Adecco admits that accounting irregularities will delay results

By Caroline Muspratt 12:01AM GMT 13 Jan 2004

Adecco, the world's largest employment agency, yesterday revealed accounting irregularities that will delay its 2003 results.

The news created waves of concern in a market which is still trying to get to grips with the fraud allegations surrounding Italian food group Parmalat. Shares in Adecco, the Switzerland-based employment services group which has 180 branches in Britain, lost almost half their value on the news before ending the day down 35pc at Sfr53.

Adecco said in a statement that it had identified "material weaknesses in internal controls in the company's North American operations of Adecco Staffing". It also said that there were "possible accounting, control and compliance issues in the company's operations in certain countries". Adecco refused to disclose further details.

The group's auditors, Ernst & Young, also refused to comment. The firm took over as auditor in 2001 from Arthur Andersen, which collapsed as a result of its involvement in the Enron financial scandal.

Ernst & Young is currently the subject of a £2.6 billion negligence suit by Equitable Life, Britain's oldest mutual. The accountants were responsible for the company's accounts between 1990 and 2001 and, Equitable claims, failed to warn the insurer it was heading for collapse over guaranteed annuity rate promises.

Adecco, which is chaired by John Bowmer, is a familiar name in the UK and has more than 40 branches in London. It has 5,800 branches worldwide and claims to find jobs for around 650,000 temporary workers every day.

The company has launched an internal investigation and said its 2003 audited results would be delayed while it takes steps "to address these matters and determine their effect on the company's consolidated financial statements". Adecco did not give a revised date for the publication of its 2003 results, which had been due on February 4.

Investment bank Dresdner Kleinwort Wasserstein downgraded its rating on the stock from buy to sell on the news. "This could be the Olsten deal unravelling," the bank said in a research note, describing the situation as "as bad as it gets".

Adecco paid $1.55 billion (£840m) for Olsten, an employment agency based in the United States, in March 2000. Olsten also operates in the UK and Germany. The lack of details in Adecco's statement raised fears that the problems relate to several overseas operations. Dresdner Kleinwort Wasserstein said: "It stacks up with comments that Adecco will have to look at regions outside the US."

Switzerland-based Bank Leu cut its price target on the stock from Sfr87 to Sfr65 and advised clients "not to touch the shares until more information is on the table".

In 2002, Adecco reported operating profits before amortisation of Sfr662m (£292m), down from Sfr1.18 billion.

http://www.telegraph.co.uk/finance/2873849/Adecco-admits-that-accounting-irregularities-will-delay-results.html