Daily News

View All News

Switzerland – Europe challenging for Adecco in Q2

09 August 2012

The world’s largest staffing firm Adecco (ADEN:VTX) reported on Thursday that business in Europe remains challenging, particularly in its largest single market France with demand also slowing in Germany and Italy.

“Geographically, developments continue to be diverse. Europe is weakening further. On the other hand, business in North America is accelerating, also driven by the IT Professional Staffing business. In the Emerging Markets, revenue growth continues to be healthy,” said CEO Patrick De Maeseneire.

Rival companies Randstad and Manpower recently reported a slowdown in Europe as staffing markets in the region have been deeply impacted by the debt crisis and face slowing activity in placing temporary workers.

Adecco is focusing on price discipline and cost control to defy “diverging economic trends” as second-quarter revenue grew only marginally by +1% to €5.2 billion, which was down -4% organically when compared to a year ago.

Permanent placement revenue fell organically by -3% to €91 million while sales from the counter-cyclical outplacement business remained flat at €67 million.

In the three months to June, gross profit increased by +5% €917 million with the gross margin improving by +0.8% to 17.7%, driven mainly by the firm’s outplacement business.

But operating income in the second quarter declined by -8% to €172 million while net income was down by -20% to €113 million.

Divergent performance in Q2 2012 sees Europe weaken and America toughening up

In Adecco’s top market France, where the staffing company derived 27% of its total second-quarter revenue, business was flagging as turnover dropped by -14% to €1.4 billion when compared to a year ago. Permanent placement revenues were down -13% and operating income dropped by -29% to €41 million. Plans to merge the Adecco and Adia under the single Adecco brand are reported to be on track with the firm expecting to invest €45 million.

In the UK & Ireland business was holding up as revenues increased +16% to €470 million, partly driven by the Olympic Games where Adecco is the official supplier of temporary employees. But permanent placement revenues were down by -21% in constant currency and operating income more than halved (-55%) to €3 million. The firm warned that profitability was impacted by the sponsorship costs for the Olympic Games which will impact third-quarter results. Integration costs related to MPS amounted to €1 million in the quarter.

In Germany & Austria, revenue development was said to be “ahead of the market”, growing by +1% to €386 million. However, organically revenues declined by -1%, compared with a very strong base last year. The firm saw strong demand from the automotive sector but a slowdown from manufacturing. Operating income dropped by -30% to €13 million.

Revenues in Italy fell by -13% to €245 million as demand slowed considerably due to the economic uncertainties in the country. But the firm said last year’s second-quarter comparison base was very high, having seen 35% year-on-year revenue growth. Operating income in the period was down by -35% to €14 million.

In the second quarter, revenues in the Benelux countries decreased by -5% to €227 million. Revenue development was reported to be in line with the market in the Netherlands, but ahead of the market in Belgium. Operating income dropped by -8% to €8 million.

In the Nordic countries revenue increased by +5% to €210 million although sales were down slightly in Sweden. Operating income surged by +139% to €9 million. The quarter was impacted by a €6 million charge related to exiting the nursing home outsourcing business in Norway.

In Southern Europe, Iberia revenues declined by -11% to €166 million due to paralysing economic conditions in the region. Operating income was up +9% to €6 million. In its domestic market Switzerland, revenues dropped by -7% to €109 million while operating income was down -21% to €9 million.

In North America, the firm’s second-largest market after France, revenues increased by +13% to €967 million in the second quarter. Operating income was up +28% to €44 million.

In Japan, revenues grew +14% to €379 million but organically revenues were down -10% and were impacted by the completion of several outsourcing projects. The firm said that profitability remained strong as operating income was up +9% to €23 million. 

In Australia & New Zealand revenues in the second quarter were up +6% to €132 million but declined -1% in constant currency.  Operating income was up +37% to €5 million. The Emerging Markets saw revenue increase by +13% to €447 million while operating income dropped by -7% to €14 million with the firm planning further investments in the region.

General and Professional Staffing revenues mixed

In the second quarter, revenues in the General Staffing business (Office & Industrial) dropped by a total of -3% to €3.9 billion as sales in the industrial segment fell -7% to €2.6 billion, compared to a +3% increase in the Office segment.

In France, General Staffing revenues declined by -13% and in Italy by -14%. Germany & Austria was down -2% organically year-on-year. In North America revenues were up +5%, whereas revenues in Japan were down -11%, in the UK & Ireland down -3% and in the Nordics down -2%, all in constant currency.

Professional Staffing revenues increased by a total of +13% to €1.2 billion. Revenues in North America were up +2% in constant currency, while revenues in France were down -10%. In the UK & Ireland revenues were up +11% in constant currency.

The Professional Staffing segment is made up of several units, including Information Technology where revenues increased +15% to €599 million.

In the Engineering & Technical business, revenue was up +15% to €290 million.  In Germany & Austria revenues grew +6%, while in France revenues were flat.

In Finance & Legal revenues were up +7% to €188 million, but down -1% in constant currency. The firm said that business in the UK & Ireland remained difficult, with revenues declining by -14% in Q2 in constant currency.

In the quarter, revenues in Medical & Science were up +9% to €102 million with a -2% decline seen in the Nordic countries. Revenues in France were down -11% in the period.

Revenues in Solutions were up +41% to €100 million. Revenue growth in MSP (Managed Service Programmes) and VMS (Vendor Management System) continued to be double-digit in constant currency, the firm said.

In its management outlook, the company pointed out that, in June, revenues declined by -3% organically (and adjusted for business days). While the revenue decline rate during Q2 2012 was relatively stable, revenue development in July was slightly weaker, mainly driven by France and Japan.

In the second half of 2012, management plans to invest approximately €10 million in consolidating several data centres in North and South America.

Adecco came first in Staffing Industry Analysts’ recent report, ranking recruitment agencies by market capitalisation. The firm provides human resource services, including temporary staffing, outsourcing, permanent placement, outsourcing, outplacement and career management, training and consulting.

In early trading this morning, the company’s share price was down slightly by -2.7% to CHF43.60, up +12.8% from a year ago and +12.0% below its 52-week high of CHF49.52 seen in March 2012. The firm has a market value of CHF 8.48 billion. 

Comments

Add New Comment

Post comment

NOTE: Links will not be clickable.
Security text:*