ManpowerGroup Inc (MAN) 2008 Q1 法說會逐字稿

Welcome and thank you for standing by.

At this time all participants are in a listen-only mode.

(OPERATOR INSTRUCTIONS).

Today's conference is being recorded.

If you have any objections, please disconnect at this time.

Now I would like to turn the call over to Chairman and CEO, Mr.

Jeff Joerres.

Thank you, sir.

You may begin.

Thank you.

Good morning and welcome to the first quarter conference call for 2008.

With me this morning as usual is Mike Van Handel, our Chief Financial Officer.

Together we will go through the first quarter results.

I will discuss the overall results of the quarter, and go into a little of the segment detail.

Mike will then discuss the items affecting the balance sheet and cash flow, and also spend some time on the second quarter outlook for 2008.

Mike, before we move into that, could you go through the Safe Harbor language.

Yes.

Good morning.

This conference call includes forward-looking statements, which are subject to risks and uncertainties.

Actual results might differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements can be found in the Company's Annual Report on Form 10-K, and in the other Securities and Exchange Commission filings of the Company, which information is incorporated herein by reference.

Thanks, Mike.

First quarter of 2008 was a solid quarter for Manpower.

We entered the quarter anticipating growth in many of our key markets, and that is exactly what happened.

Two of our large segments, other EMEA, who has been just hitting the cover off the ball for quarter after quarter, and Italy the same way, had some very outstanding performances.

Additionally we had some very good profit performance from other operations, which you have seen over the years and the quarters, our investments in other operations segment, and we started seeing outstanding performances coming out of Asia Pacific and Latin America.

U.S.

no surprise continued to be sluggish.

We also saw our French operation experience some growth at the lower end of our estimates on revenue.

However the operating profit for France was quite good.

Our revenue for the quarter was $5.4 billion, up 19% U.S.

dollars, 8% constant currency.

As I mentioned earlier, this is really coming from the growth that we are seeing in other EMEA, Italy, and the other segments.

Gross margin, great story there, was up 33 basis points to 18%, a very strong performance, reflecting again the output of our strategies, which is continued growth in our higher value offerings.

Operating profit was up 28% in U.S.

dollars, 11% in constant currency to US$132 million.

Operating margin was 20 basis points over last year to 2.5%, and our earnings per share came in at a strong increase of 36% in U.S.

dollars, and a very strong constant currency growth rate of 16%.

The current environment no surprise is fragile.

Yet, we see several areas of continued growth.

These growth areas we believe will help offset the sluggishness in the U.S.

market and the French market.

Based on these trends and mix of business, we are anticipating the second quarter earnings per share to be between $1.47 and $1.51, and we will be aided by about $0.20 of currency in the quarter.

Let me break down that gross margin a bit.

As you can see, we have continued to have good strength in this area.

Our consolidated gross profit margin was 18%.

In the first quarter, we continued strong growth and permanent recruitment, which was up 32% in constant currency.

This contributed to 33 basis points in that gross margin line.

Our business mix was favorable, with some higher margin countries like Germany, Italy, and Sweden performing very well.

We did lose, however, 26 basis points on gross margin due to relatively lower growth from our specialty businesses.

Jefferson Wells went through some contraction, and while we had nice growth at Right Management, it didn't keep up with the pace really of our core business.

Overall it resulted in a solid gross profit margin.

This improved gross profit margin along with good expense management, the operating efficiencies we have been working on for some time, continued to drive through the business all yielded an operating profit of US$132 million.

Moving on to the U.S., the U.S.

segment declined slightly more than what we had anticipated.

Revenues came in at $472 million, a decline of 2%.

This was aided somewhat by acquisitions.

The organic growth rate was minus 11%.

Based on the five quarters down in the U.S.

market, we are experiencing some deleveraging.

Our gross profit margin however is not part of that deleveraging, as we have been able to actually increase our gross margin percent by 20 basis points.

However, with that softer revenue line, and also our commitment of not ripping the U.S.

organization apart, it resulted in a $7 million operating unit profit, or 1.5% operating unit profit margin, down 38% on a year-over-year basis.

The U.S.

market conditions in the first quarter in some ways was very similar to what we saw in the fourth.

As we stated, it got just slightly worse than we anticipated, but we still have not yet felt any dramatic or drastic reduction in business across geographies and business lines.

When we go into the regions, and look specifically at the regions and specifically at accounts, we are seeing certain accounts that, particularly very large accounts that they are slowing their business down.

Ones that you would recognize, and as a result where they may have more business with us, we are feeling a little of that pain.

But none of these trends seem to be alarming to us, and we are currently able to deal with them.

Clearly, this market can change, and the market will change, or could change on a very fast basis.

But as we speak to our clients, and look closely at our book of business, we feel comfortable that the U.S.

operations are not getting any worse as we move into the second quarter, and in fact our most recent weekly numbers would say we are not seeing a worsening in our numbers, if not in actuality we are actually seeing somewhat of a plateauing.

Our Manpower Professional business continued to grow nicely in the first quarter, and our bill rates continue to move up, as we are placing higher level skills.

Also our permanent recruitment business is flat from prior year, however, the productivity of the recruiters continue to improve.

We have seen some slight softening in the demand for permanent recruitment, so we will continue to monitor and watch closely before we add any new consultants into our business.

Our U.S.

operation added some very good fire power to our recruitment process outsourcing business with the acquisition of CRI in California.

This acquisition occurred in April.

