$ADEN (+1,86%) - Quarterly figures

Zurich (awp) - The Adecco Group's business remained challenging in the second quarter of 2024. The personnel services provider continues to expect challenges in the third quarter.

Specifically, sales fell by 2.6 percent to EUR 5.84 billion in the second quarter. Adjusted for exchange rate effects and the different number of working days, organic growth amounted to -2 percent year-on-year (Q1 2024 0%), according to a statement issued on Tuesday. In the run-up to the publication of the figures, analysts had expected an average organic decline of 1.3%.

In terms of business units, the largest business unit Adecco shrank organically by 2 percent, with particularly large declines in France and Northern Europe, for example. By contrast, things went well in Asia. Akkodis also shrank by 2 percent, particularly in North America, where the situation in the market for tech specialists remained difficult. Finally, the smallest division, LHH, shrank organically by as much as 7 percent.

Gross margin down

Gross profit fell by 6 percent to EUR 1.13 billion (previous year: EUR 1.24 billion) and the corresponding margin by 70 basis points to 19.4 percent. Adecco itself had forecast a gross margin on a par with the first quarter (Q1 2024 19.8%).

Adjusted for one-off effects, the operating result at EBITA level fell by 3% to EUR 179 million (previous year: EUR 184 million). The corresponding margin amounted to 3.1% after 2.8% in the first quarter and 3.1% in the same period of the previous year.

At the bottom line, the company earned EUR 58 million, 6% less than in the previous year. Adecco's performance was slightly worse than analysts had expected.

Market share gained

Group CEO Denis Machuel, meanwhile, was positive. Despite ongoing challenges and the tough price environment, the company has gained market share, achieved cost savings and improved its cash flow. "We are determined to continue to outperform the industry and gain market share," emphasized the manager.

"Rigorous" cost management should help with this. "And our proven ability to execute will put us in a position to benefit quickly when the labor markets recover," said Machuel.

Looking ahead, the company expects sales in the third quarter to develop at a similar level to the second quarter. The gross margin should improve sequentially in line with seasonality and costs should fall slightly compared to the previous year.

Savings target exceeded

As is well known, the Group is currently cutting costs. The cost-cutting measures for administrative costs continued unabated in the second quarter. The Group achieved concrete net savings of 162 million euros by the middle of the year, exceeding its savings target of 150 million euros compared to the base year 2022.

The greatest savings were achieved by simplifying and consolidating the Group's core functions (approx. 100 million). This was achieved, for example, by introducing offshore shared service centers for finance and HR or by reducing overlaps and redundancies in management structures at business division and country level.

In addition, around 65 million euros were saved in material costs. The Group now has a clear plan to keep administrative and overhead costs below 3.5 percent of turnover in the coming periods. This should help the company to be better positioned than its competitors. For the third quarter, the Adecco Group now expects a further slight decrease in administrative costs excluding one-off effects compared to the second quarter

Happy Investing

GG

Own position:

191 shares, at ø 31.91

1x short put 28.- (will be taken over if the price does not recover)

1x short call 32.- September

Plan: Write SC options between 30.- & 32.- on a 1-2 month basis (~ 1.5 - 2% option yield per 2 months & price yield (2/28 = 7.14%), hold either 191 shares or 91 shares long term.