Adecco breaks silence on accounting woes

Adecco says its problems are limited Keystone

The Swiss employment agency, Adecco, has said that the scale of its accounting problems was limited and would not be financially significant.

This content was published on January 30, 2004 - 09:52

The company, which reported the irregularities earlier this month, also confirmed that Jérôme Caille would stay on as chief executive.

“Instances of local irregularities and misappropriations – mainly at branch-level – have been identified in certain countries,” Adecco said in a statement on Friday.

The firm added that these accounting issues were not a major issue, although they were of concern to the company.

On January 12, the world’s largest employment agency announced that accounting flaws uncovered by an internal audit had forced it to delay publishing its 2003 results, originally scheduled for February.

The company has not yet set a new date for the release of its annual figures.

Investor confidence

Shares in Adecco fell by around a third when the news of the crisis first broke but hopes of a clarification of the firm’s problems have pushed the stock higher in recent days.

In Friday trading, Adecco shares rose by about 14 per cent to SFr65.50.

"We still don't know the full extent of the problems but there's real relief that this won't be another Enron or Parmalat," Hilary Cook, director of investment strategy at Barclays Stockbrokers told swissinfo.

"But clearly there's still a lot of cleaning up to do and investor confidence has been badly damaged and it won't be restored very easily."

The company, based in Glattbrugg near Zurich, added that its financial position was sound with net debt of about €900 million (SFr1.4 billion) at the end of 2003. Demand for its services had so far been stronger in 2004 than last year, it said.

CEO stays put

Ray Roe, a former US Army brigadier general, has been appointed chief of Adecco staffing North America, the unit at the centre of the firm’s accounting problems.

Adecco said Roe would report to Caille, confirming his position as CEO. Caille has come under fire by company shareholders and the media for his handling of the accounting crisis.

Earlier this week, the Swiss businessman, Klaus Jacobs, the firm’s second-largest shareholder, said the company lacked competence, leadership and integrity.

In an interview with the Swiss business magazine, Bilanz, Jacobs called on Caille to resign if he failed to restore Adecco’s share price. He warned that Caille had only a short time to win back the confidence of investors, customers and staff.

Leadership crisis

The Adecco crisis has already claimed several of the company’s senior managers.

Both the finance chief, Felix Weber, and the CEO of the US division, Julio Arrieta, have lost their jobs.

Since then, a team of bankers from Adecco’s main bank, Credit Suisse, have reportedly intervened to help the staffing firm overcome its problems.

Before Friday’s announcement, Adecco had effectively clammed up, saying legal restrictions did not allow it to make public statements, attracting criticism of its communication policy.

swissinfo

In brief

Adecco is the world’s largest employment agency and specialises in providing temporary workers.

It places about 650,000 people in short-term work every day.

The company has not yet announced its 2003 results due to accounting irregularities in its North American division.

It said on Friday that the accounting problems should not have an impact on its financial results.

Adecco reported a net profit of SFr354 million in 2002.

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