Adecco Group AG

Our stable outlook on Adecco reflects our expectation that the group will maintain a stable operating performance in the next two years, with organic revenue growth of about 3%, relatively stable operating margins, and S&P Global Ratings-adjusted debt to EBITDA of around 1.0x. Despite the group having stronger credit metrics than we would typically associate with a modest financial risk profile, we have adjusted our financial risk profile assessment to reflect its sensitivity to periods of economic stress and the likely step change it would bring to financial ratios. We could consider lowering the ratings if the group's performance deteriorated, or if it adopted a more shareholder-friendly strategy or showed an appetite for material debt-financed acquisitions, which could weaken its

...Although the group's operations are vulnerable to cyclical downturns, Adecco has taken actions to mitigate the impact of this in recent years. About 87% of Adecco's revenues are derived from the provision of temporary staff. As a result, its EBITDA is more susceptible to cyclical downturns than business services providers operating in other sub-segments. For example, in 2009 the group's adjusted EBITDA fell by about 50%, which resulted in a material increase in leverage from 1.2x to 3.2x. Subsequent to 2009, the group has generally operated at slightly lower levels of leverage than pre-2009, and has made acquisitions to increase the share of its revenues from the counter cyclical Career Transition and less cyclical Outsourced HR services, which we believe will provide better protection to its EBITDA base in the event of future cyclical downturns. Long-term risks persist from technology players in the permanent staffing market and from automation in general temporary staffing; however major...

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