This acquisition places our U.S.

organization in a very strong position, blending our current RPO business, with one of the leading RPO firms, and in fact, if we were to consolidate all of our RPO business throughout the world, we would clearly become number one provider on a worldwide basis on RPO, which is a growing trend, and a trend within the HR industry that we believe is here to last.

The U.S.

revenues as I mentioned earlier were relatively stable during the quarter, with March staffing business being really pretty much the same.

It was slightly stronger in fact than January and February and as we look to the second quarter, we are anticipating a slight revenue improvement of 1% to 3%.

Moving on to our French operation, revenues of US$1.7 billion, up 16% in U.S.

dollars, 2% in constant currency.

This came in actually at the lower end of our range, as we saw March a little softer than January and February.

While overall market growth is soft, we also currently believe that we are below market rate right now in France, and believe this is part of the fact that we outgrew the market in 2006 and 2007, as well as we did some pretty large organizational changes within our French operation.

As many of you know, we have been going through changes of refocusing our business, to ensure that our strategic large accounts, have separate sales and delivery from our small, medium sized business accounts.

We executed this in the first quarter in our French operation, and I am confident this will be a success.

It was a success in many other countries that we have implemented it in.

But any time you have an organizational change of this magnitude it does take a little wind out of sales.

We are experiencing a slowing market in France, however, I do believe that some of the organizational distractions that we had in the first quarter will actually smooth out, and we will start to get a little bit better performance from ourselves in the second quarter, which will definitely help.

Same as the U.S., our gross margin profit improved in the first quarter in France.

We managed expenses effectively.

Which gave us an operating unit profit of $54 million, a 23% increase in U.S.

dollars, 7% in constant currency.

Our operating unit profit margin of 3.1%, actually came in 20 basis points higher than a year ago in 2007.

We continue to see very positive momentum in the permanent recruitment business in the French marketplace.

In fact, our permanent recruitment business has more than doubled over the last prior year, and the marketplace is very receptive to our offering.

Management on our French team has done a great job of focusing and adding the appropriate resources, so we believe that this marketplace is very receptive to our offering.

However, while our revenue gains are dramatic, we are also building out the infrastructure, and therefore this business should be a larger profit contribution, as we move into the future.

Moving on to the so-called superstars within our organization, the highlight of the quarter was what we were able to do in other EMEA segment.

Revenue in other EMEA was up 26% U.S.

dollars, 15% constant currency to nearly US$2 billion.

Operating unit profit was up 17% in constant currency, to US$48 million, while operating unit profit margin was able to increase to 2.6.

We are starting to really get some of that leverage coming through the operation.

Our largest engines in the other EMEA segment showed consistent growth in extraordinary leverage from a profitability perspective.

Nordics operation up 20% in U.S.

dollars, 6% constant currency.

This was clearly led by the Swedish operation, with revenue up 12% in constant currency, and profitability up dramatically over that.

Elan and you need to look at this number closely, revenue was up 43% in constant currency.

The scope and breadth of our Elan business continues to increase substantially.

We are winning business throughout mainland Europe, and are confident we will continue to build a very strong business.

Manpower U.K.

was up 4% in constant currency, with some very strong profitability.

The U.K.

operations has experienced stable conditions within the marketplace, however, not robust by any stretch of the imagination.

Our German operation did very well, with a 22% increase in revenue in constant currency, 40% increase in U.S.

dollars.

We continue to see very strong German market, and a very good secular trend.

Our German team has performed very well.

They are focused on the marketplace.

They are not distracted with anything in the market.

And they really feel comfortable about how we are going to be able to improve our market position in Germany on an organic basis.

Our Netherlands operation throughout 2007 posted some very strong year-over-year growth.

So we were up against some difficult comparables.

Even given that, we are up 6% in that marketplace in the first quarter on the revenue line, which we believe is above marketplace.

And because of our mix of business and focus on permanent recruitment, our profitability was up substantially over the top line.

Also our Belgium operation came in the very strong, with a 15% constant currency growth in revenue.

As we announced in March, we are also excited to welcome Vitae to the Manpower group.

Vitae has a strong reputation in the Dutch market, providing specialist skills in the finance and engineering areas.

The acquisition of Vitae is right in-line with our strategy of broadening out our portfolio of specialized services within our Manpower Professional brand.

This acquisition closed in early April.

So we will begin reporting their results as part of the EMEA segment in the second quarter.

One of the weaker markets, however, in other EMEA is Spain.

Revenue was down 14% in constant currency and deleveraging has occurred, which drove profitable weaker than the top line.

Within our eastern European operations, however, we did see some very strong growth, as we continued to invest in these developing markets.

Moving into just another part of Europe, and up until a little while ago was part of the EMEA segment, and that is Manpower Italy, which had a bang-up quarter.

Revenue was up 32% in U.S.

dollars, 15% in constant currency, to over $400 million in revenue.

Even better was our operating unit profit, up 55% in constant currency, to nearly US$30 million.

This created an operating unit profit margin of 7.2%, up an impressive 180 basis points.

The Italian market continues to see secular increases, while at the same time our entire Italian team is doing an excellent job of really taking the market, staying focused on the market, and outperforming the competition.

Italy's performance was very key to our overall performance in the first quarter.

Jefferson Wells, Jefferson Wells was slightly softer than what we had anticipated.

We entered the quarter thinking Jefferson Wells would be about flat with the prior year, and in fact revenues were actually down 5%.

Because of the shortage in revenue, gross profit deteriorated to a lower utilization which impacted profitability, causing the loss of 2.6 million for the quarter.

