ManpowerGroup Inc (MAN) 2012 Q2 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).

I would like to turn the call over to Mr. Jeff Joerres.

Sir, you may begin.

Good morning and welcome to the second-quarter 2012 conference call.

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

I will go through the high-level results for the quarter.

Mike will then spend some time on the segment detail as well as the balance sheet and an outlook for the third quarter.

I will then do a wrap-up, some comments, and then we'll open up for questions.

Mike, could you read the Safe Harbor language?

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.

The second quarter, given the economic environment, was a hard-fought quarter that yielded profits within our guidance.

We did see declining trends throughout the quarter but for the most part excluding the nonrecurring items and the change in currency which only affects us really on a translation basis, our operations came in where we anticipated.

We were anticipating constant currency revenue of flat to minus 2. We came in down 1% for the second quarter.

The revenue performances across the board were pretty much in line with what we had anticipated from a segment perspective, with no segment being down more than 2.7%.

Americas, slightly up at 1.4% as well as Asia up by 1.8% and Right Management finished the second quarter up by 2.9%.

We expected to have an earnings per share between $0.68 and $0.76 and in fact we earned $0.76 excluding the effect of the nonrecurring items.

As we talked about in our conference calls, we see this current downturn as quite different than what we experienced in 2008.

There really is no major falloff but rather a slow decline of business that is holding true across all geographies at this time.

In total, our operating profit decreased 11% in constant currency and our earnings per share dropped 5% in constant currency including the nonrecurring items.

While we were able to do a fair amount of work on our gross profit margin, there still is a lot more to do.

In fact we saw some drop in our permanent recruitment, which is what we have been seeing across the board for a little bit of time right now and we're still seeing some challenges in the staffing part of our business.

That is an overview.

Now I would like to turn it over to Mike to discuss the details.

Thanks, Jeff.

I will begin today with some overall comments on the quarter followed by a discussion of each of our operating segments and then a review of our cash flow and balance sheet.

Lastly, I will comment on our outlook for the third quarter.

As Jeff mentioned, our operational performance in the quarter was in line with expectations and the midpoint of our guidance.

However, there are a number of unique items included in the reported results which I will try and unpack to give you a clearer view of our underlying performance.

Revenue in the quarter was down 1% in constant currency, right at the midpoint of our guidance range of flat to minus 2%.

Our operating profit margin excluding nonrecurring items came in at 2.4% also in line with expectations at the midpoint of our guidance range.

While we delivered on our operating profit margin, our gross margin fell short of expectations but were able to compensate with that with productivity improvements and expense reductions.

I will comment on both of these elements in just a bit.

Our reported earnings per share were $0.51 which includes reorganization costs of $0.17 and legal costs of $0.08, which gets you to an adjusted earnings per share of $0.76, which is at the higher end of our guidance range.

Of the $18.7 million reorganization charge, $10.4 million relates to the final phase of the reorganization plan announced in the fourth quarter for Right Management.

This plan included realigning our management structure to more effectively deliver service to our clients and reducing our office costs by combining our office footprint with our professional business in certain markets.

Under this reorganization plan, Right is able to continue to deliver their market-leading services in a more efficient and effective way while maintaining a strong presence in each of its markets.

This portion of the reorganization plan will result in additional annual savings of $6 million, bringing the total reorganization plan savings to $20 million annually.

Also included in reorganization charges is an $8.3 million charge in the Americas of which $6.9 million relates to the US.

Roughly half of these costs are severance costs associated with business realignment and half relate to office rents as a result of utilizing less office space in some markets and office consolidation in other markets.

Also included in reported earnings in the US is a nonrecurring legal charge of $10 million primarily related to the settlement of an alleged class-action lawsuit regarding our vacation pay policies in Illinois.

While we deny any liability in this matter, we concluded a settlement was in our best interests given the costs of ongoing litigation.

Our earnings before nonrecurring items of $0.76 per share was favorably impacted $0.04 as a result of a lower than planned income tax rate due to tax benefits from internal reorganizations.

Our effective tax rate on earnings before nonrecurring items was 45.1% compared to our forecast of 48%.

Earnings were also favorably impacted by $0.01 as a result of a lower share count due to share repurchases in the quarter.

I will discuss this in more detail later in the call.

Finally, our earnings were unfavorably impacted $0.03 more than expected from exchange rates as the total negative impact was $0.07 per share compared to a forecast of $0.04 per share.

Our gross profit margin in the quarter came in at 16.6% which is short of expectations and below prior year by 40 basis points.

The shortfall from expectations is attributed to lower permanent recruitment revenues and a lower temporary recruitment gross margin in some European countries.

Permanent recruitment fees showed good growth in the Americas albeit at a slightly lower rate than the first quarter but softened considerably in Europe with the contraction of 17% in Southern Europe and 8% in Northern Europe, both in constant currency.

Compared to the prior year, our gross margin was impacted negatively by 60 basis points due to lower margins on temporary recruitment.

About one-third of this impact relates to pricing pressure coming from Italy, Holland, and the US Experis business.

