Adecco shares plunge 35% on results delay Company warns of accounting issues

By NAOMI KOPPEL

Associated Press, with files from Bloomberg News

Tuesday, January 13, 2004 - Page B11

Adecco SA, the world's largest employment agency, yesterday said it was delaying publication of its annual results for 2003 because of 'material weaknesses in internal controls' in its North American business and possible accounting and compliance issues elsewhere.

The news sent frightened investors rushing to sell, and shares in the company plummeted. Analysts lowered their recommendations amid fears of an accounting scandal like that which has devastated Italian food group Parmalat.

The company had been due to publish its audited annual results on Feb. 4 but said it now did not know when they would be released. Spokesman François 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 of Adecco Staffing" and "the resolution of possible accounting, control and compliance issues in the company's operations in certain countries."

Adecco said its audit and finance committee has 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 management has been under pressure to deliver better results and to fulfill the wishes of the market, especially in North America. The profitability of that business is far below the average of the group. If management is under such pressure, the risk is always higher for having compliance problems."

Adecco's announcement follows the collapse of the Italian food group Parmalat, 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 and his partner.

Last year Dutch food retailer Ahold NV admitted overstating earnings by more than $1-billion in 2000-2002, mostly due to inflated sales at its U.S. Foodservice subsidiary.

Analysts expressed concern that Adecco changed auditors in 2001, prompting fears that any previous accounting mistakes could have resurfaced since the change.

Its former auditor was Arthur Andersen, the company that audited the figures of collapsed U.S. energy company Enron Corp.

Though Adecco switched to Ernst & Young in 2001, the main auditor for both Arthur Andersen and subsequently Ernst & Young was Mike Sills.