The Adecco Group ((ADEN:VTX), reported revenue of €6,052 million in Q2 2018. Organic revenue growth was 5%, or 4% with trading days adjusted. This is a slowdown from the 6% growth (organically and trading days adjusted) achieved in Q1 2018 with deceleration experienced in Italy, France, Iberia, and Benelux & Nordics, partly offset by an improved performance in North America, UK&I General Staffing.

According to Reuters, net profit was below the expected average of €173 million in a Reuters poll of analysts.

Adecco’s 5% organic growth compares to the 5% organic growth achieved by Randstad in its second quarter, its biggest rival.

Currency movements had a 4% negative impact on revenue in the second quarter, compared to last year, while M&A had a small positive impact. The number of trading days in the quarter had a positive impact of 0.5%.

Organic revenue growth was broad-based across service lines, with the exception of the counter-cyclical career transition (outplacement) business. Temporary staffing revenues increased by 5% to €5,259 million, permanent placement revenues rose 18% to €147 million, career transition revenues were €87 million, down 7%, and outsourcing and other activities revenues grew 8% compared to the prior year, all on an organic basis. By business line, revenues were up 6% in General Staffing, up 2% in Professional Staffing, and up 3% in Solutions, all organically.

“In temporary staffing there is a slight deceleration in Europe, but there are still solid macro-economic figures and there has been no disruption in the buying behavior of our customers,” Chief Executive Alain Dehaze told Reuters. “We are not seeing any reluctance among hirers. Companies keep hiring temporary staff because you have a lot of uncertainty in the world. Temporary staffing is an excellent way to cope with this geopolitical climate.”

EBITA was €260 million, a decline of 4%. EBITA excluding one-offs was €270 million, down 6% year-on-year on a reported basis and flat organically. EBITA margin excluding one-offs was 4.5% compared to 4.8% in Q2 2017. The company stated that profitability was impacted by strategic initiatives including the ongoing roll-out of new IT infrastructure, investments in digital ventures, headcount additions and the consolidation of its Tuja and Adecco brands in Germany.

Selling, General and Administrative Expenses (SG&A) excluding one-offs was €837 million, up 4% year-on-year on a reported basisOn an organic basis, SG&A was flat sequentially and up 7% year-on-year.

In July 2018, the Adecco Group entered into a definitive agreement to sell its remaining 43% ownership interest in vendor management system provider, IQN/Beeline Holdings (‘Beeline’), to New Mountain Capital. The proposed transaction is expected to close during Q3 2018 and will result in a gain on sale of approximately €110 million and after-tax cash proceeds of approximately €172 million. The sale brings total proceeds from the disposal of Beeline to more than €310 million (including payments received as part of the merger with IQN). Beeline was acquired as part of the acquisition of MPS Group, in 2010. 

In the year ended 31 December 2017, and in the first six months of 2018, the Adecco Group did not recognise any earnings relating to its investment in Beeline.

Earlier this year, the Adecco Group completed the acquisition of General Assembly, a US-based technology education provider. The company became a part of Adecco Group’s Career Transition and Talent Development segment.

Dehaze, commented on the second quarter results, “In Q2 2018, underlying revenue growth was solid, at 4%, and the mix of growth became more balanced. North America General Staffing returned to growth, achieving its strongest performance since Q2 2015, mostly offsetting lower growth in certain European countries. And in France, our largest business, we significantly outperformed the market. Permanent recruitment also remained strong, reflecting the targeted investments that we have made. Gross margin stabilised in Q2.”

“In the second half of 2018, we expect the group margin trend to improve, and we are on track to deliver the €50 million of productivity savings previously indicated. The investments we are making to digitalise the Adecco Group will significantly strengthen our competitive position, allowing us to grow our market share in our core businesses, and also expand our solutions into attractive adjacent markets.”Revenue by region was reported as follows for the second quarter. Career Transition and Talent Development includes Lee Hecht Harrison and General Assembly.

In France, revenue growth was ahead of the market growth rate. Revenues increased by 8% in General Staffing, which accounts for over 90% of revenues, and grew by 6% in Professional Staffing. Revenue growth was broad based, driven by manufacturing, logistics and automotive. Permanent placement revenues in France were up 16%. The EBITA margin declined to 5.9% from 6.6% due to the reduction of the CICE tax credit.

Within the North America, UK & Ireland General Staffing segment, North America, which accounts for approximately 75% of segment revenues, was up 3%; its strongest growth since Q2 2015. UK & Ireland represents approximately 25% of segment revenues and was up 7%, or up 6% trading days adjusted, driven mainly by large client wins. Permanent placement revenues were up 8% in North America and declined 4% in UK & Ireland.

Within the North America, UK & Ireland Professional Staffing segment, revenue in North America represents approximately 65% of revenue and was flat. Growth in Engineering & Technical, Finance & Legal and Medical & Science was offset by a decline in IT. UK & Ireland represents approximately 35% of revenues and was down 4%, or down 5% trading days adjusted, due to a decline in IT. Permanent placement revenues increased by 13% in North America and by 18% in UK & Ireland.

In Germany & Austria, revenues were up 2% or flat when adjusted for trading days, impacted by the consolidation of the Adecco and Tuja general staffing brands, and regulatory changes. In Switzerland, revenue growth further accelerated to 21%, or 19% trading days adjusted.

Growth slowed to low-single-digit in both the Netherlands and Belgium, due to a tougher comparison base and a focus on client profitability. In the Nordics, revenues were up 7% or up 5% trading days adjusted, with strong double-digit growth in Norway offset by a low-single-digit decline in Sweden, which was impacted by lower volume growth at a number of large clients.

In Italy, revenues were €521 million, up 11% organically and trading days adjusted, decelerating in-line with the market trend, after seven quarters of very strong growth.

In Japan growth continued to be led by professional staffing and permanent placement.

In Iberia, revenue growth slowed mainly due to a more challenging year-on-year comparison base.

In the Rest of World, revenue growth was 9% in Australia & New Zealand, 17% in Latin America, 4% in Eastern Europe & MENA, while Asia was down 6% and India was down 16%, all trading days adjusted.

Career Transition and Talent Development (including Lee Hecht Harrison and General Assembly) revenues were €109 million, down 4% organically, reflecting the counter-cyclical nature of Career Transition.

In its management outlook, The Adecco Group said revenue growth in June and July combined was 4%, organically and trading days adjusted, in-line with the Q2 2018 trend. In Q3 2018, there are not anticipated to be any significant one-off effects on the group gross margin. The group is on track to deliver €50 million productivity savings in 2018, supporting an improvement in the EBITA margin trend in the second half.

As of last trade Adecco Group traded at CHF 59.70 (€51.82), down 1.65% on the day and 4.70% above its 52-week low of CHF 57.02 (€49.49), set on 26 Jun 2018. Based on its current share price the company has a market value of CHF 9.99 billion (€8.67 billion).