal was negatively impacted by the ending of a number of large client projects, the impact of which will continue for the remainder of the year. UK & Ireland Professional Staffing was down 2%, impacted by Brexit related client uncertainty. Permanent placement revenues were up 3% in North America Professional Staffing and down 6% in UK & Ireland Professional Staffing.

In Germany & Austria, revenues declined 11%, or 12% trading days adjusted, driven by the market slowdown, regulatory changes and the consolidation of the Adecco and Tuja general staffing businesses. Dehaze told Reuters this morning that “The new law on emissions... has created a bottleneck and is slowing down seriously the sales of new cars in Germany. Around 30 percent of our revenues come from the automotive industry; this had an impact in the previous quarter and continued to have an impact in this quarter.”

In Switzerland, revenue declined by 1%, or by 2% trading days adjusted, against a challenging prior year comparison base.

In the Nordics, revenue declined 1%, or 2% trading days adjusted, with growth in Norway offset by a decline in Sweden. Revenue in Benelux was down 11%, or down 10% trading days adjusted. Belgium experienced a low-single-digit revenue decline, while the Netherlands declined double-digits, due to softer market conditions and a repositioning of the business away from high volume, lower value activities.

In Italy, revenue was down 4%, driven in particular by weakness in the manufacturing and automotive sectors.

In Japan, revenue was up 6%, or up 8% trading days adjusted, with good growth in professional staffing and permanent placement.

In Iberia, revenue was down 3%, or down 4% trading days adjusted. EBITA was EUR 14 million.

In Rest of World, revenue was up 4%. Revenue grew 10% in Australia & New Zealand, 6% in Latin America, 3% in Asia, 5% in India and were flat in Eastern Europe & MENA, all trading days adjusted.

In Career Transition and Talent Development (including Lee Hecht Harrison and General Assembly), revenue was flat organically at €129 million. Revenue in career transition declined mid-single-digit, reflecting the counter-cyclical nature of the business and high proportion of revenues coming from North America where the economy remains robust. Meanwhile, growth in talent development was strong.

Revenue by business line

Guidance

Looking ahead the group said the timing of bank holidays will have a negative impact of approximately 10 bps on gross margin in Q2 2019. The replacement of CICE (competiveness and employment tax credit) in France will have a negative impact on cash conversion in Q2 2019. For full-year 2019 it will have a broadly neutral cash flow impact.

Share price and market cap

Despite the revenue decline and flat gross profit, as of last trade Adecco Group traded at CHF 58.68 (€51.46), up 1.70% on the day and 12.99% below its 52-week high of CHF 67.44 (€59.13), set on 7 May 2018. Based on its current share price the company has a market value of CHF 9.62 billion (€8.43 billion).