Adecco first-quarter beats forecast, but warns on economy : US Business

By Katie Reid

ZURICH (Reuters) - Adecco posted a forecast-beating 3 percent rise in first-quarter net profit, lifting shares, but cautioned that economic weakness would weigh on its sales growth goal in 2008.

Adecco, the world's largest staffing group, said on Tuesday profit rose to 137 million euros ($211.7 million), helped by revenues in its key France unit and beating a forecast of 122 million in a Reuters poll.

But the group said it expects revenue growth in 2008 to be below its long-term target of 7 to 9 percent due to economic uncertainty.

By 0845 GMT, shares in the group had risen over 1.57 percent to 64.70 Swiss francs, adding to the some 4 percent gained so far this year and outperforming the Dow Jones Industrial Goods and Services index <.SXNP>, which was slightly weaker.

"The results are excellent. They were ahead of expectations and the key areas of the U.S. and France were both better than expected," said Vontobel analyst Scott Weldon.

"One uncertainty going into the results was the impact of Easter and while it did have an impact on sales this did not carry through to profitability. This means the outlook for the second quarter is strong," he said.

SLOWING ECONOMY

But economic weakness in the United States, which is seen spilling into Europe, is a dark cloud hanging over the staffing sector and could overshadow Adecco's recent attempts to improve profitability by moving into the professional services market.

"The U.S. is still weak no doubt about it. We do not see an improvement of the environment we are in. Volumes will probably go sideways," Chief Executive Dieter Scheiff told Reuters.

The group expects moderate growth in Europe and Japan, but Scheiff said there had been a "slight deceleration" in the French staffing market in April.

In April, Dutch rival Randstad posted a slight rise in first-quarter net profit and forecast slowing sales growth as the economic slowdown takes its toll.

And U.S. peer Manpower reported a sharp drop in operating profit at its U.S. operations, though numbers from its international activities were higher.

Despite Adecco's more cautious tone on 2008, it stuck to its long-term target for average annual revenue growth of at least 7 to 9 percent and was confident it would improve the operating margin to over 5 percent by 2009.

The operating margin increased by 30 basis points to 4.1 percent, Adecco added.

Scheiff said the group was still on the prowl for acquisitions in the professional staffing business in developed markets such as Europe, Asia and America.

"We can raise a debt of up to 1 billion euros, but we also have roughly 400 million (euros) in shares, which we could also use if it was needed for an acquisition," Scheiff said.

(Editing by Stephen Weeks)

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