One-third relates to the impact of timing of the May holidays in Europe, and the balance relates to changes in business mix and smaller one-time items.

This was partially offset by relatively stronger growth in our higher-margin ManpowerGroup Solutions business as well as growth in Right Management's outplacement business, each of which added 10 basis points to our gross margin in the quarter.

I will comment further on gross margin in the segment discussion.

SG&A expense on a reported basis was $767 million in the quarter compared to $811 million in the prior year.

After adjusting for the $28.7 million of nonrecurring items, SG&A costs in the quarter were $739 million.

The represents a reduction of $73 million from the prior year of which $51 million is currency and $22 million comes from current operations.

This 3% constant currency expense reduction primarily relates to personnel costs as headcount and bonus incentive costs are lower than the prior year.

On a sequential basis, SG&A costs were down 1% from the first quarter also on a slightly lower headcount and lower incentives.

We continue to focus on driving efficiency and productivity across our 3600 office network by delivering superior service to our clients and candidates.

Next let's turn to our gross profit analysis by business line.

A core part of our business strategy is to drive accelerated growth in our solutions and Experis business, which comprises about one-third of our business mix while also taking advantage of cyclical and secular trends in our traditional Manpower business.

Gross profit in our Manpower business represent about two-thirds of ManpowerGroup gross profit.

During the quarter, we experienced a decline of 6% in constant currency, reflecting the weaker economic environment.

That being the case, we continue to be encouraged by the growth prospects in our Manpower business as clients continue to focus on expanding flexibility within their workforce.

Our Experis business represents almost 20% of our overall mix and is comprised of three primary professional skill verticals, IT being 70% of revenue and finance and engineering each comprising 10% of revenue.

During the quarter, Experis gross profit was down 9% with growth in engineering but contraction in IT and finance.

From a segment standpoint, we saw growth in Southern Europe and Asia Pacific Middle East with some contraction in the Americas and Northern Europe.

I will cover this in more detail in the segment results.

Our ManpowerGroup Solutions business represents nearly 10% of Company gross profit and consists of recruitment process outsourcing, MSP, talent-based outsourcing, borderless talent solutions, and strategic workforce consulting.

This business saw exceptional growth of 18% in the quarter as our clients are looking for higher value solutions to their workforce challenges.

Lastly, Right Management comprises about 6% of our gross profit and consists of outplacement and talent management services.

During the quarter, we saw a nice improvement in Right's gross profit increasing 6% in constant currency over the prior year.

I will discuss this in greater detail later in the call as well.

Now let's review the performance of the operating segments.

Revenue in the Americas came in at $1.2 billion, a decrease of 2% on a reported basis or an increase of 1% in constant currency.

Operating unit profit was $18 million, which includes an $18.3 million charge for the previously discussed nonrecurring items, $10 million of which was for legal costs in the US and $8.3 million was for reorganization charges.

Excluding these nonrecurring items, OUP came in at $36.6 million, a decrease of 5% in constant currency and the OUP margin was 3.2% or a decline the 20 basis points.

This decline was a result of very modest deleveraging as the gross profit margin in the region was stable and SG&A costs increased modestly by 2% in constant currency before nonrecurring items.

Our US business, which represents two-thirds of the Americas segment, had revenues of $763 million, down 4% from the prior year, which is in line with expectations.

Our US gross profit margin increased over the prior year on the strength of permanent recruitment revenues, which were up 32%.

SG&A costs excluding nonrecurring items were down 1% resulting in OUP excluding nonrecurring items of $25 million, a decline of 10% from the prior year.

Within the US, our Manpower business comprised 57% of revenues and saw revenues flat with the prior year.

Within the client mix, we saw stronger growth in our small-medium businesses which was up 4% over the prior year versus our larger key accounts which were down about 5% from the prior year.

Within Manpower, our total gross margin was above prior year due to the strength of permanent recruitment and our gross -- and our staffing gross margin was in line with prior year.

Our US organization continues to [remain] strong pricing discipline on new business opportunities, which explains the decline in our key accounts business.

Our Experis business in the US represents almost 40% of revenues and saw a revenue decline of 6% in the quarter.

The demand for professional skills remains strong on the smaller retail accounts, up 6% over the prior year.

The demand from larger strategic account softened and revenue decreased 13% from the prior year.

In fact, our five largest clients within Experis had a revenue decline of 33% compared to the prior year.

Our gross margin for Experis fell behind the prior year primarily as a result of upward pressure on hourly pay rates.

These higher wage rates have not been fully passed on to clients in the form of higher bill rates and this remains a key focus of the Experis organization in the second half of the year.

Our market leading RPO and MSP businesses both had strong quarters with RPO gross profit up 27% and MSP gross profit up 15%.

Our business in Mexico continues to be one of the strongest throughout the world with constant currency revenue growth up 14% and strong profitability.

Revenue in Argentina was up 11% in constant currency, which is driven by the inflationary environment.

We've seen a significantly weaker economic environment in Argentina resulting in a billable hours decline of 17% from the prior year.

This has resulted in a significant decline in OUP and OUP margin in Argentina.

