Shares dive at Adecco on news of irregularities

Adecco's share price plunged on Monday amid news of accounting irregularities Keystone Archive

The world’s leading employment services firm, Adecco, announced on Monday it had found accounting irregularities that would delay publication of its 2003 results.

The company’s share price plunged to SFr47.60 ($39.17) on the news, down more than 40 per cent on Friday’s close of SFr81.80.

Adecco, which is based at Glattbrugg near Zurich, said in a statement that it had discovered “material weakness” in its internal controls in North America.

The company also said it had found “possible accounting, control and compliance” issues at operations in “certain countries”.

The problems came to light in a routine audit of the company’s numbers.

Results postponed

The world’s largest provider of temporary workers, which had originally planned to announce its results on February 4, said its audit committee had appointed an independent lawyer to hold an investigation.

The statement added that the company could not say when the 2003 audit of its consolidated financial statements would be completed.

Adecco said it was still in the process of working out how and whether its 2003 figures would be affected by the issues discovered.

A company spokeswoman said that she was not in a position to give further details due to “legal restrictions”.

News that Adecco was launching an investigation came as dealers expressed concern that the issue might balloon into an accounting scandal similar to those at energy trader, Enron, and Italian food giant, Parmalat.

“Whenever something like this happens,” said Nigel Cobby, managing director of European equities at JP Morgan, “there is always a fear that runs around the market that it will be the tip of the iceberg.”

Market uncertainty

Brokers rushed to downgrade the shares, with Bank Leu in Zurich recommending that clients avoid the company’s stock until more information was forthcoming.

“For the time being, the company has changed to a black box,” the bank said in a note.

One trader said the problem at Adecco “has got to be something big” if the company could not give a new date for release of its 2003 figures.

The US market accounts for about a quarter of Adecco’s overall revenues.

Adecco Staffing accounted for about 90 per cent of the group’s 2002 turnover of SFr25 billion.

swissinfo with agencies

Key facts

Shares in the employment services firm, Adecco, have taken a nosedive at the stock exchange on news of accounting irregularities.
The company is conducting an investigation and has delayed publication of its 2003 results, which were due out on February 4.
Brokers are warning investors to be wary of Adecco stock.