We are consistently seeing many projects accepted.

Our backlog of projects is quite strong.

However, yet the engagements are being we delayed in many of our U.S.

clients, as they are hoping to delay costs as they see what this uncertain U.S.

market really has to bring to them.

We believe that we will keep our pipeline strong, stay in front of these clients, and as we start to get a bit of a break in the economy, we are hoping that those backlog of projects will be a bit unleashed.

Despite the difficult environment, we are confident in this marketplace over a longer period of time.

We continue to invest in the key areas, while taking out costs in other areas in Jefferson Wells.

We are investing in Europe, and we are building out some of of our service lines, namely in the area of tax and construction audits.

Another one of our specialty businesses, Right Management, had a very good quarter.

Revenue was just over $100 million, up 5% in constant currency, 10% in U.S.

dollars.

This produced a $7 million operating unit profit, up nearly 10% in both U.S.

dollars and constant currency.

Our operating unit profit margin was flat at 6.5%.

We continue to see strong revenue increases in our organizational consulting business.

Up 17% on a year-over-year basis, or 10% in constant currency.

We actually have yet to see any strong uptake in the classic outplacement business.

We are not seeing any large scale downsizings that we would normally associate with an economic downturn of this kind.

We have seen as we have experience in the last few quarters, industry specific downsizings, namely in Automotive industry, Pharmaceutical industry, and selected Finance industries.

Our European operations at Right also did very well.

As did our emerging markets, namely China, as we are seeing the organizational consulting practice gain some very good momentum.

Moving on to another good performance in the quarter, and that is our Other operation segment.

Had a very healthy quarter with revenues at 745 million, up 12% in constant currency, 24% in U.S.

dollars.

Our operating unit profit increased 68% in dollars, 49% in constant currency, to $21 million.

This yielded a 2.9% operating unit profit for the segment.

The improvement in this area is really coming from market growth.

As these markets are in growth mode, and we have some very good management in our other operations team.

Within Asia-Pacific, our Japanese operation grew at 8% in constant currency, a very solid growth profitability, and we suspect above market.

Our Australia, New Zealand operations are down 1%, but our profitability increased substantially, as our mix of business and permanent recruitment, and recruitment process outsourcing did very well in the first quarter.

Additionally, while we have seen some softness in previous quarters in Mexico, Mexico was able to achieve a 10% increase in top line, and a very solid bottom line.

Additionally, we experienced good revenue and profit gains in Argentina and Colombia.

This contributed nicely to the overall success in the Other operations segment.

Overall, we had a very solid quarter.

This first quarter is typically a difficult quarter, because of the leverage or lack of leverage we get from many of our operations, because of the seasonality.

As I mentioned earlier, we are experiencing, however, good top line growth, and we are achieving impressive operating leverage.

The team did a great job executing in all elements in the first quarter.

Whether it be in sluggish marketplaces, which we do have those now ,and are adding a few more to that category, or in more robust marketplaces, our teams are performing well.

Although we face some uncertain economic conditions in some of our markets, in other markets we are experiencing good growth without real economic concern, other than possibly some clouds off into the distance.

With this as a back drop, we are anticipating our second quarter to be in the range of $1.47 to $1.51, with an impact of $0.20 in currency.

This would represent a constant currency increase of earnings of 8%, at the midpoint of the range.

If we exclude the impact of the change in payroll tax calculated in of course 2007 for France.

With that as the segment detail, I would now like to turn it over to Mike for a few of the details on financials.

Thanks, Jeff.

I will begin today by talking about the balance sheet, then give you some detail on the cash flow, and then some color, a little bit more color on our outlook for the second quarter.

Our balance sheet remains strong at the end of the quarter with total cash of $641 million, and full debt of $999 million, which results in a net debt position of $358 million, which is a modest decrease since the end of 2007.

Our total debt to total capitalization remains stable in the quarter at 26%.

Accounts Receivable were $4.7 billion, an increase of $246 million from the end of 2007.

This increase is due to changes in foreign currencies, as Accounts Receivable would have declined $36 million on a constant currency basis.

Our days sales outstanding, or DSO, increased by one day compared to the first quarter of 2007.

This increase reflects slightly longer collection periods in a few of our operations, which I expect will get back on track in the next quarter.

Looking at free cash flow, which we define as cash from operations less capital expenditures, was slightly lower at $82 million compared to $86 million in the prior year.

This lower free cash is attributable to higher capital expenditure payments in the quarter, which were the result of investments made at the end of 2007, but were paid for in early 2008.

During the quarter, we used cash of $53 million for share repurchases.

Of this amount, $11.5 million relates to shares bought at the end of 2007, and $41 million relates to 752,000 shares, which we bought in the first quarter of 2008.

As of the end of the quarter, we had 2.5 million shares remaining available under our share repurchase authorization.

Next, I will take a look at the outlook for the second quarter.

On a consolidated basis, we are expecting revenue growth between 18% and 20% in U.S.

dollars.

Our constant currency revenue growth rate is expected to range between 6% and 8%.

As you can see, currency continues to have a strong favorable impact in the second quarter as well.

As in the first quarter, we expect the majority of our growth to be driven from Europe, where we anticipate our other EMEA segment to be up between 17% and 19% in constant currency, or 29% to 31% in U.S.

dollars.

Included in this growth is the acquisition of Vitae in the Netherlands, which should add slightly more than 2% to this segment's growth rate.

Italy should also see strong growth ranging from 12% to 14% in constant currency.

We expect our U.S.

business to grow between 1% and 3%, which includes some growth from acquisitions.

Excluding acquisitions, our U.S.

business will continue to contract, albeit at a slightly lesser rate than what we saw in the first quarter on that same basis.

As Jeff indicated earlier, we saw our France growth rate decline, as we made our way through the first quarter and into early April.

Our estimate for the second quarter is for revenue to be down between 3% and 5% in Euros, which reflects the level of contraction we are currently experiencing.

We expect our Jefferson Wells business to improve 3% to 5% on a sequential basis, however, this still would be a decline on a year-over-year basis of between 3% and 5%.

Revenue growth at Right Management should be in the low to mid-single digits in constant currency, and revenue at our Other segment should continue between 11% and 13% in constant currency.

Our gross profit margin should range between 18.3% and 18.5%.

This improvement continues to reflect the higher growth of the permanent recruitment business and the improving higher value business mix.

Our operating profit margin is expected to range from 3.3% to to 3.5%, very close to last year's 3.5%, if we exclude the impact of the French payroll tax change from last year's numbers.

We expect our tax rate to continue in the range of 37.5%, which results then in the forecasted earnings per share of $1.47 to $1.51, which again includes a positive impact of $0.20 currency.

The midpoint of this guidance range represents growth in earnings per share of 8% in constant currency, again excluding the impact of the French payroll tax change in the prior year.

Jeff?

Thanks, Mike.

Again, overall I am confident it was a very solid quarter, and we look to the second quarter, we are seeing some modest weakening in a few locations, but as we said, in the U.S.

we are seeing a bit of stabilization, if not slightly increasing.

With that, we would like to open it up for questions.

Thank you.

(OPERATOR INSTRUCTIONS).

Our first question comes from Jim, your line is open, and please state your company name.

Yes, hi, it is Jim Janesky from Stifel Nicolaus.

Jeff and Mike, can you talk about permanent placement trends, both in the U.S.

and abroad, as we move through the second quarter, or I am sorry through the first quarter and into the second quarter?

Did they tend to strengthen or weaken, and how is that as we are entering 2Q?

It is a great question, and it is one that all of us would look to at some type of indicators, and I think that there is some real reality to the fact that this can be an indicator.

We get a little challenged, because we have entered the market, and in some markets in a new way and are creating markets, so it gets a little bit difficult to put it into kind of a formula.

As I stated in the prepared remarks, the U.S.

saw some flattening in permanent recruitment, but not in all areas.

And we divide our permanent recruitment up into three different areas, kind of the classic one-offs, some more of the large scale ones and then more in the RPO category, and also some in conversion.

And two of those continue to grow, one of them are not growing.

So we are seeing some of the large scale ones maybe not grow as quickly.

So we will continue to monitor it.

Where we go over to Europe, where actually you have a little bit more of an exposure, because it is not as, you can't be as agile with the workforce there, we are seeing just a little bit of plateauing, but not a lot.

And if I took out, if I included France, you would see France that we doubled it, but that is more of a secular issue than an economic issue.

Overall, I think to be fair, I would say that we are not seeing permanent recruitment on steroids.

We are seeing more of permanent recruitment in kind of an okay mode.

We are going to watch it.

We are going to watch what we add to recruiters.

but we have not seen it drop off the cliff.

Okay.

Thanks.

And within the U.S., to expect growth in the second quarter, I know maybe it is just you are up against easier comps.

Certainly that would not be in line with overall market trends.

Do you think you are taking share?

I am not sure if we are taking share, but I think if you look closely, I think we are seeing some slight improvement.

Certainly our professional business continues to gain traction, as we continue to focus on that business and invest there.

We do have a few large accounts that always play into our mix, and part of what we are seeing as we go from the first quarter to the second quarter, and the second half of last year, we had one larger account that took their business in-house, and so the anniversary impact of that is a little bit less on a year-on-year basis in the second quarter.

So I would say things for us as we look at our business mix, we expect it to get slightly better, but again, still contracting as we do have acquisitions in the mix overall in the U.S.

that we made in the fourth quarter, and then in the RPO business that closed just in early April.

You know, and Jim, I might add, the U.S.

team has done over the last 12 to 18 months some very intensive things.

We have done the split in about 19 to 20 cities.

We have increased the footprint in Manpower Professional.

Our metrics are much better.

So kind of stay tuned, but I am hoping some of it is us, and also I feel pretty confident that from a market perspective, the market doesn't seem to be draining out faster.

So it stabilized a little.

If we can get a slight stabilization and better performance from us, we can squeak out a few things that could be positive for us.

Just one quick thing.

Was France expectation for the second quarter down 3 to 5% in constant currency?

Was that correct?

That is correct.

Okay.

Thank you.

Thank you.

Our next question comes from Ashwin Shirvaikar, your line is open.

Please state your company name.

Citigroup.

Thanks, guys and nice quarter.

Thank you.

Question I have is, again, going back to France, if you could sort of break out company specific versus macro, if it is possible at all, because the outlook seemed down 3 to 5% constant currency, it seemed a little unexpected there.

I thought you guys were actually gaining shares somewhat against one of your large competitors.

Yes, it is a good question and we had been gaining share for almost two years.

Those of you who follow the industry, basically three players have 75%, maybe a little bit more.

So some of that moves around a little, and I think we did a good job of doing that.

As I mentioned, and I don't want to put overemphasis on it, but I want to be as transparent as possible, we did some sizable changes within the organization.

The management team there did some phenomenal work during that process, but we probably lost a little attention on the marketplace.

