Wednesday, 5 November 2008

Adecco feels the pain in UK and IT

(By Anthony Miller) Switzerland-based staffing giant Adecco found revenues and profits in decline in the September quarter (see results here), with the UK and IT causing most grief. Revenues at Adecco’s UK & Ireland business, about 7% of the company’s €5.1bn Q3 total, fell 16% yoy in constant currency (ccy) terms to €344m, the biggest decline worldwide. UK profits slumped 58%, leaving margins at 1.4%, lowest in the group. Adecco’s business in Emerging Markets painted quite a different picture, with 16% ccy revenue growth and 4.1% margins, up 40 bps. France is Adecco’s largest market (34% of total revenues) but Germany is the most profitable, with stellar 13.2% margins, albeit 40 bps down yoy.

IT was Adecco’s poorest performing service line, with revenues declining 9% ccy to €285m, now less than 6% of the group. Management referred to “continued weak developments in the UK & Ireland” which brought the region’s IT revenues down 15% ccy. Even the US & Canada region ‘only’ fell 5%. Just two of Adecco’s service lines saw any significant growth in Q3, Medical & Science and Human Capital Solutions, both up double-digits. Draw what conclusions you may.

Adecco operates multiple brands in the UK, the most well known in IT being Computer People, once the star of the UK ITSA (IT staff agency) firmament. You may recall that Adecco was keen to buy UK-based recruitment firm, Michael Page, but an unsolicited bid failed in September (see Adecco walks away from Michael Page ). There’s little surprise in hearing that IT recruitment is in the doldrums and share prices have been hit harshly like many IT stocks. Among the most notable UK-quoted ITSAs, Michael Page, Spring and SThree, have seen their share price fall 20-30% ytd, much like Adecco, though Harvey Nash is down closer to 60%. There seems little salvation in sight for some time yet.

No comments: