Adecco SA's finance chief resigned on Friday as it revealed widespread accounting flaws in its North American business, but the employment agency stopped short of telling investors the scale of the damage.
The world's largest staffing firm said Chief Financial Officer Felix Weber and the head of its North American arm Julio Arrieta had quit, as Chairman John Bowmer moved to clean up its books, restore confidence and shore up its battered shares.
Adecco was not able to say how the problems would affect its bottom line and gave no new date for releasing 2003 results while probes continued into its bookkeeping -- including one by the U.S. Securities and Exchange Commission.
Its shares fell as much as eight percent to 55.25 Swiss francs before recovering to 58.05 francs, down three percent, at 1130 GMT in an otherwise firmer Swiss market.
Adecco has lost around a third of its market value since Monday, when it warned of possible accounting problems in a terse statement that sparked fears of a scandal akin to those at Enron, Ahold and Parmalat, where billion-dollar frauds have triggered criminal probes.
"We still do not know what the impact will be on its profit and loss account," said Coutts Bank Switzerland fund manager Rudi Buxtorf, who holds Adecco stock. "It is still my guess we should not expect a worst-case scenario," he added.
Chairman Bowmer, previously the firm's chief executive and a company veteran, will spearhead efforts to resolve the problems in North America, which Adecco said involved IT system security, payroll bank accounts, accounts receivable, revenue recognition, billing errors and a lack of segregation of duties in branches.
CEO Jerome Caille, who has been in his position for less than two years and was previously chief of the firm's global staffing business, will concentrate on day to day operations.
"Some (of the problems) have already been corrected, and the balance are being actively addressed," Adecco said. "...the board remains strongly confident about the company and its future."
The firm said it had 1.4 billion Swiss francs ($1.12 billion) in cash, equivalents and short term investments at the end of 2003.
Attention has focused on Adecco's 2000 takeover of U.S. firm Olsten, which makes up the bulk of its Adecco Staffing business in the United States and also has smaller operations in Europe.
Despite the laundry list of control issues uncovered at Adecco's North American activities, Bank Leu analyst Ronald Wildmann noted that the business was a small part of the group in terms of profitability.
"That's very important," he said. "They have to restate the figures but I don't believe the restatement should be too much."
Other countries involved in its probe accounted for less than 10 percent of service revenue in 2002, Adecco said.
In total, the company is investigating businesses that account for around one third of its 2002 sales of some 25 billion Swiss francs (now worth about $20 billion) and are centered on its lower margin traditional "temp" agency activity.
Adecco's more profitable businesses include headhunting and the placing of professionals such as engineers with companies and institutions.
Bank Sarasin analyst Britta Simon upgraded Adecco stock to neutral and said the problems were less material than initially feared but warned that Adecco remained opaque and compared it to "a black box."
Some analysts said the accounting shortfalls meant there could still be far-reaching consequences.
"With the current system they have you cannot exclude that," said Nicole Burth Tschudi of Lombard Odier Darier Hentsch. "Look, we really don't know and frankly the company probably doesn't know either."
Monday's statement turned into a public relations disaster when Adecco refused to comment further publicly, but told selected analysts that its problems were not in any way comparable to a Parmalat-type meltdown.
Even though Adecco officials insisted they could not talk to the media for legal reasons, finance chief Weber appeared in a newspaper to play down the problem. Adecco spokespeople then refused to confirm or deny his comments.