Revenue growth in Southern Europe softened pretty much in line with expectations, contracting 3% from the prior year on at constant currency basis.

Revenues came in at $1.9 billion and OUP came in at $31 million.

OUP was down 30% in constant currency and the OUP margin declined 70 basis points to 1.6%.

The decline in OUP margin primarily came from lower gross profit margin in France and Italy, which I will cover in a minute.

Within Southern Europe, France represents 75% of the segment and had revenues of $1.4 billion, down 13% in US dollars or 3% in euros.

On an organic basis, French revenues were down 5% in euro.

France OUP declined to $16 million from $25 million the prior year and the OUP margin declined 40 basis points to 1.1%.

This decline in OUP margin primarily came from a decline in the gross margin.

The core staffing gross margin improved in France as we continued to drive better pricing and we are more selective on new business opportunities.

This improvement in our core gross margin was more than offset by the impact of two holidays falling during the week this year that were on the weekend last year and an increase in profit sharing costs for our associates.

Gross margin was also negatively impacted 20 basis points by a decline in permanent recruitment fees.

Our permanent recruitment business was down 21% in constant currency, which includes a further wind down of the Pole Emploi contract with the French government.

Excluding the Pole Emploi contract, permanent recruitment fees were down 1% in the quarter.

As expected, revenues in Italy softened considerably during the quarter.

Revenues in the quarter were $274 million, a decline of 21% or 11% in constant currency.

OUP declined 37% in constant currency to $13 million.

This represents an OUP margin of 4.6% compared to 6.5% the prior year.

About one-third of this margin decline is due to SG&A deleveraging and about two-thirds is due to a decline in gross margin.

We've experienced pricing pressure in Italy with our SMB clients given the economic backdrop and have found it necessary in certain circumstances to reduce our pricing to defend our market position.

We also saw further market deterioration in Spain.

Revenues were off 5% from the prior year in constant currency while profits weakened on further deleveraging.

Revenue in Northern Europe came in at $1.4 billion, a decline of 10% or 1% in constant currency which also is about as expected.

OUP for the quarter was $39 million, a decline of 24% in constant currency and a reduction of 80 basis points in OUP margin to 2.8%.

Gross profit was down 8% in constant currency on a lower gross margin and SG&A expenses were tightly controlled, down 4% in constant currency.

The low gross margin was due to a decline in permanent recruitment fees, which were down 8% in constant currency, the timing of May holidays in Germany and the Netherlands resulting in more unbillable time, changing business mix with higher growth coming out of the lower gross margin UK market and some pricing pressure in the Netherlands.

In Northern Europe, our Manpower business comprises 74% of revenue and Experis comprises 23% of revenue.

We're able to produce some modest revenue growth in Manpower primarily driven by growth in the UK while our Experis business declined 6% in constant currency.

We experienced softening demand for professional skills in Northern Europe with contracting revenues in most geographies.

UK continues to be one of the stronger markets in the region with revenue growth of 8% in constant currency for the quarter.

While the UK market is fairly stagnant, our UK team continues to find good growth opportunities in staffing, professional services, and solutions.

Our Nordics operation began to see contraction in revenue in the second quarter as a result of softening demand in the Swedish market.

Our operation in Norway continues to produce good revenue growth of 7% and midteens OUP growth.

Germany and the Netherlands also experienced further market declines with revenue in Germany down 7% in constant currency and Netherlands down 10% in constant currency.

Our Asia-Pacific Middle East segment had a very good performance in the second quarter.

Revenues were flat at $663 million but up 2% in constant currency.

OUP came in at $22 million, an increase of 18% in constant currency, bringing the OUP margin to 3.3%, an increase of 50 basis points.

The OUP improvement was driven by tight expense controls and productivity improvements resulting in an SG&A cost reduction of 2% in constant currency.

Our overall gross margin and staffing gross margin were stable with the prior year.

Japan is the largest country within the Asia-Pacific Middle East segment with 44% of segment revenues.

On an overall basis, revenues in Japan remained flat with the prior year in constant currency.

Our ManpowerGroup Solutions offering continues to do quite well in the Japanese market with growth of 5%.

We're also beginning to see the effects of the slowing economy in Australia, where revenues were down 7% in constant currency this quarter compared to growth of 2% in the first quarter.

We continue to see good revenue growth in India, China, Hong Kong, Korea, Thailand, and Singapore, which drove OUP growth between 31% and 41% in constant currency in each of these countries.

Revenue growth at Right Management was about as expected, up about 3% in constant currency to $84 million.

OUP for the quarter was $7.5 million before the impact of the $10.4 million reorganization charge.

The OUP margin excluding this charge was 8.8%, an improvement of 5.5% over the prior year and reflects the success of our reorganization plan where our expenses are now better aligned with our current revenue levels.

Now let's turn to the cash flow and balance sheet.

Free cash flow defined as cash from operations less capital expenditures was a use of $74 million for the first half of 2012 compared to a use of $220 million in the prior year.

Free cash flow in the second quarter was a use of $33 million compared to a use of $49 million in the prior year.

