Adecco sees European labor markets at turning point
ZURICH (Reuters) - European labor markets have reached a turning point, world No. 1 staffing firm Adecco (ADEN.VX) said on Thursday, as it beat second-quarter profit expectations and saw its shares surge to a two-and-a-half year high.
Staffing firms are regarded by analysts as good indicators of future economic trends and Adecco's more optimistic tone about the euro zone could add to expectations it will move out of recession later this year.
Adecco's underlying revenues, excluding currency moves and acquisitions, fell 3 percent in the second quarter to 4.93 billion euros ($6.57 billion), in line with expectations and an improvement on the 7 percent decline in the first quarter.
That trend had continued, with revenues down 2 percent in June and a similar level in July, said the Swiss firm, which makes roughly 45 percent of revenues in the euro zone.
"We have reason to believe that we are at a kind of a turning point and that we will turn positive in the second half of the year," Chief Executive Patrick De Maeseneire told Reuters, adding the chemicals and logistics sectors were driving the improvement.
His comments echo Dutch rival Randstad (RAND.AS) and U.S. firm ManpowerGroup Inc (MAN.N) which have also sounded more upbeat about European economies.
De Maeseneire cautioned that he did not expect "tremendous economic growth" for a number of years, but said Europe was now over the worst.
The number of jobless in the euro zone fell for the first time in more than two years in June, while business surveys show manufacturing activity in the region is growing again.
Shares in Adecco, which have risen more than 16 percent in the past two months, were trading up 4.2 percent by 0850 GMT at 62.65 francs. The European industrial goods and services sector .SXNP was up 0.2 percent.
"Adecco fulfilled expectations on all levels. The outlook statement is quite promising," said J. Safra Sarasin analyst Patrick Hasenboehler.
While underlying revenues in Germany, Italy and Nordic countries were flat, they were down 12 percent year-on-year in France, Adecco's biggest market, compared with a 17 percent fall in the previous quarter.
"France is a market where reforms did come very late and I think still a number of things have to be done, in terms of productivity," De Maeseneire said.
He said Southern Europe, where salaries have fallen and productivity has improved, was now more competitive.
Adecco said it was cooperating with the French authorities over an investigation into staffing companies concerning alleged violations of French competition law.
A particular bright spot for the company was Britain, where underlying revenues rose 4 percent as the government hired more temporary workers. North America grew 3 percent and emerging markets were up 8 percent.
Growth in its higher margin professional staffing business and its focus on cost discipline helped profitability. Net profit jumped 12 percent to 126 million euros in the quarter, beating forecasts for 112 million.
Adecco confirmed its target for an earnings before income tax and amortization (EBITA) margin of above 5.5 percent by 2015. In the second quarter, the EBITA margin rose 40 basis points to 4.1 percent.
It said it planned a new share buyback program of up to 250 million euros.
($1 = 0.7508 euros)
(Editing by David Cowell and Mark Potter)
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