The Adecco Group (ADEN:VTX), reported revenue today of €5.26 billion for the second quarter ended 30 June 2021. Revenue was up 29% organically and trading days adjusted.

The company also announced the acquisition of AKKA Technologies, a global engineering consulting firm with 1.5 billion in 2020 annual revenue, the biggest deal in Adecco’s 25-year history.

The year-on-year growth is materially influenced by the prior year comparison base, with Q2 2020 results severely impacted by the pandemic. Compared to the first quarter 2021, revenue growth momentum improved modestly.

Alain Dehaze, Adecco Group CEO, said, “The second quarter performance was strong with positive momentum throughout, particularly in Permanent Placement. Revenues are now 5% below pre-crisis levels on an underlying basis, while the group’s gross profit is now broadly in line with pre-crisis levels. This is well aligned to the group’s drive to deliver sustainable, profitable growth through organic and inorganic actions. Our businesses continued to execute well, with margin improvement supported by mix, pricing and strong productivity. At the same time, the group has begun to extend its investment in sales to drive growth.”

Rival Randstad published their Q2 2021 results yesterday with 38% organic growth compared to the prior year period and 3% up compared to Q2 2019.

Revenue growth was broad-based across Service Lines. Permanent placement revenue was particularly strong at €151 million, up 88% organically year on year, more than offsetting softness in the countercyclical career transition service line, which was 7% lower organically year-on-year.

Flexible placement rose by 30% organically, Outsourcing, Consulting & Other Services grew by 17% organically and Training, Upskilling and Reskilling increased by 78% organically, when compared to the prior year period.

All global business units improved revenues on a year-on-year basis. Adecco’s revenues were up 33% organic Trading Days Adjusted (TDA), Talent Solutions’ revenue rose 21% organic TDA, while Modis’ revenues grew by 12% organic TDA in comparison to the prior year period.

Revenue by segment

Growth rates below are on a year-on-year organic and TDA basis unless otherwise noted.

In Adecco France, revenue rebounded strongly, mainly due to favourable base effects. Relative to the first quarter 2021, the business achieved modest recovery, as lock-down restrictions continued through most of the second quarter period. Relative to the prior year, sectors including logistics and transportation, manufacturing and construction grew strongly, while hospitality sectors and the automotive industry continued to face challenges.

In Adecco Northern Europe, revenue performance varied across the region. UK & Ireland grew by 14%. Revenue in Benelux increased 23%, and the Nordics rose by 30%.

Within Adecco DACH, revenue in Germany grew by 42%, while Switzerland & Austria grew 12%. Healthcare and the automotive sector developed positively.

Within Adecco Southern Europe & EEMENA, in Italy, revenue increased by 55%, while Iberia was up 31% and EEMENA by 11%. Revenue for the region is now well above pre-crisis levels. Growth was driven by higher demand from manufacturing, logistics and automotive sectors.

In Adecco Americas, Latin America revenue was up 42% while North America revenues was 9% higher. The revenue result in both regions improved sequentially, and Latin America revenue is now comfortably above Q2 2019 levels. The US faced headwinds from lowered workforce availability, contract turnover and subdued activity in the automotive sector. Measures to improve US performance are underway.

Within Adecco APAC, growth was strong in Australia & New Zealand, with revenues up 16%, and Asia up 11%. Revenue from Japan was robust, up 1% while revenue in India was 4% lower, linked to the exit of certain lower-margin activities in 2020.

In Talent Solutions, revenue improvement was driven by very strong momentum in Professional Recruitment, which is recovering close to 2019 levels, reflecting high levels of confidence in the economic outlook. US Professional Recruitment revenues was up 41%, and Global Professional Recruitment revenue was up 31%. LHH’s revenues grew 3% this quarter.

In Modis, revenue developed well across the business, led by the Americas, where revenues were 17% higher and demonstrated positive momentum across the quarter. In EMEA, revenue grew by 12%, while in the APAC region, against a tough comparable period, revenue rose 3%.

The Adecco Group also announced today that it had reached an agreement with the Ricci Family Group and SWILUX SA (CNP) to acquire their holdings in AKKA Technologies, providing Adecco Group with a controlling stake in the company.

Headquartered in Brussels, AKKA is a global engineering and technology consulting group which acquired the US engineering staffing firm, PDS Tech in December 2018.

Thereafter, the Adecco Group will launch a mandatory tender offer for the remaining AKKA Technologies securities. The total consideration of €2.0 billion Enterprise Value reflects an offer price of €49 per share and accounts for AKKA Technologies’ net financial debt as of 30 June 2021.

AKKA and Modis will be combined, creating a business with €3.7 billion in revenue and 50,000 digital experts and engineers, positioned as the global number two in the global ER&D (engineering research and development) services market behind Cap Gemini. Closing of the deal is expected in H1 2022, subject to regulatory approvals.

Jan Gupta, President of Modis, has been appointed President-elect of the combined business.

“We are very pleased to announce today that AKKA Technologies and Modis will come together in a landmark transaction,” Dehaze said. “Alongside our Workforce and Talent Solutions global pillars, we are creating a global market leader in technology and digital engineering. The combined business will be a trusted partner to the world’s leading companies, with an ability to capture the accelerating demand for digital transformation through its Smart Industry focus.”

According to Reuters, the acquisition will make Adecco the world’s largest provider of temporary staffing by total revenue including non-temporary revenue streams, overtaking rival Randstad.  

Adecco Group expects trading conditions to further improve gradually in the third quarter, with strong year-on-year revenue development, assuming limited impacts from the delta variant as vaccination campaigns continue.

“We have seen pockets of talent scarcity and wage inflation in our end-markets, particularly in technology solutions, and the pace of recovery in Permanent Placement is unprecedented,” Dehaze said. “We are cautiously optimistic that all our service lines, including Flexible Placement, have scope to recover further in the quarters ahead. We are confident that with the implementation of our Future@Work strategy, including the digital transformation of our business, we will be optimally positioned to take market share.”

Shares in Adecco Group last traded at CHF 58.26 (€53.92), down 5.24% on the day and 13.10% below its 52-week high of CHF 67.04 (€62.05), set on 9 April 2021. The company has a market cap of CHF 10.02 (€9.27 billion).