Cash flow was negative during the quarter due to a net increase in working capital resulting from timing of tax payments.

Our accounts receivable DSO was stable with the prior year at 55 days.

During the quarter we repurchased 879,000 shares of ManpowerGroup stock for $32.6 million.

This leaves 2.7 million shares remaining on our buyback authorization.

During the first half of the year, we used $34 million of cash to fund acquisitions, most of which came in the second quarter related to a high-end IT services and solutions company in France.

Our balance sheet remained strong at quarter with net debt of $301 million and total debt to total capitalization of 23%.

Total debt in the second quarter increased from $722 million to $755 million.

This increase relates to the refinancing of our EUR300 million note, which came due in June of this year with a EUR350 million note with a six-year term coming due in June of 2018.

The fixed interest rate on this new note is just slightly below the retired note at 4.505%.

There were no borrowings under our $800 million revolving credit agreement at the end of the quarter.

There were however, $2 million of standby letters of credit issued and therefore we had $798 million available for borrowing under the revolver giving us ample liquidity.

Our revolver has two primary financial covenants, both of which we are well in compliance with during the quarter.

Lastly, I would like to offer our thoughts regarding the third-quarter outlook.

As we look to the third quarter, we believe we could see some further easing in demand in many in our markets but we are not forecasting a dramatic drop-off.

This is the context we are forecasting revenue growth in the third quarter to be down between 3% and 5% in constant currency, which at current exchange rates would be down between 11% and 13% on a reported basis.

One important aspect to consider in the third quarter, which is included in our guidance, is that most of our markets have one less billing day this year compared to last year.

That results in 1.5% less revenue in the quarter or about $90 million.

Because our SG&A expense base is not significantly impacted by one less billing day, the gross profit lost on this lower revenue falls directly to the bottom line.

As a result, the impact on the quarter's earnings-per-share is quite significant, which we estimate to be a negative $0.10 per share.

From a segment standpoint, we expect revenues to contract on a constant currency basis in the Americas, Southern Europe, and Northern Europe, with year-on-year revenue growth 2% to 4% weaker than what we saw in the second quarter.

We expect modest low single-digit revenue growth in Asia-Pacific Middle East and Right Management.

We expect our gross profit margin to range between 16.3% and 16.5%, just slightly below the prior year due to lower permanent recruitment fees and continued pressure in the few markets we mentioned earlier.

Our operating profit margin should range from 2.1% to 2.3%.

This is slightly weaker than the 2.7% in the third quarter last year which is attributable to slight operational deleveraging given the business contraction and the impact of having one less billable day in the quarter.

Our income tax rate is expected to be at 46%, which is in line with the prior year or 34% if we exclude the impact of the French business tax.

This will result in earnings per share ranging from $0.64 to $0.72 per share, which includes an estimated negative currency impact of $0.08 per share.

Again, it is important to keep in mind the impact of one less billing day resulting in $0.10 of lost earnings.

As you look ahead to the fourth quarter, most of our markets have the same number of billing days in 2012 as they did in 2011, so we would not anticipate a similar impact in the fourth quarter.

With that, I will turn things back to Jeff.

Thanks, Mike.

The second quarter presented clearly more challenges than we experienced in the first quarter.

However overall, we held up well given the drop -- the backdrop of all of the challenges that are in the marketplace.

Throughout the quarter we were able to continue and expand many of our new offerings, which include Experis and the Solutions programs.

At the same time, Right Management, through lots of work as Mike talked about, was able to produce good profitability and Manpower improved efficiency and productivity, all of which as you heard from what Mike said allowed us to achieve our anticipated profit in the second quarter.

Our strategic driver of differentiation continues to gain traction as we are experiencing more pull through our network as more prospects and clients see us as a solutions provider.

We are being invited and asked by many companies to participate in bids and come in and have conversations about their work forces as they are challenged with the chaos of today's world and the effects on its own workforce.

We continue to lead in thought leadership and we are turning this thought leadership into sales opportunities and business.

Diversification, another strategic driver for us, is going very well.

Our Solutions business is growing faster than market.

In the first quarter, we grew our GP at 18% in constant currency and we were able to hold that strong growth in the second quarter.

At the same time, we were able to continue to add to our book of business with 34 additional RPO wins, up from our previous run rates in the last few quarters of that in the mid-20s.

And we see great uptake also in our talent-based outsourcing, which is the outcome-based pricing that involves service-level agreements.

This is done in all of our brands as well as the combination of our brands, which makes it extremely powerful.

Efficiency and productivity, another strategic driver, again paid off and there is more left within the organization.

This isn't necessarily about cost-cutting.

It's about doing business differently.

We continue to look at what we can do to assist the branches to be more efficient and productive and again this quarter, it helped us achieve an operating profit of $123 million without the nonrecurring items.

Our SG&A improvement I believe will continue for some time as there are many projects and initiatives in the works that have yet to be realized.

We continue to experience positive secular trends.

Our conversations with clients as well as the percent of workforce that is working as an independent contractor as well as through temporary arrangements continue to reinforce that trend as they have gone up.

