UPDATE 2-Adecco sees European labour market bottoming out

Tue May 7, 2013 3:44am EDT

* CEO says Italy, Spain, Portugal starting to improve

* Q1 net profit 67 mln euros vs 80.1 mln forecast in poll

* EBITA margin narrows to 3.0 pct from 3.8 pct year ago

* Says on target for EBITA margin of 5.5 pct by 2015 (Adds CEO comments, details on countries, background, shares)

By Caroline Copley

ZURICH, May 7 (Reuters) - Adecco, the world's largest staffing company, said there were signs austerity-ravaged markets in southern Europe were starting to stabilise as big drops in wages make workers there more competitive.

The euro zone's debt crisis has paralysed job markets, sending unemployment in the single-currency bloc to a new record of 12.1 percent in March, meaning more than 19 million euro zone citizens are out of work.

Recent economic data offer little hope for a quick recovery. However staffing firms - which act as a bellwether for wider labour markets because companies typically hire temporary workers at the start of a recovery and let them go when a downturn looms - are offering a ray of hope.

"What we're seeing in countries like Italy, Spain, Portugal, is that activity is increasing somewhat, but from very low levels," Adecco Chief Executive Patrick De Maeseneire told Reuters in an interview.

"There's been enormous salary cuts in those countries, and they are now becoming more competitive. Slowly, modestly we see some investments coming back from these very low levels."

That echoed comments from Dutch peer Randstad, which said it had noted the first signs of recovery in Spain and Portugal in recent weeks, and an improvement in other European markets.

Adecco said it expected more favourable economic conditions towards the end of the year.

Revenues at the Switzerland-based firm fell 7 percent, excluding acquisitions and currency fluctuations, in the first quarter to 4.6 billion euros ($6 billion), just short of the mean forecast of 4.7 billion in a Reuters poll..

That marked the fifth consecutive quarter of contraction. Adjusted for trading days, revenues were down 5 percent.

However, Adecco said revenues started to stabilise towards the end of the first quarter, falling an underlying 4 percent in March with a similar trend observed in April.

In Adecco's biggest market, France, where revenues fell 17 percent, the group said it was starting to close recent underperformance to the rest of the market, although conditions remained challenging.

Adecco, which also competes with U.S.-based ManpowerGroup , said first-quarter net profit fell to 67 million euros, undershooting the average poll forecast of 80.1 million euros.

It reiterated a target for an earnings before income tax and amortisation (EBITA) margin of 5.5 percent by 2015. In the first quarter, the EBITA margin fell 80 basis points to 3.0 percent.

Adecco shares, which trade at 13.7 times forecast earnings for the next 12 months, similar to Randstad's 13.8, were up 0.1 percent at 50.75 Swiss francs in early trade.

($1 = 0.7659 euros) (Editing by David Cowell and Mark Potter)