So I would probably throw up maybe 1, maybe 2% of that might be our own doing.

But frankly, I think when we look at the Prism data which will be out --

early May for April.

Early May, I guess you would probably see a little bit of a decline from the last Prism data that came out.

It is nothing dramatic, it is just on the margin as some of these industries there, and there are a lot of political things that are happening, that are just creating some hesitation from businesses.

Okay.

And on the positive side, Elan, you guys seem to really light a fire under them.

Can you explain what you meant when you said increase the scope and breadth, if you could go into that a little more?

Yes.

I mean, any time you get a billion dollar organization being able to grow at 43%, things are doing not badly.

Now, part of that is is what we are seeing is Pan-European contracts, where we are able to do RPO business on a large scale.

We are also seeing some good work, even in the U.K.

market, which has been a little bit more difficult in just pure IT staffing.

So overall, I think our mix of business is good.

We have secured some large contracts and we are starting to see the effects of that.

We announced that on a conference call two quarters ago.

Saw a little of that effect in the fourth quarter, and you are continuing to see that effect in the first quarter.

So Elan we are adding staff.

We are adding locations.

And there seems to be a good appetite for a Pan-European highly professional IT contracting firm.

Okay.

If I could sneak in one last question, RPO you mentioned.

I agree with you on the strength of RPO, at the New York HR show recently, and this weekends, everyone there claimed to be an RPO.

Could you put some specific numbers on how big you are globally?

And I do believe the profitability of RPO is significantly higher.

Could you comment on that?

Yes, that is true, RPO is one of those confusing things.

Any time you put O somewhere in an acronym, it is left for a lot of interpretation, because outsourcing is a nice buzz word, so people throw it around like candy.

We define RPO very tightly, which is where you would have RPO of taking on the responsibility of large scale hiring across many geographies, over a period of time that would include assessment, on-boarding, and a lot of conversations with managers.

One of our largest opportunities and one we've had for some time is The Australian Defense, which we recruit in that way including doing all the advertising for the entire military operations within Australia.

When you pull these together, we are well into the 100s of millions of dollars of us doing RPO.

We secured some good contracts in Germany.

We have just secured contracts in the U.K.

It is one of the larger growth engines of Elan.

You will be seeing more information come out as we benchmark us against what we think is the industry.

The challenge with the industry is many companies put all permanent recruitment in RPO.

We separate permanent recruitment one off, five off from RPO.

RPO is truly a co-sourcing or outsourcing environment, and our definition of that added value at a different level, and adds a different margin because we are adding that value.

If you are a couple hundred millions of dollars, then you are clearly #1 I think.

Our teams have done the calculations, and said even if we're off by some, we are still well ahead of everyone else.

Okay.

Congratulations and great quarter.

Thank you.

Our next question comes from Andrew Fones your line is open.

Please state your company name.

Yes, it is Andrew Fones from UBS.

I was wondering if you could tell us approximately what the impact of the RPO acquisition was, is expected to be in the U.S.

in Q2, please?

Sure, sure.

In terms of the U.S.

market itself, we will be picking it up right in early April and we would be looking at something that will be, a couple percent impact on the growth rate overall.

Not too significant, but certainly a good addition to the overall business within the U.S., and certainly strategically important, but it will be something less than 2% to the overall growth in revenue.

And the way that business would work, you will get a little bit more growth on the bottom line because it doesn't have that high revenue component.

It has a bit higher gross margin component.

Which has already been done, consolidated it into our operation, changed their name, and have already started to add clients to it.

So as Mike said, it is a good strategic acquisition.

We had a good sized RPO business in the U.S.

We didn't have a good reputation.

We didn't do our branding job, and now we are doing that with this acquisition.

Okay.

Thanks.

And then can you confirm, is the franchise opportunity you bought in, are they adding about 7%?

Does that sound right?

Yes, well, as we said, our overall U.S.

business was down about 2%, on an organic basis we are down about 11%.

So you have got about a a 9% impact on growth from the franchise acquisitions.

Okay.

Thanks.

And then finally, in terms of the Jefferson Wells, you mentioned that you have a good pipeline of work there.

But there has been some kind of delays in making decisions to move forward.

Can you kind of help us understand kind of what is in that pipeline and what kind of gives you the confidence that that work is going to start kind of coming through?

Thanks.

Yes, well, there is good interest and good activity out there, and I think our pipeline reflects that.

I think the brand Jefferson Wells is very well respected.

I think what we are seeing is particularly on the more discretionary project work is where we have, we have been talking with clients, and they are ready to start projects and then what we would hear is, well, we are going to delay that project for another two weeks, four weeks, whatever.

So that is a little bit of what we are seeing, and part of the reason why we are a little bit short of our revenue estimate in the quarter.

The more recurring work that we have continues on at a normal pace, and we are seeing that continue to grow.

But you know, it is typical in a slowing environment where you start to see discretionary spend on projects start to slow a little bit, as companies are trying to figure out exactly where they are.

We are seeing that particularly in the retail business, as some of the retail numbers have been getting weaker, some of the retail clients are pausing a bit, so that is what is happening overall within that business, but as I said, still good growth prospects, but I think we could still, until we get through particularly in the U.S.

this softer economy, could take a little bit while, a little bit longer than we like to realize some of that revenue.

Okay.

Thank you.

We have a question from T.C.

Robillard.

Your line is open, and please state your company name.

Thank you.

It is Banc of America Securities.

Good morning, guys.

Mike, can you give us a sense as to how we should think about margins in France?

