Adecco (AO) | Buy | Top line acceleration continues, gross margin under pressure

Research evidence excerpt

Adecco (AO) | Buy | Top line acceleration continues, gross margin under pressure

Adecco Buy | Target Price: CHF34.00

Company description Management

Adecco is the world's largest staffing company with EUR23bn in sales and it is Denis Machuel, CEO

active in 60 countries across the globe. France (23% of sales), U.S. (13%), Italy Valentina Ficaio, CFO

(10%) and Germany (7%) are its key markets. Adecco has a relatively diverse Key shareholders

service portfolio ranging from general and professional staffing (53% of gross Free float 95.00%

profit) to other HR services like outplacement, R&D outsourcing and Silchester 14.99%

trainings/upskilling. UBS AG 6.47%

Blackrock 4.26%

Investment case Valuation methodology

The rebound in global manufacturing PMIs is supportive for Our EUR 34.00 price target is derived as the mid-point between a

temp volumes, especially in blue-collar segments, while DCF valuation, assuming a terminal growth rate of 1.0% and a

increasing layoff announcements drive demand for white-collar terminal EBITA margin of 4.0%, and an EV/EBITDA-based

outplacement services, a constructive combination for Adecco’s valuation applying an 8.5x NTM EBITDA multiple, which we view

diversified mix. as conservative and reflective of a modest recovery scenario.

Adecco has taken steps to deleverage its balance sheet by Risks to our rating

adopting a flexible dividend policy with a 40–50% payout of Ongoing deterioration of staffing markets.

adjusted EPS. Combined with a well-funded capital structure, Loss of market share and margin pressure from competitors.

we believe Adecco can reduce leverage in the coming years

which should drive a re-rating in our view.

Ongoing cost savings and investments in markets where Adecco