Adecco faces continued challenges amid sales decline and cost cuts

Adecco again feels challenging environment Keystone-SDA

The job placement agency, Adecco Group's business remained challenging in the second quarter of 2024, with the personnel services provider continuing to anticipate difficulties in the third quarter.

Specifically, sales fell by 2.6% to €5.84 billion (CHF5.45 billion) in the second quarter. Adjusted for exchange rate effects and the difference in the number of working days, organic growth was -2% year-on-year (Q1 2024 0%), according to a statement on Tuesday. Analysts had expected an organic decline of 1.3% on average prior to the publication of the figures.

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In terms of business units, the largest unit, job placement company Adecco, shrank organically by 2%, with significant declines in France and Northern Europe. In contrast, Asia performed well. Akkodis also shrank by 2%, particularly in North America, where the market for tech specialists remained difficult. The smallest division, LHH, shrank organically by 7%.

Gross margin down

Gross profit fell by 6 %to €1.13 billion (previous year: €1.24 billion), and the corresponding margin dropped by 70 basis points to 19.%. Adecco had forecast a gross margin on par with the first quarter (Q1 2024: 19.8%).

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Adjusted for one-off effects, the operating result at EBITA level fell by 3% to €179 million (previous year: €184 million). The corresponding margin was 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 €58 million, 6% less than in the previous year. Adecco’s performance was slightly worse than analysts had expected.

Market share gained

Despite ongoing challenges and the tough price environment, Group CEO Denis Machuel was positive. 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,” emphasised Machuel.

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“Rigorous cost management should help with this. And our proven ability to execute will put us in a position to benefit quickly when the labour markets recover,” he added.

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

The Adecco Group is currently implementing stringent cost-saving measures. In the second quarter, the Group achieved net savings of €162 million by mid-year, exceeding its savings target of €150 million compared to the base year 2022.

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The greatest savings were achieved by simplifying and consolidating the Group’s core functions (approx. €100 million). This was accomplished by introducing offshore shared service centres for finance and HR and reducing overlaps and redundancies in the management structures at the business division and country levels.

Additionally, around €65 million were saved in material costs. The Group now has a clear plan to keep administrative and overhead costs below 3.5% 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 anticipates a further slight decline in administrative costs, excluding one-off effects, compared to the second quarter.

Translated from German by DeepL/amva

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