Is down 3 to 5% in constant currency, will you start to see some delevering there, or do you get an offset and a benefit from kind of the mix shift that you guys are seeing?

Yes, good question.

A number of good things going on there.

Certainly our firm recruitment business continues to grow quite nicely, and that should help the overall gross margin, and overall we have been seeing a fairly stable pricing environment, and stable gross margin on the staffing business.

So from that perspective, things are in pretty good shape on the GP line.

When you get to the operating margin line, if we do see the type of decline in the 3 to 5% on the revenue side that we are looking for, it will probably see a little bit of pressure on the operating margin.

There certainly are some costs that we will look at, and may be able to take out, but there is also some investing going on, as we continue to build out the Manpower Professional line within France.

So we are not completely pulling in our horns on our strategy.

We still see a good market there, and we still want to continue to invest in what we think are some important platforms.

So all-in-all, I would expect perhaps a little bit of pressure on operating margins at that level, but not significant.

Would that be a little bit of pressure on a year-on-year basis, or sequentially?

Yes, I am sorry, on a year-on-year basis.

Seasonally, the second quarter strengthens for France relative to the first quarter.

So I would expect on a seasonal basis we would see some type of improvement.

Okay.

Then just lastly, have you guys gotten the cash from the retro tax payments from the French government yet?

Good question.

We have collected most of that.

We still have a few of the agencies that we are still working with to collect that, but we are getting pretty close to having fully collected that.

And how much is outstanding, roughly?

I mean, I am not going to pin you down to a specific.

I mean, is it material, or are we only talking less than 10 million now?

It is in that ballpark.

Okay.

Great.

Thanks for the color.

We have a question from Steven Hill.

Your line is open, and please state your company name.

Hi, First Investors.

Great job, Jeff and Mike.

I am tickled pink with the performance.

Definitely surprised on the upside though, and it looks like I missed a few things.

I am wondering if you could comment on them.

Italy is much stronger than I thought it would be in this environment.

Second of all, is I noticed your share repurchase in the first quarter appears to be lower than it was on the fourth quarter, even though it looks like the first quarter you would have gotten a better deal, and then finally, I think I overestimated actually, your foreign currency benefit that would be realized, I had a few pennies higher.

Maybe you did some hedging there, or maybe I just did the math wrong?

Thanks.

Mike, you want that one?

I will cover a little bit about Italy.

Italy is doing extremely well and has been.

Italy has a couple things going in their direction.

One, a very good management team.

Two, a strong footprint.

And three, a large percent of their business, 80, 85% of their business is small and medium sized businesses, just a function of the Italian market.

And as a result, we are able to add a lot of value to our clients, but do it in kind of homogeneous way, which allows you to take a good gross margin, but actually bring a fairly high net to gross calculation to the end of the quarter.

Additionally, there has been some acceleration in some of the training that we are doing.

We have a good sized training company.

So we have got some good things going in Italy.

And I do believe we are still going through secular growth within Italy, and therefore while cycles will affect it, there will be a bit more immune to cycles, because there is still some secular growth.

Mike, you want to add anything to that?

No.

That is good.

The other comment on the share repurchase, we did purchase over 700,000 shares in the quarter, and will look to continue to do that.

And our view on share repurchases to really average in over a period of time, clearly at these levels we see the share prices as good value, but of course you would expect me to say that.

But we are really just looking at averaging in through the course of the year, and I would expect we will continue to do that.

When we look at cash flow, we are looking at how much free cash we have coming in, what we are using for acquisitions, and clearly to the extent that we have more acquisitions laid in, that may impact the timing and the amount of our share repurchases, as well as we look at our uses for cash across the board.

So Mike, can I read into that that the slower pace indicates that you might have something in the pipeline?

Well, we already bought a few.

Yes, yes, so we had the two that we announced that closed in April, so Vitae and CRI closed in April.

And a small one in France which was announced this morning I believe, called Spirit, which is in the finance area, that would also fit into Manpower Professional, on our expanse in France.

Okay.

And then on the foreign currency?

On the foreign currency, we do hedge specific movements of cash when we are going to move, when we know we are going to move from overseas, once we make the decision.

But we don't hedge the translation impact at all.

So in terms of where we ended up versus what you have, I am not sure why the difference, but no particular hedging.

But if there is something specific there that you have that you want to walk through, feel free to give me a call.

I would be happy to do that.

Sounds great, Mike, good work.

Our next question comes from Mark Marcon.

Your line is open.

Please state your company name.

R.W.

Baird.

Let me add my congratulation to a terrific performance.

Other operations are doing extremely well, and particularly you are starting to see some leverage there.

I was just wondering if you could expand a little bit, in terms of where you are seeing the leverage, and how much more may come, because you have been making a lot of investments there, and it has been keeping the margins down, for people who aren't aware of all of the investments that you have been making, it has been quite significant.

Now we are starting to see some leverage.

I am wondering where it could go?

Well, we really look at Asia-Pacific as something that can generate some nice little add-ons throughout 2008.

But we are really looking at Asia-Pacific for '09 and '10 and '11.

Now, there still is kind of an imbalance within Asia.

Japan is the largest unit.

What we are able to do in Japan is to really reformulate some of our approach to the market, have gotten much more aggressive in how we are looking at our sales.

That doesn't mean aggressive on price.

We actually implemented a price increase in the Japanese marketplace, and I think our management there has got a real bounce in their step.

A big part of what you were seeing from the profitability increases was some good profitability out of Japan.

