Adecco Trims 2015 Margin Target on 'Modest' Sales in Europe

  • Adecco reports third-quarter loss on EU740 million impairment
  • Revenue growth was `modest' in western Europe and U.S. markets

Adecco SA shares plunged the most in almost 10 months after the world’s largest provider of temporary staff reported a 740 million euros ($805 million) write down related to its German business and cut its profit-margin target for 2015.

The one-time charge propelled Adecco to a third-quarter net loss of 513 million euros, compared with a profit of 198 million euros a year earlier, the Glattbrugg, Switzerland-based company said in a statement on Thursday. The non-cash impairment will not affect the company’s dividend policy, Adecco said.

Proposed regulatory changes on equal pay for temporary and regular employees in Germany as well as an uncertain economic outlook for Europe’s largest economy led to an impairment on businesses acquired between 2006 and 2007, Adecco said. The company still sees Germany as an attractive market, but margins won’t return to pre-financial crisis levels seen at the time of the deal, Chief Financial Officer Hans Ploos Van Amstel said in a telephone interview.

“If you combine new legislation with what is happening in the market we came to the conclusion we have to recognize an impairment,” he said.

Adecco shares fell as much as 11 percent, the most since Jan. 15, and traded 10 percent lower at 66.40 swiss francs as of 1:37 p.m. in Zurich. That wiped out the gains for the year, and values the company at 11.6 billion francs ($11.6 billion).

Disappointing Outlook

The margin on earnings before interest, taxes and amortization will be about 5.2 percent in 2015 and about the same in 2016 as third-quarter revenue grew slower than anticipated in its largest European markets, Adecco said. It had previously aimed for a margin exceeding 5.5 percent of sales.

“The impairment and outlook for 2016 are disappointing,” Marco Strittmatter, an analyst at Zuercher Kantonalbank, said in a note to clients.

Revenue growth accelerated in emerging markets in the three months through September, yet remained “modest” in the main western European markets and the U.S., the company said.

Total revenue increased 9 percent to 5.67 billion euros. That was lower than the average 5.74 billion euros forecast of nine estimates compiled by Bloomberg. Earnings before interest, taxes and amortization climbed 18 percent to 326 million euros.

Before it's here, it's on the Bloomberg Terminal.