We've recently seen a positive sign though slight right now in Italy regarding regulation.

The Parliament approved but it is not yet effective some changes that are attempting to induce hiring which of course will be beneficial to us.

The outlook for the third quarter looks a bit more difficult than it did coming into the second quarter.

We have seen, as Mike described, a continued downward trend through moderate -- though moderate throughout the quarter.

This will give us our challenges but clearly the team has proven in the second quarter that in fact we know how to face these challenges and come through the third quarter in the finest fashion we possibly can.

With that, I would like to thank you and use this time to open it up for questions.

(Operator Instructions).

Kevin McVeigh, Macquarie.

Great, thanks.

Mike, I apologize.

Could you just go through the $0.10 kind of nonrecurring impact as we think about that into Q4?

You explained it but I just didn't pick up it conceptually.

You are talking about the loss of one billing day that --?

Yes, the $0.10 that kind of flows through to the bottom line and the loss of the one billing day, yes.

Right.

So as we look at the third quarter this year, we have one less billing day than we did last year.

So if you think about one less billing day, that's about 1.5% impact on our revenue, so say 1.5% less revenue.

And so the GP off of that revenue basically drops down to the bottom line -- if you look at it on a comparative to prior year, drops down to the bottom line because one less day, billing day really doesn't impact our SG&A cost in a month.

A lot of those are monthly type costs.

So effectively less revenue as result of one less billing day, less GP.

That GP will -- makes its way down to the bottom line and as a result, it impacts the year the year-on-year comparative as a result.

I did make the comment that as we look to the fourth quarter, we don't have that issue.

We have a few markets that have a few -- or that have one more billing day, have an extra billing day in the fourth quarter but with the holidays I'm not sure how to handicap that.

Perhaps there might be a little bit of an uptick in the fourth quarter from that but I'm not sure that I would count on that just given the timing of the rest of the holidays.

Got it.

Then just I know it's tough given the visibility but any thoughts on kind of how Q4 trends, more just kind of around Right Management in particular -- are we going to expect a nice pick up in that just given kind of the environment we're in right now?

Kevin, Jeff.

I have been told I should sit a little closer to the speaker, so the answer is on the margin, we've actually done our research.

We are seeing that most companies are looking at trying to hold on to their staff.

You are seeing some things particularly in the financial industry where they were announcing some layoffs and some downsizing.

So what we have done from a restructuring perspective in Right Management gives us some really good hope and confidence when it comes into the profitability.

When you look at that top line popping up in any kind of dramatic way, we are not actually forecasting that.

Now in today's world, things happen pretty quickly but I would say other than the finance industry right now, which we have a pretty good presence in, we are not really hearing from our clients that they are really getting their lists together and are looking for any large downsizings coming up in the fourth quarter.

Got it, okay.

Thanks.

Nice job.

Paul Ginocchio, Deutsche Bank.

Thanks.

Just a couple minor housekeepings and one bigger picture.

Just on Experis top lines.

How many of those are financial services?

And then I think you won a relatively large contract in France.

When do you cycle that contract win?

Remind us what percent of France is auto.

And finally, Jeff, for you.

Can you just talk about the impact of the equal pay in the Netherlands and the recent supplemental wage agreement in Germany where that's going to compress the cost of a temp in a perm order?

Thanks.

Paul, as usual you packed in a whole bunch of those and you said them very quickly, so we will try to cover those.

Mike, do you have a couple of the first ones?

Yes, I was copying so feverishly, I missed the first one, Paul.

Say again.

I'm sorry.

Experis, the top five customers, what percent or how many are financial services?

Yes, you know our larger -- we do have some larger clients in the financial services on the Experis side.

We have been doing a lot of work with a lot of the integration as they have been through their acquisitions and migrating and some of that business is now falling off.

So we are not -- the business -- we are not losing it to competitors per se but it's just business that's winding down and that's what we are seeing.

So in terms of overall mix, if you look at the US business, it's maybe a quarter of the mix, something like that overall right now, something in that neighborhood.

I don't have the exact number right in front of me from a mix perspective but it would be in that neighborhood.

I think the second question you had was around France and France auto.

We don't have a big contract per se that we are anniversarying there but we do do business with the major French automaker's overall.

Our overall mix of business there would be less than 3% of the overall business in France and it has been declining.

I am sure you have read the headlines on PSA and the French automotives all together have been declining.

So I would expect -- so it's about 3% of the mix.

I would expect the second half of the year we will do less businesses as they cut back on staff.

Could it be half of what we did in the first half?

I suppose it could be something of that magnitude, but certainly less for sure in terms of the overall mix from that perspective.

I think the next had to do with the Netherlands.

Yes, I will take a little.

You're right, Paul, there has been some movement on CLAs primarily in Germany and then most recently announced in the Netherlands, where the Netherlands has had some of those agreements in the CLAs.

When you get into the kind of detail that we are talking about here, there's kinds of what I would call puts and calls.

Overall, to be very transparent, we think that this isn't better for us but it could be somewhat neutral.