The rest of it, when you get into Asian and others, or China where we have added a lot of investment, we are starting to see that they are not draining us, because they are now able to invest with their own dollars, and grow that.

But I would say that, you are not going to really start to see some of that come into place until 2009, where some of those get larger.

But a little country, not on the radar screen, you got somebody like Malaysia, they are popping in a million some dollars a quarter.

That starts to add up.

And before they weren't anything like that.

And then also, while there was some in Asia-Pacific, Argentina, Mexico, Colombia, these guys are, Argentina has just, their GDP growth has been 5.5% plus for the last five years, and we are really starting to, we have almost 40%, maybe a little bit north of 40% market share in Argentina.

As a result, we are starting to get some really good profitability.

I really think it is that story of balance and where it comes from, and how these different economies really can contribute to us.

Mark, the other one that came in quite strong in the quarter was Australia, and added to the leverage as well.

As you saw in the earlier slide probably, from a revenue perspective, they were down slightly.

But they just nailed it on the perm recruitment side did quite well, and that really did a nice job of bringing some good profitability and overall leverage in the segment in the quarter as well.

Is the perm strength in Australia due to something that you are doing specifically, or is that kind of a market strength?

I know the unemployment rate there is quite low.

It would be more company-specific, in terms of a couple of clients that we are executing quite well with, doing a really nice job of overall service delivery on a very broad scale.

Okay.

And then you mentioned in the U.S.

that you have done the split in 19 to 20 markets.

What are you seeing out of that, or is it too early to tell?

Well, in some of our pilot markets it has gone well.

But the split that we are now going through, I don't think you will see the effect of that.

You might see some energy and effect maybe on the margin as we kind of portray a little bit in the second quarter.

But it is primarily third quarter and fourth quarter is where we would start to see possibly a little bit of a bump because of that.

Okay.

And just to be clear, for the U.S.

and for France, the organic revenue growth rate that you are expecting for the U.S.

for the second quarter is -- ?

We would expect about 9% on acquisitions, again, something in that order.

So we would be looking for something around negative 7% organically in the U.S.

And in the case of France, the acquisitions are so small, I wouldn't even read anything into that at all, in terms of their growth rate.

And the French organic growth rate, is that consistent with what you saw in March, or are you anticipating that things get worse?

It would be consistent with what we saw late March, and into early April.

We don't have a lot of data points, but it does look like the market has taken a bit of a step down in late March, and now the first couple weeks in April have pretty much stayed there.

So not getting worse, if you will, but albeit with only a few data points, but as we normally do, if we don't see any reason to change what we are currently seeing, we just kind of extrapolate that out in terms of the forecast.

Certainly we would hope that we are going to see that start to turn up a little bit, the comparables get a little bit easier in the second quarter.

But we will see how that plays out.

Okay.

And lastly, any clarity or any more feel for regulatory changes in France, or is it still kind of steady state?

Nothing new on that front.

I mean, there is always discussion certainly with the new Sarcosi government, but nothing that we see in the headlights for our industry that should have a significant impact.

Great.

Thank you very much.

We have a question from Gary Bisbee.

Your line is open, please state your company name.

Lehman Brothers.

Can you give a little more color on the RPO market?

I am wondering just sort of some things like do you put people on-site for some of these big contracts?

What would be the term or the length of the average contract there, long-term contracts, and you mentioned the margins are better, but some sense of how the economics stack up, in terms of what you are collecting revenue for, how you are able to get the better margins?

Good question.

It is a combination of a few things.

Primarily what we do is set up centers, kind of regional centers that are recruitment centers and then we would put recruiters within the client as well, and then the recruiters within the client works with the centers, to create a much more efficient process.

As a result, I think the flow-through of candidates, and then the kind of vetting of those candidates are done in a very efficient way.

Because we have some technology that is able to do that, as well as the different centers.

So you would see a client be giving us the opportunity to do their hiring in X number of classifications or categories on a yearly basis.

So clearly, that moves around as the economy moves around.

The other thing that we are seeing is those that are quite receptive to this are larger companies, mid-sized to larger companies, and many times they have a footprint outside of the U.S.

So that is where our global reach comes in, of why do it one way in the U.S.

when we can then drive it as a single process, better reporting, much more efficiency, drive some of the cultural training, induction processes up front.

So we are going to really be maximizing our global footprint, and in a short period of time, in just the last two weeks, we have picked up two or three global deals, just based on what CRI was doing and what we were doing, putting together and talking about the global footprint.

We are optimistic about it.

We also know that RPO is about permanent hiring.

If things start to drop off of a cliff, permanent hiring is going to go down a little bit.

Right now where we have larger centers it probably helps, you can flex a little bit more, but it would cause a little bit of a challenge, but right now that RPO market seems to still be moving because it is a fresh market.

It is not a mature market.

I think that will help us right now.

Okay.

And with the bigger customers it has always been a challenge on the margins for you.

They have pressed you more on pricing.

I guess they are acknowledging with this model at least to date, that there is more value add so they are willing to let you earn higher margin?

Absolutely.

It is about value add.

I think that is the way we manage that.

They look at how much they were spending, and the kinds of time from request to order they are spending, and we are able to dramatically reduce that.

So this is true value pricing.

And at the same time, we don't see ourselves as a boutique.

What I mean by that is as we get scale, we will be able to pass along savings to clients, so they feel as though they're getting a fair price based on the value, not a boutique price that is based on what the boutique wants to do to pull money out of the pockets of the client.

Okay.

