Adecco Group AG

Overview Key strengths Key risks Global leader in human resource (HR) solutions, with revenue of €24 billion in 2022. Macroeconomic uncertainty and poor growth across Europe and North America to weigh on Adecco's near-term operating performance. Good long-term growth prospects for the temporary staffing industry on the back of the global workforce's transition to more flexible practices, with diversification into permanent, outsourcing, consulting and other services Exposure to economic cycles as talent-solution revenue is insufficient to offset cyclical declines in staffing. Diverse client base and strong geographic presence in 60 countries. Participation in highly competitive and fragmented industry with a market share of about 4.5%. Temporary spike in leverage following acquisition of Akka technologies, expect to drop below 2x, however,

...We expect Adecco to improve leverage from fiscal 2023 onward, but there is limited headroom for underperformance. Adecco's leverage increased to 2.6x as of fiscal 2022 due to the debt- funded acquisition of Akka Technologies, completed in February 2022, compared to 0.2x as of fiscal 2021. Historically, Adecco's balance sheet was run very conservatively with leverage of less than 1.0x, as a mitigant to the cyclical nature of its staffing business. The integration of Akka Technologies and investments in selling and marketing initiatives have impacted margins and resulted in a slower-than-expected reduction in leverage. We believe Adecco could deleverage to about 2.0x as of fiscal 2023 and further to 1.6x as of fiscal 2024. This is supported by the full-year EBITDA contribution from Akka and related synergies, lower integration costs, stable organic growth, and improvement in EBITDA margins. Adecco's business mix has evolved recently with the share of relatively cyclical flexible placements...

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