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Adecco Q2 profit rises as hiring picks up

Adecco SA, the world's biggest temporary staffing company, said Q2 profit rose 35% as economic growth fueled hiring and it expanded the more profitable business of placing qualified professionals. Net income increased to € 135 million ($172.5 million), or 70 cents a share, from € 100 million or 52 cents a year earlier. Profit beat the € 129 million median forecast of seven analysts polled by Bloomberg News. Staffing across Europe is picking up as the region is forecast to grow at the fastest pace in six years. Klaus J. Jacobs, Chairman, Adecco Group said: "I am pleased with the continued good performance of Adecco in the second quarter. We grew revenues 10% organically with encouraging profitability improvements." Chairman and billionaire investor Jacobs, trying to make Adecco more profitable and less dependent on economic swings, has expanded professional staffing with the purchase of Deutscher Industrie Service AG in June. „It's a good strategy,” said Marco Strittmatter, an analyst at Zuercher Kantonalbank in Zürich who rates the shares „overweight.” Services including permanent placement „can amount to a lot” of income, he said. Staffing of qualified professionals accounted for 18% of revenue in the Q2 and 26% of operating profit. Jacob wants to raise the contribution of the professional segment to about 50% of operating profit by 2010. „I see high structural growth potential in the global human resources market, particularly in the area of professional staffing,” said Dieter Scheiff, the former DIS CEO who took over from Jacobs as Adecco CEO this month. Scheiff commented: "I see high structural growth potential in the global human resources market, particularly in the area of professional staffing. With the strategy introduced at the beginning of the year, I feel that we are well positioned to capitalise upon this opportunity thereby reaching our long-term goals of 7 to 9% annual revenue growth as well as an operating margin of over 5% by 2009." Scheiff confirmed a goal to grow revenue as much as 9% a year and raise operating income to 5% of sales by 2009, from 3.9% in the Q2. Adecco's shares have gained 13% this year. They have underperformed rival Manpower Inc., the world's second-biggest temporary staffing company, whose shares have risen 23%. Manpower last month reported a 29% increase in Q2 profit and forecast a „strong year.” Randstad Holding NV, the world's fourth-largest temporary employment agency said Q2 profit rose 33%, boosted by German demand. Amsterdam-based Vedior NV is the No. 3 temporary staff agency. Sales rose 13% to € 5.13 billion, helped by a „more robust economy” in the large European countries, Adecco said. Sales in France, its biggest market, rose 8.1% to € 1.74 billion, and revenue in Germany, where Adecco bought DIS, gained 137% to € 202 million. Economic growth in the 12 euro-countries may exceed a forecast of 2.1%, the fastest pace since 2000, the European Commission said July 11. Unemployment in the region fell in June to 7.8%, the lowest since the single currency was introduced. „The key for Adecco is France,” said Michael Kretschmer, a fund manager at Robeco Group in Rotterdam that manages about € 140 billion ($180 billion) for clients including Adecco shares. Adecco makes over half its profit by supplying industrial and back office workers to companies including French carmaker Renault SA. Operating profit in France rose 1.7% to € 60 million from € 59 million a year ago, while it almost doubled to € 14 million from € 5 million in Germany. Currency fluctuations had a minor impact on the second quarter's revenues and operating income. Adecco has made four acquisitions since January 2005 to increase its profit from higher-paid professional services. Besides DIS, it bought a majority stake in French consulting firm Altedia SA, acquired Spanish human resources company Humangroup, and Staffwise Legal, a US legal recruiting company. Adecco also is in talks to buy Russian professional services company Ancor, Jacobs said in March. (Blomberg, adecco.com)