And then it would seem like today's environment and moving forward, would be sort of the perfect environment for the older core Right Management business.

You said that hasn't really picked up yet.

Any sense as to why?

And I guess how do you think about that moving forward?

One is, a lot of the U.S.

companies have been run relatively lean and thin, so I think it needs to get a little bit harsher and deeper from a downturn, before they would lay off people.

Only in the last couple weeks have we maybe started to see 100 people here, 500, 700, 1,000, other than of course as I said in pharmaceutical, where they may have a backlog or pipeline of drug issues, or in the finance industry, or in the Automotive industry.

But when you compare this to 2000 or 2001, it doesn't even scratch the surface.

2000, 2001, it wouldn't be unusual to be seeing 35, 40% growth rates in that business, and we are still sitting at 5, 6% growth rates in CT, or career transition.

Okay.

Great.

And then just I guess one last one.

You mentioned, you have talked about this before, but splitting how you service or sell into small customers versus large customers in a couple markets.

Can you give a little more color on that strategy, how it is working, and sort of what the outlook should be?

We are very excited about this strategy.

We have been implementing this in Europe, where we did it first in the Netherlands, and the results have been very good.

We are able to change compensation plans based on if you are a postal code or zip code salesperson, versus a large account salesperson.

We are able to, because we have such an intense service culture in our Company, if there is a large order for a client to come in, it is all hands on deck, and we serve that client.

What happens is is then the small, medium sized businesses may not get the attention they need.

Now that they are actually physically in most cases different offices, what we are finding is we are picking up business in the high teens in most places, which is above our overall growth rate in the small, medium sized business.

So we think this is a great opportunity for us.

It makes sense.

It has always been the industry conundrum of how do you not have a large account take all of the energy out of your office.

We basically said we have enough offices that we don't really have to increase our footprint.

We will just swizzlestick the offices around.

If we have five offices, two of them are now large accounts, strategic clients, and the other three are small, medium sized business, and we will need to hire some different people, or move some different people, but we will be much more focused and I believe that for years we have abdicated some of that market to local players, and we are not going to do that anymore.

We are going to go get them.

We have a question from Matt [DiTullio].

Your line is open.

Please state your company name.

Yes, Reinhart Partners.

Great quarter, guys.

Real quick question here, given all the reinvestment of petro dollars, particularly in the Middle East, maybe you guys can talk about what you are doing to take advantage of those dollars?

Yes.

The Middle East we made a very key acquisition of Clarendon Parker.

We worked with Clarendon Parker for two years.

I had an opportunity a couple weeks ago to spend three, four days in Dubai.

I think we are able to, A) work with the large multi nationals, which Clarendon Parker maybe did not, or could not.

There is a high degree of trust with the Manpower brand and Manpower Professional brand, but most important is our operations in Malaysia, Philippines, Thailand, India, are huge sources, because with the workforce being 90% in expat workforce, we have a global strategy of being able to bring workers into the marketplace, and do it in a dignified and proper way.

We have actually implemented a program called Cross Border Connections, it has been used in Europe, between eastern Europe and Western Europe.

We see this as major opportunities.

We are looking at potentially key joint ventures within the Emirates, and I believe that while we are not going to see instant results on it, because we like to build things the right way, it really is the last growth engine in kind of organized labor markets.

Having said that, it is one of the most restrictive regions having to do with licensing in our industry, and we have all of the licensing in eight different countries that we need.

We feel as though we are in pretty good shape.

Great.

Thank you.

Last question, please.

We have a question of Andrew Steinerman.

Your line is open.

Please state company name.

Italy, 7.2% operating margins, Jeff, I heard you speak about the efficiencies there, and how the company is run with a focus on small, medium sized businesses.

Mike, just correct me if I am wrong.

First quarter for Italy like a lot of your markets is the skinniest quarter of the year for operating margins, so with a start like this, doesn't it provide kind of a robust outlook for second quarter operating margins in Italy, and anything else around Italy operating margins?

Yes, I think what we really, Italy has just been on a strong path from a leverage and operating margin standpoint.

The growth has been good.

They have been driving some great productivity and efficiency, really for the last several quarters.

And I think that is what we have seen really carried into the first quarter of this year, and you are right, there is some seasonal impact in that 7.2%, that follows off of our 8.3% in the fourth quarter.

So it did dip down a little bit seasonally, but frankly was quite strong for the first quarter in Italy, what you see is a little bit of a smaller first quarter, which we get in most operations.

But in fact, the third quarter is a little bit tougher in Italy, because of just the timing of holidays, and some things like that.

But I think they are setting themselves up for another good year.

We had some strong seasonal training business come in a little bit more than usual.

But it was seasonally strong, and so I think that has helped us, helped the first quarter out a little bit.

Hopefully we can sustain some of that as we get into the other quarters.

But from what we are seeing now, still good revenue growth, and good operating margin outlook for the year.

One more quick question on pricing.

The pricing volume in Italy?

Pricing environment in Italy still continues to be quite stable, and it is a very good market from a pricing standpoint.

We continue to expand out on the professional, Manpower Professional services, as well as the perm recruiting.

As we continue to build that out, that has been helping gross margin, while the more traditional staffing gross margin has been quite stable.

So I think things are moving there quite positively as well.

Great.

Thank you.

All the best.

All right.

Thanks all for attending.

As usual, if there are any questions you can refer to information on our website, or call Mike and we will try to give you the best information we can.

So thanks again, and everyone have a very good weekend.

That concludes today's conference.

Thank you for participating.

You may disconnect at this time.