Adecco, the world's largest staffing group, said on Tuesday it had still not seen any recovery in its main European and U.S. markets and launched a new round of cost-cutting to protect profitability after a sharp drop in sales in the second quarter.

Looking ahead, management anticipates no material pick-up of business activities and has therefore initiated further restructuring measures, the company said after announcing an unexpected second-quarter net loss due to one-off charges.

Revenue slipped 31 percent to 3.6 billion euros ($5.10 billion) as firms across the world slashed their workforces to offset the fallout from the economic slump, but Adecco said the pace of decline had eased in most markets during the quarter.

Shares in the group were down 2.7 percent at 51.40 euros by 5:14 a.m. EDT, when the DJ Stoxx European industrial goods and services index was up 0.1 percent.

Overall results are below expectations even if we applaud the continued cost discipline of the company, Vontobel analyst Michael Foeth said in a note.

In debt markets five-year credit default swaps on Adecco's debt were 8.5 basis points wider at 127.5 basis points, a trader said, with some concern about the possibility of a credit rating downgrade to a very low investment grade.

Adecco would be able to give a more detailed outlook after the third quarter, Chief Executive Patrick De Maeseneire, who has been at the helm since June, told Reuters in an interview.

The cautious comments echoed those made recently by Dutch rivals Randstad and USG People as well as America's Manpower, which have yet to see a recovery in their employment markets despite having seen the pace of decline ease in recent months.

Michael Page, Britain's second-largest recruiter behind Hays, also said it had seen a stabilization in some markets but did not expect a firm recovery until next year.

Adecco swung to a second-quarter net loss of 147 million euros after making impairment charges of 192 million euros on goodwill and intangible assets which it said were mainly due to the severe impact of the economic downturn on its German market.

Analysts had on average expected the company to make a second-quarter net profit of 29 million euros.

Adecco, which has already shut branches and cut jobs to protect its profitability, said it expected to incur another 40 million euros of restructuring costs in the second half for various countries after charging 54 million euros in the second quarter, 40 million euros more than previously indicated.

Staffing company stocks jumped at the end of last week after the latest U.S. employment data showed the first decline in the U.S. jobless rate since April 2008.

But analysts cautioned seasonal factors had to be considered and questions remained about the pace and sustainability of the expected recovery in temporary staffing.


However, the company also said on Tuesday it hoped to boost its professional staffing business with the buy of Britain's Spring Group for 108 million pounds ($180 million), or 62 pence a share.

With this transaction Adecco will strengthen its position in the fragmented UK market and further increase its professional staffing exposure, Adecco said.

Spring Group had sales of 517 million pounds in 2008.

The acquisition seems like a reasonable one. They have pretty low margins, but they are paying a pretty low price for it, Fortis analyst Teun Teeuwisse said.

Adecco failed last year in its bid to buy the bigger Michael Page, which would have improved its foothold in the higher-margin professional market.

Adecco's adjusted EBITA (earnings before interest, tax and amortization) margin rose 30 basis points sequentially in the second quarter to 2.4 percent as selling, general and administrative expenses fell 21 percent on an adjusted basis and in constant currencies.

The group is also likely to cut more full-time equivalent employees after this number was reduced by 19 percent in the period, Chief Financial Officer Dominik de Daniel told Reuters.

USG People, Hays and Michael Page have also cut jobs to preserve margins in the face of weak sales.

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(Editing by Greg Mahlich)