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Adecco SA, the world's largest staffing company, said it was encouraged by the demand for temporary workers as an uncertain economic recovery leads employers to rely more on contingent labour, and set a target for profit margins that an analyst called conservative.
Adecco said demand has picked up over the past year, driven by factors like an ageing population, a lack of skilled workers and a shift toward more made-to-order production and the increased role of government in many economies.
Echoing the comments made by Adecco, Rob Zandbergen, Chief Executive of Dutch staffing company USG People also expects to benefit from high demand for temporary workers. On Thursday, he said, "We believe that our clients don't want to take any risks, because they don't know if the recovery in demand for goods and services will persist. This uncertainty is good for the staffing sector and I believe it will continue for some time".
Adecco, which will provide personnel for the London Olympics in 2012, said it was still committed to its mid-term EBITA (earnings before interest, tax and amortization) margin target above 5.5 percent.
"Unemployment rates are staying very high and still we are increasing our business," Adecco Chief Executive Patrick De Maeseneire said at the start of two-day investor event in Miami. "Our customers have decided to have more temporary workers."
The percentage of temporary workers within labour is probably going to exceed highs reached in 2007 and 2008, which range from about 1.5 percent in the United States to almost 5 percent in some European markets, he predicted.
"An uncertain economy is good for temp staffing companies and Adecco's target is likely conservative", analyst Teun Teeuwisse of ABN Amro told Reuters. He added that Adecco no longer gives specific revenue targets.
"It's definitely achievable," he said. "The previous targets they never achieved so they've become more conservative. It's a wise decision to remain a bit cautious."
Teeuwisse, who also covers Dutch rivals Randstad and USG People, said Adecco has done a good job of emphasising margins over sales growth, as its earlier strategy depressed pricing.
The highly cyclical staffing sector is operating in an environment defined by mixed signals on the strength of recovery in both the United States and Europe amid a sovereign debt crisis and evidence U.S. growth may have stalled.
Adecco's CFO said he did not expect a double-dip recession, but U.S. and European economies could be weaker in 2011 than this year.
"We have very low visibility," Dominik de Daniel said, declining to forecast revenue. De Daniel said Adecco would shy away from large acquisitions over the next year and a half as it integrates recent deals, but Adecco might make smaller purchases in emerging markets or niche areas. This seems to effectively dismiss recent market speculation that Hays was a firm acquisition target for Adecco.
Adecco said sales rose around 16 percent in the first two months of the third quarter, and trends continued into September.
Industrial workers accounting for nearly half of Adecco revenue and office and IT workers are its next biggest segment. Its top markets are France and North America.
The U.S. economy shed 8 million jobs during the recession, which officially ended in mid-2009, of which about 900,000 were temporary jobs. Since the recovery began a year ago, about 400,000 temporary jobs have been recovered, accounting for about half of overall job growth, as employers look for flexibility before committing to full-time hiring.
Adecco aims to push more into professional staffing, which it suggests accounts for about a third of the global staffing market and is growing at a faster pace than lower-margin general staffing. Professional staffing accounted for 26 percent of Adecco's total revenue in the second quarter, up from 17 percent in 2008.
"We want to be in professional staffing because that's where the mature markets are going to develop. We have to change the profile of the company," De Maeseneire said.