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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (40096)	10/24/2003 5:10:15 AM
From: elmatador	Respond to of 74559

Why I don't see job market climbing: ADO Squeezed margins pressure Adecco No. 1 staffing firm's 3Q profit tops estimates but soft U.S. labor market weighs on results. October 22, 2003: 8:11 AM EDT ZURICH (Reuters) - A poor labor market and tough U.S. conditions that weighed on margins took the shine off Adecco's third-quarter results Wednesday, knocking shares in the world's top employment services firm lower. Adecco, best known for its "temp agency" staffing network, said net income rose by almost a third as cost cutting offset weaker revenues in its employment placement business. But Chief Executive Jerome Caille said economic recovery had not yet resulted in strong job creation. Shares in the company, which is often used as an economic indicator, fell 3.03 percent to 76.70 Swiss francs, underperforming the Swiss market and European rivals like Dutch firms Randstad and Vedior. YOUR E-MAIL ALERTS Adecco SA Labor Layoffs and Downsizing or Create your own Manage alerts \| What is this? Adecco (ADO: Research, Estimates) said the labor market in its biggest markets of Europe and the United States remained challenging, in contrast to largest rival Manpower's more optimistic outlook earlier this month. The U.S. market accounts for about a quarter of Adecco's revenues. "It is too early to say the economic recovery has transformed into a jobs recovery," Caille told Reuters. "We remain cautious for the short term because the markets are very tough." The Swiss firm reported 30 percent higher net income of 104 million, or $121.4 million, while operating income before amortization rose 19 percent to 163 million. Sales fell three percent to 4.25 billion, but rose two percent in constant terms. "The expectations were too high (on the outlook). Few companies can give a bullish outlook after what has happened in the last two years," said Rudi Buxtorf, Coutts Bank Switzerland fund manager, who has an overweight position in the stock. "Analysts and strategists had already upgraded their expectations and it was too hard to beat them," he added. Adecco's gross margin fell 107 basis points to 16.7 percent, on a decline in its high-margin permanent placement business, the impact of currency movements, and lower U.S. "temp" margins. "The results are better than expectations," said Nicole Burth Tschudi, Lombard Odier Darier Hentsch analyst. "But I am not pleased with developments in margins," she added. Adecco stock has risen by over 40 percent this year, outstripping the performance of shares in Manpower by some 10 percent, with investors attracted to its cost-cutting story and betting it will benefit from an economic upturn. Adecco slashed costs and cut 2,000 jobs in the first half. The firm further reduced its cost base by nine percent in local currency terms during the third quarter. Adecco's CEO declined to comment on talk linking Adecco to U.S. employment firm Right Management Consultants, in the middle of a proposed management buyout. "We are continuously assessing our opportunities but we want to grow professional staffing," he said. Around 90 percent of Adecco's revenues come from its traditional "temp" business but it is keen to expand its offering in the high-margin professional services business. The day we see ADO not keeping up with the demand, then a recovery has arrived. Forget about statistics from the Dep. of Labor. The future points to temp jobs, not to permanent employement. Permanent employment always ends up creating pseudo-jobs.