So in Germany, two of the largest unions which now make up about 35% of the workforce, the IG Metall and the IGBCE, came out with some parity you pay when, in fact as we know, Convention 181 and some of the other things that have been done with the agency worker directive have already talked about parity pay.

This basically moves you into from a group one salary all the way to a nine-month, and you get these raises throughout to increase the minimum wage.

Having said that, many of our people are already at or above that minimum wage, so that changes the calculation or at least lessen the effects of the calculation.

We have seen parity pay in a fair amount of spots, and there has been little blips.

The biggest one of course was in the UK, but we don't see a major impact.

What could happen out of this, and we do expect in Germany that many of the other unions will follow suit, but most likely mathematically what happens out of this is our revenue possibly goes up and our gross margin percent goes down.

But the dollars being yielded is actually slightly higher.

Then when you get into usage, in the case of Germany when you get past nine months, you can go all the way up to 24.

When you get past nine months, you could say that there is a little bit of a disincentive at that point to possibly use a temporary contract within Germany, but we are not quite sure.

Our clients are still a little bit confused and a little bit concerned about which way they will go on that.

Netherlands changed it a little bit more rapidly.

They already had something like this in place and again we would see the Netherlands really being something that will affect us but it will be more on the margin.

Anything to add to that, Mike?

Yes, I think just in terms of the Netherlands, I think what they are talking about there is that there would be a parity pay effective week one versus now it is week 26.

So I think it's a little bit further out and that would be effective in 2015.

I think the important thing to remember is why we are used.

It's not really for the pay arbitrage.

It's really for flexibility.

That's what clients are looking for.

That's what they're using us for.

So might there be some clients as pay rates go up on temporaries that don't use us?

I think that is certainly possible but it really is the flexibility is the primary reason that we find our clients are using us, just given the uncertainty and the changing workforce dynamic out there.

So I think it's those elements that are driving a lot of this.

So we'll see how it plays out, but as Jeff said, our view would be gross profit margin percent may go down but as we pass it through to the gross profit dollars, should be the same but some risk on the revenue line if some clients drop off as a result of the pay rate increase.

And in Germany most recently, I think it was yesterday or the day before, Labor Minister Ursula von der Leyen, had stated that we are going to just calm down here for a second.

She didn't use those words but we suspect back in November some of the other unions will probably pick up and mimic some of the things that have been occurred in the other two unions that have already struck their CLA agreements.

Thanks, Jeff and Mike.

I appreciate it.

Sara Gubins, Bank of America Merrill Lynch.

Thanks, good morning.

In France you are continuing to outperform the market and I am wondering if you think that can continue?

I'm also wondering if you are seeing any pricing pressure in France?

We have been and if you look at the Prism Data, which I am sure you are referring to, Sarah, and us, we are outperforming and it really is the same reasons we had talked about in the first press conference call.

We put a tremendous amount of emphasis and sales activities on the SMB and we have been able to do that.

In addition to that, while our costs are higher they are (inaudible) than we want and the team has just done a great job in efficiency in moving it down.

So I think for them to hear me say that it's higher than what we want would be a little bit of distress for them.

But the fact is we've made sure that we didn't impact the quality and many of our competitors are being some challenged with the quality and that's allowing us to pick up some additional business.

We've seen and I would like to say but I don't believe it -- I would like to say yes, we're just going to keep this spread of beating the market.

That market is a tough market and typically what we find, we were leading that market for three or four quarters and then you start to anniversary it and all of a sudden it goes a little way the other way on the margin.

So I think we've got a little bit of some good things going there but my sense is competition is tough and for us to be on market if we are doing on market with the appropriate amount of margin indiscipline, I am fairly happy with that.

Which leads to the second question on pricing pressure.

It exists in France but no more than what we saw in the first quarter.

So I would say that we are seeing, which is typical, very typical of what we are seeing in Italy and maybe, Mike, you will talk about pricing pressures in Italy because I think that is almost more important when you look at some of the GP.

It is some of the midsize players in the midsize accounts that are now giving us some of the challenge because the market has gotten soft and the margin left is really in what would be called the SMBs and therefore they're getting a little bit under attack.

So overall, we are still outperforming the market through some good execution.

Pricing seems to be fair, tough.

It is a tough market but not a major concern for us at this time.

Mike, do you want to just parlay into maybe Italy?

Sarah, does that answer your question?

Yes, it does.

Okay, so Italy just for a second.

Maybe even just a little color on France before I go to Italy.

In terms of -- so when you look at what we've been trying to do, we've been trying to push pricing and push pricing up in that market, which is of course challenging in a contracting market.

So we have been able to get a little bit of pricing and a little bit of market share at the same time but that is difficult given the contraction we are seeing.

So overall, our gross margin in France is down a little bit this quarter but the core underlying gross margin is actually up a little bit.

What did impact us, what brought our gross margin down this quarter was the timing of holidays.

