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Switzerland – Adecco off to a bad start in 2013 after Q4 profits slump

13 March 2013

The world’s largest recruiter Adecco (ADEN:VTX) reported on Wednesday that revenue in the fourth quarter dropped to €5.027 billion, an organic decline of -6%. Europe remained tough as France and Iberia were badly hit while North America posted healthy growth figures. The firm also revealed that revenue fell -5% in the first two months of 2013 after profits in the three months to December were below market expectations.

CEO Patrick De Maeseneire said: “In 2012 we faced diverse trends among the regions in which we operate. Most of Europe was challenging and we faced double-digit revenue declines in France, Italy and Iberia.

“Exceptions were the UK & Ireland, where revenues grew +6% in constant currency and we continued to gain market share in Germany & Austria where revenues increased +1% organically. We achieved solid results in North America, where organic revenue growth picked up throughout the year. Also the emerging markets continued to grow in double-digits.”

But fourth-quarter results show that gross profit fell -6% in constant currency to €894 million with the gross margin dropping to 17.8%, a decline of 10 basis points. Operating income in the quarter plummeted -34% to €136 million.

Net income plunged a sharp -74% to €35 million, well below average estimates of €88.6 million. The firm faced restructuring costs of €46 million during the quarter to integrate units in Europe and cut jobs.

Dutch rival Randstad last month reported similar fourth-quarter results as markets in Europe remained challenging and net loss widened. ManpowerGroup, the third-largest staffing firm in the world, also saw revenues slip in the quarter and expects “potential disruptions” across major markets.

Looking ahead, Adecco expects improved market conditions towards the end of 2013. The group will continue “to focus on price discipline and the tight alignment of the cost base to revenue developments. In 2013 we plan to invest €30 million to further optimise the cost base.”

Europe hit by weak Q4 demand

During the fourth quarter in France, the firm’s most important market, revenue dropped -17% to €1.2 billion as demand for permanent staff declined and revenue in this segment fell -29%. The firm incurred restructuring costs of €33 million in the period, saying the merger of its Adecco and Adia brands are nearly complete.  

In the UK & Ireland, revenues fell -1% in constant currency to €490 million. Permanent placement revenues were down -25% in constant currency.

Adecco said that revenue development in Germany & Austria were ahead of the market, but revenues still declined by -4% organically to €387 million.

Southern European operations were much impacted by the market decline with revenue in Italy falling -8% to €234 million in the quarter. In Iberia revenues fell -10% to €160 million as economic conditions in the region remained challenging.

In the Benelux countries, revenue dropped by -6% to €225 million, especially in the Netherlands. The Nordic countries offered brighter prospects as revenues grew by a total of +3% to €217 million with Sweden posting a decline and Norway a “solid” rise in sales. Switzerland revenues fell -7% to €112 million.

Outside Europe, Japan could not escape weak market conditions as revenue in the fourth quarter fell -15% organically to €361 million. Revenues in Australia & New Zealand were also down -6% to €133 million. Emerging Markets posted revenue growth of +4% at €475 million, mainly driven by Latin America. North America revenue grew +8% to €947 million.

Staffing revenues mixed

In the fourth quarter, revenue in the General Staffing business (Office & Industrial) fell by -7% to €3.8 billion. Revenues in the industrial business dropped -9% in constant currency, hitting markets in France, Germany, Austria and Japan.  

Professional Staffing revenues were flat in constant currency, but dropped -1% organically. Revenues grew in North America, but fell in the UK & Ireland and France.

In Information Technology, revenues were down -3% organically despite strong growth in North America. Revenues in the UK & Ireland declined by -7% in constant currency.

In the Engineering & Technical business, revenue was up +10% in constant currency and +4% organically, driven by growth in Germany, Austria, France, North America and the UK & Ireland.

In Finance & Legal, revenues were flat in constant currency. During the quarter, revenues in Medical & Science were down -4% organically, especially in France and the Nordics. Revenues in Adecco’s Solutions business grew +4% in constant currency with MSP (Managed Service Programmes) and VMS (Vendor Management System) both showing growth.

In early trading, the company’s share price fell by -4.2% to CHF 52.40, an increase of nearly +9% from a year ago. Based on its stock price, Adecco has a market value of CHF 10.34 billion (€8.37 billion). 


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