Adecco beats Q1 estimates on market share gains, but shares drop

(Sharecast News) - Shares in Adecco dropped sharply on Wednesday despite the Swiss HR provider and temp staffing firm beating forecasts with its first-quarter results, as the company pointed to further declines in margins in the coming quarter.

The firm delivered a strong start to the year, with revenues up 2% at €5.66bn, as organic growth picked up to 5.3% from 3.9% in the fourth quarter, helped by strong market share gains. Company-compiled consensus pointed to a figure closer to €5.56bn, with organic growth at just 3.7%.

EBITDA excluding one-off items rose 12% to €148m, ahead of the €147m expected by analysts, though the gross margin slipped 40 basis points year-on-year to 18.8% due to business mix.

"Adecco continues to outperform the market with growth across all regions and double digit increases in Iberia, Nordics, North America, Latin America and Asia," said chief executive Denis Machuel.

Permanent placements were 7% lower on an organic basis, though all other areas of the business reported gains. In a press briefing on Wednesday, Machuel said the demand for permanent staff continues to fall amid an uncertain environment.

"It's linked to ⁠the uncertainty and explains also why flexible placement is quite active, because the overall ​economy is pretty good," he said.

Looking ahead, Adecco said it had seen a continuation of the positive momentum in volumes to date over the second quarter, though the gross margin is expected to be "marginally lower sequentially, reflecting normal seasonality". That would represent a decline quarter-on-quarter and year-on-year, with last year's gross margin for the second quarter coming in at 18.9%.

The stock, which had dropped more than 20% so far this year by Tuesday's close, was down a further 12.6% at CHF15.99 by 0908 BST.