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Adecco Tells of Possible Accounting Trouble

Shares of the world's No.1 employment agency plunge after the Swiss-based firm delays releasing its '03 results.

January 13, 2004|From Associated Press

Adecco, the world's largest employment agency, said it couldn't close its books for 2003 because of possible accounting problems, causing its stock to plummet Monday.

The Swiss company could not predict when its 2003 results would be available. That sent frightened investors rushing to sell. Analysts lowered their recommendations amid fears of an accounting scandal like the one that has enveloped Italian food group Parmalat.

Shares of Adecco closed down 35% on the Zurich, Switzerland, exchange. The company's U.S.-traded shares sank $5.23, or 31%, to $11.70 on the New York Stock Exchange.

The company had been due to publish its audited annual results Feb. 4 but said it now did not know when they would be released. Spokesman Francois Vassard declined to give any more information because of the investigation.

Adecco said it was looking into "material weaknesses in internal controls in the company's North American operations" and "the resolution of possible accounting, control and compliance issues in the company's operations in certain countries."

The company said its audit and finance committee had appointed an independent counsel to resolve the issue.

"This opens the field for speculation, and I would say there are a lot of possibilities, from just a relatively minor accident up to something that goes to the substance of the company," said Roland Wildman, an analyst at Bank Leu in Zurich.

The U.S. operation is based in Melville, N.Y., the former headquarters of Olsten Corp., which Adecco bought in 2000 for $1.55 billion.

Adecco, which is based near Geneva in Cheserex, earned $261 million in 2002. It directly employs 28,000 people in 68 countries and claims to connect businesses with 650,000 workers who seek permanent or temporary jobs.

In terms of sales, Adecco is the market leader in placing general employees, surpassing U.S. rival Manpower, which is No. 2. That business, which contributes 90% of Adecco's overall revenue, is the part of the company being investigated.

Adecco also operates European job-search website Jobpilot, a professional recruiting service and a career training and advising service.

Wildman said the best-case scenario would be that the problems are confined to the United States -- which represents only 4% of Adecco's revenue -- and could relate to problems over workers' compensation or unemployment. The worst possibility would be that it relates to Adecco's income from major clients, he said.

Adecco's announcement follows Parmalat's collapse, in which more than a score of people are under investigation, including two officials with auditor Deloitte & Touche's Italian branch and the former head of the Italian branch of auditor Grant Thornton.

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