Morningstar | ADEN Updated Forecasts and Estimates from 01 Nov 2018
Recruitment leader Adecco delivered a set of first-half results bang in line with consensus but slightly behind our estimates on an EBITA basis. Organic revenue growth remained solid over the period at 4%, while adjusted EBITA margins were down 30 basis points year over year at 4.5%. We do not expect to make any changes to our forecasts at this early stage in the year, however, and reaffirm our CHF 75 fair value estimate and no-moat rating. We believe the shares currently offer good value.On the revenue side, as a reversal of what we have seen in the sector over the last year, core regions such as France and North America witnessed an acceleration in growth, reaching 8% and 4%, respectively, on an organic basis. From a margin perspective, the 30-basis point margin decline year over year is explained mainly by investments in IT infrastructure and tax changes in France, which we expect will neutralise over the remainder of the year.
From a structural perspective, Adecco continues to slowly diversify its revenue base away from the highly cyclical temporary staffing market. Higher margin permanent placements increased by 18% organically year over year and the company acquired training provider General Assembly at the end of May this year. General Assembly provide digital skills training in areas such as coding and digital marketing to both those currently in work and those recently made redundant. With Adecco's weight behind the company, we believe there lies a large potential for a roll-out of training programs, further strengthening the Lee Hecht Harrison offering.
Adecco Group provides human resource services, including temporary staffing, permanent placement, outsourcing, consulting and outplacement. Co. has more than 5,500 branches in over 60 countries and territories. Co.'s Office and Industrial businesses offer a range of general staffing services, including temporary staffing, permanent placement, assessment, training and integrated human resources applications. In addition, Co. operates professional business lines, which include Adecco Finance & Legal, Adecco Engineering & Technical, Adecco Information Technology, Adecco Medical & Science, Adecco Sales, Marketing & Events and Adecco Human Capital Solutions.
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