Better-than-expected organic growth and EBITA margin

Adecco beat expectations in Q3 23. Organic and TDA revenue grew by +3% and the EBITA margin before one-offs was 4.0% of revenue (+0.4pt). The Adecco business unit had strong activity in the DACH, Southern and Eastern Europe/MENA and Asia Pacific regions while LHH benefited from a buoyant Career Transition business. The margin increase reflected the solid gross profit and G&A cost savings. For Q4 23, Adecco expects a gross margin and SG&A cost in percentage of revenue broadly similar to its level

Beating peers on revenue growth but profitability remains under pressure

Adecco reported Q2 figures that were broadly in line with the consensus estimates. Organic and TDA adjusted growth was ahead of its peers and was driven by strong growth in the Adecco business unit. The gross margin declined yoy and qoq due to an unfavourable mix. Consequently this also impacted the EBITA margin which declined by 40bp yoy. CFO was positive. For Q3, Adecco expects the gross margin to be similar to Q2, and the SG&A spend to be sequentially slightly lower.

Reasonable start to the year but profitability improvements will take time

Adecco’s Q1 figures delivered a marginal beat over consensus estimates across the board. Organic and TDA revenue growth was supported by Adecco and Akkodis. The gross margin improved yoy and qoq and the EBITA margin benefited from an earlier payment from the FESCO JV. SG&A spend was up yoy but broadly inline qoq. CFO was negative due to the timing around working capital. For Q2, Adecco expects the gross margin and SG&A spend to be broadly in line with Q1 23 levels.

Decent end to 2022; soft profitability also expected in 2023

Adecco’s Q4 results were decent across most areas except net income. Like in the Q3, revenue growth was supported by Adecco and Akkodis. The gross margin was flat qoq and the EBITA was impacted by the absence of special benefits and continued investment in the business. CFO was stronger due to working capital reversal and the board will propose a dividend of CHF2.50. For Q1 2023, the gross margin and SG&A expenses are expected to be broadly in line with their Q4 2022 levels.

Q3 profitability beats consensus; slowdown worries remain

Adecco’s Q3 results were in line with the consensus estimates on revenues, marginally below on gross profit and above them on EBITA, net income and organic growth. Revenue growth was supported by Adecco and Akkodis. The gross margin hardly budged and EBITA was affected primarily by higher investment in the business. CFO was lower due to reduced profits and a higher working capital requirement. For the Q4, the group expects the gross margin and SG&A expenses to be broadly in line with their Q3 20

Another profitability-impaired quarter; AKKA being integrated; margin hope pinned on H2

Adecco’s Q2 results were in line with consensus estimates on revenues, marginally above on gross profits but below on EBITA, net income and organic growth. While the gross margin was better, EBITA was once again affected by higher investments in the business and lower margins from LHH. CFO was negative due to one-off costs and increased working capital requirement. In Q3, Adecco expects solid yoy growth in revenues and, in H2, it expects a higher EBITA margin and CFO generation.

Soft start to 2022 to be overcome in H2

Adecco’s Q1 results were a mixed bag with revenues and gross profits ahead of consensus but the adjusted EBITA and net income below. Permanent Placement recorded another quarter of solid growth and was supported by good growth in Outsourcing and Consulting. Although some of this growth was offset by continued weakness in Career Transition. Regarding profitability, increased investments into the Adecco division affected margins. Going forward, the group expects the EBITA margin to improve sequent

Entering 2022 on a stable footing, Akkodis on track

Adecco released a decent set of results with revenues in line with consensus but profitability slightly above them. The revenue growth mainly came from Permanent Placement even as Flexible placement remained flat. The counter-cyclical Career Transition remained impacted. On the profitability side, the group benefited from the favourable mix and better pricing. Also, good cost control helped EBITA margins. For FY21, the board will propose a dividend of CHF2.50. Lastly, the AKKA acquisition remain

Q3 has a decent finish

Adecco’s Q3 results were broadly in line with consensus with profitability being slightly better than revenues. Permanent Placement recorded another strong quarter and the counter-cyclical Career Transition another weak one. Flexible Placement continued to recover but was also hindered by the automotive and electronic end-markets. Labour shortages were seen in hospitality and transport. Going forward, this is expected to continue, at least, for the short term. In terms of outlook, the group expe

A step towards better growth and margins?

This morning Adecco announced the acquisition of AKKA technologies, a key player in Engineering R&D services. AKKA will join forces with Modis to create a strong player in the emerging Smart Industry market. The former has its headquarters in Belgium and has about 20,000 employees. Adecco will pay €2.0bn (EV) for the transaction though cash and shares, and this transaction in expected to close in H1 21. Read on to find out more.

Q2 did better on profitability, acquisition announced

The acquisition of AKKA technologies led to a surprise Q2 announcement by Adecco. Revenues and gross profits matched expectations, whereas adjusted EBITA and net income were above both consensus and our estimates. This quarter clearly benefited from a low base of comparison but the recovery in Permanent placement was strong nonetheless. The group expects this momentum to carry forward into Q3. The acquisition is sizeable and we believe that it deserves its own comments.

Off to a decent start

Adecco’s Q1 revenues matched consensus estimates but were above those of AV’s. EBITA, however, decently beat consensus but was below our estimates. Altogether, the end of Q1 showed signs of revenue recovery and could mean well for the quarters ahead. Regarding profitability, the group continued to enforce pricing discipline and cost actions, which drove profitability upwards. Following this result, the group expects Q2 to improve sequentially while also benefiting from a lower base.

Better than expected Q4 but FY20 ends in the red

Adecco’s Q4 results showed a sequential improvement from Q2 onwards and were above our and consensus expectations. Revenues showed signs of recovery and continued demand from e-commerce, healthcare, etc., whereas margins were managed through the continued focus on pricing and cost actions. The group’s financial position remained solid, which allowed it to propose a dividend of CHF2.50 and restart its buy-back programme amounting to €600m. However, the group did not provide a clear FY21 outlook.

Leveraging the human touch to drive digitalisation

Adecco, at its CMD yesterday, unveiled the new Future@Work strategy, which will take the baton from the Perform, Transform and Innovate strategy ending in FY20. The group intends to capitalise on the mega-trends of increased demand for flexible working and the need for up- and re-skilling by making itself an end-to-end workforce partner, leveraging data to drive digitalisation. The group also revealed its new business unit structure and its individual strategies from FY21 onwards.

Good Q3 but an uncertain Q4 ahead

Adecco’s Q3 results were slightly above both AV’s and the consensus expectations on the back of improved business activity after a trough in the previous quarter. The ability to meet increased demand in growth areas (e-commerce, logistics), focus on pricing, a balanced business portfolio and cost management were behind this result. Additionally, Adecco’s balance sheet remains robust and the group continues to generate good cash flow. However, we remain cautious about Q4 due to the second COVID w

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Morning Note – 16 April 2024

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

PROGRESSIVE: Severfield: Step change in European and Indian outlook

Severfield’s full-year results to March will be ‘slightly above’ the Board’s expectations, according to today’s trading update, with net debt significantly better. We maintain our PBT estimates for both forecast years, which are ahead of consensus, but reduce our net debt for FY24E. Record orders were boosted by the steel specialist’s European operations, after last year’s Voortman acquisition, while the Indian JV has seen ‘another step up in profitability’. The group has also launched its first

Clean and competitive fertiliser