Adecco Reports Flat Revenues, Lower Margins Amid European Headwinds in 2012

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Strength in North American operations was not enough to offset revenue and profitability pressure in the majority of Adecco’s European regions as economic headwinds persisted throughout 2012. Currency effects led to relatively flat revenue growth year over year at EUR 20.5 billion; however, this masked an organic decline of about 4% as France, Italy, and Iberia showed particular weakness throughout the year. Amid a difficult economic backdrop, cost control efforts contributed toward gross margin improvement of 50 basis points to 17.9% for the year.

However, North American and European restructuring charges weighed heavily on overall operating margins, which declined 40 basis points year over year to 3.3%. In 2012, Adecco’s professional staffing segment outperformed its general staffing segment, as stronger demand for skilled white-collar professionals translated to 9% constant currency revenue growth in Adecco’s engineering vertical, 2% in information technology, and 1% in science and medical.

This contrasts with constant currency revenue decline in all other segments, with the industrial vertical experiencing the largest decline at -8%. This supports the belief that demand for white-collar professionals will continue to grow as developed markets shift away from manufacturing toward more service-oriented economies.

Despite Adecco’s lack of an economic moat in a highly commoditized industry, that future development in the professional staffing segment will further differentiate Adecco from industry players that mainly focus on general white- or blue-collar staffing. That said, this represents longer-term potential, as professional staffing represents less than 25% of Adecco’s consolidated revenues today.

 

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