Adecco's profit rises, but expects to miss 2008 revenue goal
ZURICH, Switzerland—Adecco SA on Tuesday reported a 3 percent rise in first quarter net profit but the temporary employment firm warned that it won't reach its revenue target in 2008 because staffing markets are deteriorating worldwide.
The world's largest staffing company in terms of sales said net profit edged up to 137 million euros ($212 million) in the three months ended in March from 133 million euros in the year-earlier period. That beat expectations for a profit of 115 million euros ($178 million).
"Adecco started well into 2008," said Chief Executive Dieter Scheiff. But he downplayed its prospects, saying markets have become more challenging and that the staffing firm expects only modest growth this year, making it unable to boost revenue as planned by 7 percent to 9 percent.
"While growth rates in the European and the Japanese markets are decelerating, they are still on a solid path", Scheiff said. "Demand in the U.S. remains weak, whereas the emerging markets continue to grow strongly."
Scheiff's comments reflected earlier statements by competitors such as Randstad Holding NV and Manpower Inc , both of which warned of challenging market conditions, especially in the U.S.
The outlook news didn't affect the company's shares, as analysts said that, amid the current economic downturn, such news wasn't a surprise. Adecco shares, which have gained 4 percent this year so far, continued their upward trend, adding 1.6 percent in an overall weak market.
Adecco said revenue rose 1 percent to 5 billion euros ($7.7 billion) from a year earlier, hampered by the weaker dollar.
While the company managed to boost sales in France, one of its key markets, revenue in the U.S., where trading conditions have been weak for more than a year, fell 4 percent. In the U.K. and Ireland, revenue declined a steeper 9 percent.
Germany, helped by acquisition effects, however, saw a strong rise in revenue, and markets such as India also performed well, Scheiff said. He added that Adecco would continue to be on the lookout for acquisitions, especially in the professional staffing market in Asia and Europe.
Most of Adecco's revenue currently stems from the placement of blue-collar workers. But the company also aims to boost the placement of expert staff in the medical, financial and law fields in a bid to increase its margins.
"These are excellent results as the company was able to boost its operating margin despite higher investments and holidays," said Scott Weldon, analyst at Bank Vontobel, who rates the stock at buy.
Analysts also partly shrugged off the sales warning, saying it was already clear that Adecco wouldn't be able to reach its ambitious growth goals amid an economic downturn.
"The outlook for 2008 is in line but also rather reassuring as the modest sales growth implies a rather stble trend for the remainder of the year", said Marc Zwartsenburg, analyst at ING in Amsterdam, who rates the stock at hold.
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