The Adecco Group (ADEN:VTX), reported revenue today of €5.89 billion during the first quarter ended 31 March 2023, an increase of 3% organically and trading days adjusted (TDA). On a reported basis, revenue was up by 8%.

Revenue rose across the majority of the group’s service lines, led by Career Transition, for which revenues were up 60% organically (63% reported).

At the Global Business Unit level, organically and Trading Days Adjusted, Adecco revenue was up 3%, Akkodis revenues rose 4%, and LHH revenues were flat.

Denis Machuel, Adecco Group CEO, said, “The group achieved a very good Q1 performance, effectively delivering against our plan, with growth that continued to outpace the market and a gross margin that remained industry-leading. In Adecco, we achieved further significant share gains with outperformance in many key geographies, while dynamic pricing and productivity improvements kept profitability at a solid level.”

“Akkodis continued to perform well including navigating the US tech staffing slowdown, with the team harnessing the newly combined tech and engineering capabilities to secure continued major consulting contract wins, with a healthy pipeline in place,” Machuel continued. “In LHH, our Career Transition business actively captured further corporate restructuring projects resulting in record high performance levels, while Ezra, our digital coaching business, also posted excellent growth.”

On an organic basis, gross margin expanded 10 basis points in Flexible Placement and 70 basis points in Career Transition. These benefits were partly mitigated by lower contribution in Permanent Placement, down 20 basis points, and from Outsourcing, Consulting & Other, down 40 basis points.

EBITA excluding one-offs was €184 million, compared to €185 million in the prior year period.According to Reuters, Adecco Group beat first-quarter sales expectations. The group’s €5.89 revenue in Q1 2023 was above analysts' estimates of €5.83 billion in a poll provided by the company.

Rival Randstad recently reported revenue of €6.51 billion with organic revenue per working day declining by 4.2% compared to €6.62 billion a year ago.

Revenue by Segment

Unless otherwise noted, all growth rates in this section are set against the same period in the prior year, with revenues stated on an organic and trading days adjusted basis.

Adecco France delivered moderate revenue growth of 1% in the quarter, in line with the market. Growth was robust in flexible placement and QAPA, training and perm activities were strong. In sector terms, autos, healthcare, IT and manufacturing were strong, while logistics and construction were soft.

Within Adecco Northern Europe, revenues from UK & Ireland were up 1%, with strong growth in finance and construction, largely mitigated by subdued activity in logistics. Revenues were 2% lower in the Nordics, weighed by lower manufacturing activity. in the Benelux. Overall, the region’s growth outpaced the market.

Revenue in Germany was up 13%, strongly outperforming the market. In Switzerland & Austria revenues were flat. Growth was generated mainly from autos, logistics and professional services

The Adecco Southern Europe & EEMENA region’s growth rate, at 4%, was boosted by EEMENA (Eastern Europe, Middle East and Africa), where revenues were up 16%. Both Italy and Iberia grew 2%, and all areas gained share. In sector terms, autos, retail and consulting developed favourably, while logistics was soft.

In Adecco Americas, Latin America revenues grew 18%, with Argentina, Brazil and Mexico performing notably well. In North America, revenue was 8% lower, impacted by an uncertain macro-economic environment. In Adecco US, the company claimed revenue developments outperformed in a challenging market. In operational terms, Adecco US delivered continuous improvement in voluntary turnover levels, continuous improvement in fill rates, and strong sales intensity levels during the quarter.

Within Adecco APAC, revenues were 10% higher in Japan, up 13% in Asia, and up 13% in India. Australia & New Zealand revenues were flat, weighed by the end of a large government contract. End-market growth was broad based, with consulting, IT Tech, retail and manufacturing all performing well.

In Akkodis, the EBITA margin of 4.9% reflects the impact from the timing of AKKA’s consolidation and lower staffing volumes in North America, while benefiting from strong synergy delivery and high utilisation in APAC and EMEA. The group said the repositioning of German operations is on track, and management are adapting US operations given current market headwinds. Akkodis’ integration is well progressed, it added.

In LHH, Recruitment Solutions revenues were 16% lower, reflecting a tough comparison period and continued market headwinds, particularly in the US. Recruitment Solutions includes The Adecco Group’s professional recruitment brands - Accounting Principals, Ajilon, Paladin and Parker & Lynch - all now trading as LHH Recruitment Solutions. Gross profit was 16% lower, with Permanent Placement fees 20% lower. Excluding the US, gross profit was 3% lower.

Career Transition & Mobility revenues were up 63% and 38% sequentially, to record levels. The result was driven by excellent win momentum, mainly in the US and UK.

Learning & Development revenues were down 8%. Revenues in General Assembly and Talent Development were subdued. Ezra revenues were up 45% and bookings accelerated strongly. In Pontoon & Other, Pontoon was flat, with growth hindered by subdued demand in tech. Revenues for the Group’s digital hiring platform, Hired, were also challenged by the downturn in the US tech sector.

Revenue by Service Line

Adecco Group exited the quarter with growth at 3%. Looking ahead, volumes in April were resilient, and the market for talent services remains dynamic, Adecco Group stated. The group added that it is ‘well positioned to capture market share opportunities in a rapid and agile manner’.

“Q1 2023 benefited from the timing of FESCO JV (joint venture) income, which will not repeat in Q2,” the group stated.

In Q2, the group expects both gross margin and SG&A expenses (excluding one-offs) as a percentage of revenues to be broadly in line with Q1 2023 levels.

Machuel said, “Looking ahead, we still have a number of areas that require further focus and we are fully concentrated on these, while remaining agile and responsive to market conditions. Overall we see strong momentum from our Simplify-Execute-Grow plan; our teams are equally focused on achieving significant G&A cost reduction, which we expect will begin to flow through in H2, while driving growth and market share.”

Adecco Group shares last traded at CHF 29.42 (€30.00), up 0.07% on the day and 11.52% above the 52 week low of CHF 26.38 (€26.90) set on 10 October 2022. The company has a market cap of CHF 4.93 billion (€5.02 billion).