Investing.com -- Adecco (SIX:ADEN) shares climbed 4% as the staffing company reported first-quarter results that exceeded market expectations.
The firm’s sales reached €5,573 million, surpassing the forecast of €5,467 million and the consensus estimate of €5,524 million. Clean EBITA also outperformed forecasts, coming in at €132 million against expectations of €116 million. The company’s net income for the quarter was €60 million, beating the forecasted €47 million, attributed to a lower tax rate and reduced one-off costs.
Organic revenue growth adjusted for working days saw a decline of 2%, which was less severe than the anticipated 3.7% and the previous quarter’s 5% decrease. This performance was relatively strong compared to Adecco’s peers, with RAND and MAN posting declines of 4.2% and 2%, respectively.
Geographically, Adecco’s Americas and APAC regions showed positive growth rates of 4% and 11%, respectively, marking an improvement from the previous quarter. However, France and the EMEA region experienced declines. The gross margin slightly decreased by 40 basis points to 19.4%, in line with forecasts but down year-on-year.
Selling, General and Administrative (SG&A) expenses were reported at €974 million pre one-offs, a 1% organic decrease with full-time equivalents (FTEs) down by 6%. The underlying EBITA margin dropped by 40 basis points year-on-year to 2.4%. The company’s net debt increased to €2,701 million from €2,476 million in the previous quarter, with a working capital outflow of €261 million.
Looking ahead, Adecco anticipates modest positive momentum to continue into the second quarter, with volumes improving through the first quarter. The group expects a sequential decrease in gross margin due to normal seasonality and a modest reduction in SG&A expenses excluding one-offs.
RBC analysts commented on the company’s valuation and prospects, stating, "The shares have come back towards the lows and are now trading on 0.27x 25E EV/sales, towards the bottom of the historical range. We are positive generally on staffing, despite the uncertain macro and see significant upside on a mid-cycle view, although clearly the increased uncertainty of late is unhelpful."
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