We had two holidays last year were on a Sunday that happened to be on a Tuesday this year, which is a bit of a double whammy because you get the fact that now the holiday is in the middle of the week so you end up paying the temporaries and then also because they are on a Tuesday, it ends up being but we call a bridge holiday, where there is a day -- one workday in between, which then has more of a dramatic impact because many of them take the Monday off if it's on a Tuesday, so that is has impacted us.

We also had a little bit of an increase in our profit sharing costs to temporaries as well, which has impacted the margin as well.

But I just think it's important to underline that despite the overall France gross profit margin being down a bit, the core gross margins actually bumped up a little bit as the team there continues to push as much as they can in a very difficult environment on price overall.

And we're seeing some of the business that we had descoped or taken out affect that as well, which is helping some of that lift in the GP.

That's right.

In the case of Italy, there we do -- there we are seeing a little bit more pressure particularly on the SMB margin, which is a greater percentage of book of our business there.

So we are seeing more pressure amongst the smaller players in that market, which is fairly typical in a contracting market.

That usually happens -- does happen first.

And we also have a mix issue in Italy where the SMB side of the market is actually contracting more quickly than the key accounts as well.

So we've got a couple things going on that's impacting the overall margin on Italy overall.

So that's where that's having some impact.

Great, and then just one other separate question.

In the US it looks like professional is slowing more with large accounts in the core Manpower business with its large accounts.

If that's right, can you talk about what's driving that?

Is that simply the decline in financial services business or is it something else?

No, you hit it on the head.

We have talked about that for two quarters and unfortunately the banks still haven't found their feet.

Mike, what percent on the top line of our businesses is financial for Experis US?

Experis US, it's about 25%.

So we are running about 25% and what's happening in there is that they are shedding off some of their projects, some of the integration projects that we had hundreds and hundreds of contractors in have rolled off.

Additionally to add to the GP story, which I am not happy about at all but is correctable is our paid bill gap had narrowed primarily in Experis US.

We are getting some pressure from the market as some of the higher skills are asking for more pay.

But in the financial industry particularly, we have not been able to pass through some of that additional pay that is required to secure the candidate and therefore, we are lessening a little of the gross margin in Experis.

I've got confidence in the Experis team.

They're working on that not only in the financial services but also in the SMB, where we have got to get back to that paid bill gap that we were at before.

So there were some execution issues that we are working on there but that also contributed somewhere around -- what about 20 bps in there, Mike, on some of the GP decline?

Thanks.

Tim McHugh, William Blair & Company.

Yes, can you just talk a little bit about the differential, why you continue to see good permanent growth in the US versus the trends in the temporary?

Is it simply the lack of exposure to financial services or is there any more -- anything else going on that that kind of underlies?

It's a good question and it's one that we have analyzed and looked at and it really is following a secular trend that is positive for the industry and even more positive for us because of the infrastructure we've put in place.

What we're seeing is the tie if you will or that correlation between permanent recruitment and temporary and where you are in the cycle and how one leads to another, I think is broken down somewhat.

There are still some directional trends that can help out but are broken down.

In fact if you recall about three quarters ago when they said you must be in the later innings of the recovery because perm is already so strong, and we said no, that's not the case.

What the case is is companies want more agility and when they need more agility, one of the things they've noticed is why should I have a staff of recruiters when I'm going to stop or slow down hiring, I still have those recruiters?

So they have basically abdicated that recruitment to us, whether it be through RPO, large perm recruitment deals, or just one off perm.

We've done extremely well in addressing that market place and therefore, we are seeing our number percent of GP of perm is still relatively high even in this quarter as high as what we have seen in some of the peaks back in 2007-2008.

So that will and does have a chance of coming down as you see the market come down but it's a bit more resilient than it has been in the past.

It's a little different than in Europe because in Europe they have not quite gone that extreme of outsourcing but they still have done some of that.

So that's why you are seeing the perm hold up primarily in the US.

Good execution and really some secular trends that we are taking advantage of.

Okay, great.

Then, Mike, just two kind of numbers.

One, for Right Management, the margin excluding their restructuring charge up and [upper] single digits, is that sustainable?

And then also, the tax rate you are guiding for Q3, up 34%.

Is that something that can continue for a couple of quarters after that?

Sure, so in the case of Right Management, I would expect that with the reorganization plan we've taken, it really was to get those -- our costs better in line with now the lower revenue levels.

So our expectation would be that we are going to be looking at upper single-digit type operating margins given these revenue levels if revenue picks up a little bit more, if revenue goes the other way, which I don't see that happening at this stage.

We may have to trim costs back a little bit but there is always some seasonality in Right.

Usually the third quarter is a bit of a softer quarter, so I would expect third quarter to dip down just a little bit.

But overall I think you can reset your thoughts around Right Management.

I think we now are more on an even steady playing field there.

In terms of the overall tax rate, I do expect that we are going to have this lower tax rate throughout this year.

As we look to next year, I would then bring it back up next year I would say back into what's been a more normalized rate of about 37% before the business tax.

I think that's for planning purposes 37% to 38% is maybe where I would think about for next year and we will see how things move forward.

But you can expect a lower rate for the balance of this year anyway.

