Staffing group Adecco sees second-quarter as trough in coronavirus downturn

By John Revill

ZURICH (Reuters) - Staffing firm Adecco Group <ADEN.S> reported a first-quarter loss and halted its share buyback programme on Tuesday as companies closed their doors to limit the spread of the coronavirus pandemic.

The Swiss company, which makes about three-quarters of its revenues from temporary positions, said March revenues fell 19% before plunging 40% in April - the start of its second quarter - as the global crisis escalated.

Chief Executive Alain Dehaze said the second quarter would be tough, though he thought Adecco was over the worst as countries start to ease restrictions to curb the spread of COVID-19, the respiratory disease caused by the new coronavirus.

"If you look at the second quarter, for sure it will be a difficult quarter," he told Reuters. "But we expect it to be the trough."

Adecco, which competes with ManpowerGroup <MAN.N> and Randstad <RAND.AS>, reflects the health of the broader economy, with companies finding it easier to axe temporary staff during a downturn.

Countries that were the first to bring in restrictions and were now relaxing would be the first to start hiring again, Dehaze said, citing Spain, France and Italy. The situation in the United States remained unclear and varied greatly from state to state.

Still, Dehaze remained cautious about the potential for a recovery.

"When I am listening to customers there will be a gradual recovery, probably slow," he said.

"When shops open again, that has a positive impact on the economy, but it is still limited," he added. "As long as you see the full economy, the borders, the manufacturing and hospitality (sectors) are not open it will not be a full recovery."

BUYBACK ON HOLD

Adecco posted a 9% drop in first-quarter revenue to 5.14 billion euros ($5.61 billion), beating the 4.9 billion euro company-gathered consensus view.

It swung to a 348 million euro net loss as it took a 362 million euro goodwill impairment charge for its business in Germany, where the automotive sector was struggling even before the coronavirus crisis.

Excluding one-offs, operating profit fell 32% to 154 million euros. The company paused its 600 million euro share buyback, although its financial position remained strong with 2 billion euros in cash and credit on hand.

Its stock gained 0.3% as analysts highlighted how it had maintained operating profit margins.

"The market environment in the context of COVID-19 is highly challenging for staffing companies," said Bank Vontobel analyst Michel Foeth, who rates the company hold.

"Adecco is clearly benefiting from past digitalisation initiatives which helps it to remain fully operational."

($1 = 0.9169 euros)

(Reporting by John Revill; editing by Brenna Hughes Neghaiwi and Mark Potter)