Okay, thank you.

Andrew Steinerman, JPMorgan.

Mike, I was surprised when you unpacked gross margin that you didn't call out idle time, just given the declines in Germany and Holland.

I would think that idle time is having an impact here.

And Jeff, I know we've sort of been through this intellectual discussion before but let's just try at this stage if real GDP in France inflects positive over fourth quarter, first quarter but to modest levels, do you think that will drive overall French temporary help or do you think that will narrow the declines?

Okay, Andrew, a couple things.

One, Mike, you can discuss some of the idle time, but one of the components of the downturn or the pricing is the Netherlands and the Netherlands does have particularly in our Experis unit have a bench model which is downtime.

So, Mike, do you want to maybe take it from there and put a little bit more color on it or --?

Yes, so I think I didn't mention idle time.

I did mention a little bit of pressure in Holland and part of the pressure in Holland does come from exactly that.

We do have within our Experis business a bench model in Holland, so that did put some pressure on margin.

And then also the other market of course when we think about idle time is Germany and I somewhat bundled that, if you will, with the impact from the overall holidays because to some extent, whether it is holidays or just downtime or its unutilized time, if you will.

So within Germany, that was actually the biggest piece and I kind of characterize that as the overall impact of the holidays but it is -- has some of that idle time inherent in there as well.

So you are right in thinking that.

It's a good clarification.

Thank you.

Then regarding the French scenario and GDP, while you are right there is a little bit of a philosophical but mostly intellectual conversation on it, you can turn it to it is one of the markets where you had more higher correlation between growth in GDP and growth in temporary staffing and we believe that is still true.

Now when you get growth in GDP in Europe in the past it had been what I would call kind of just a regular growth due to demand.

With the new administration in Europe, which is looking at some stimulus, stimulus will create GDP growth.

We then have to look at can we participate in that stimulus?

You've heard me talk about in the past that some stimulus programs in the US and other parts of the world really are GDP growth that we cannot participate in, therefore it doesn't have an effect on us.

In the case of France where we are large in the construction industry and construction tends to be a good stimulus area, we would see increased GDP growth in France having an effect on us.

Now the question is is when you get to 1% versus 1.5%, that will make a big difference to us.

When you get into a 1% GDP growth in France, I think you will see a nominal effect.

When you get to 1.5%, closer to 2%, now you start to see some of the momentum build.

So going from 0.2 down or whatever the post number will be up to 0.2 or 0.3 up, I think you're not going to feel it.

Around 1%, you start to feel a little relief.

1.5%, you start to actually get a little leverage on it.

Perfect, thank you very much.

Jim Janesky, Avondale Partners.

I wanted to ask a question around perm first.

Mike, what percent of GP did you say that was?

12.9% of overall Company GP.

So CEO would round that to 13%.

Thanks.

And Jeff, it sounds like the increase in perm in the US is more secular than growth driven right now unless I didn't catch that right.

So I'm just wondering do you think that there is some pent up demand or deferred hiring that can happen in the back half of 2012?

And then take that into Europe as well, do you think that the perm slowdown is those jobs are gone for good or could come back in a better economy?

Jim, it is a really good question and frankly, it's where our heads are.

If you talk to some of the labor economists, which I guess you can pick whichever one you are in favor of because they have answers all over the place.

But the majority of them would talk about this inflection point of productivity, where companies are and the growth of GDP is maxed out.

I believe there's little left in there but the reason I bring that up is that if you get some slight demand, you actually have to start adding.

Companies are right on the cusp of there's not much left juice, not much juice left in the orange if you will, to get some productivity or work done.

So if demand starts to pick up, I think our perm number has a nice jump to it.

I do think that we are getting into a little bit of a soft patch and then we also have some uncertainty in the US, all the things everybody is aware of that is holding back.

Well, this holding back is actually creating a little bit of that catapult latent demand to it where they still may need the hiring.

They're asking for more with less but they know they can't do that a whole lot longer.

So our perm business is secular but it's also -- I don't want to take anything away from our team.

What we have built in our perm recruiters, how we drive our perm recruiters, what we are doing in conversion rates from temp to perm, which is still almost 40%, is really showing that we have an offer that the clients want and we have an economy that when it springs back, there's not a lot of slack in that labor market in order for us not to achieve some really good perm numbers out of it.

What about within globally especially Europe?

Well, you see some of that in Europe.

No doubt.

You'd see some of that in France which actually in 2011 and the beginning of 2012 had some very good perm members.

We started to see that tail off a little bit more.

That's very economically driven.

I would suspect they have a bit more slack in their system than we would so as the economy comes back, you would see a little bit more of a lag effect because it is social plans are much harder to implement so you have a little bit more excess capacity than you would in the US.

But across Europe in Sweden, the UK market, Netherlands, I think -- more than think, I am confident perm has a very good future for the industry and because of our infrastructure and how we built nearly close to some $500 million in GP dollars in there, that it's a good second wave for us.

The question is is -- do we see any of that in the fourth quarter or do we see more of that in 2013?

I'm not prepared to really put a number out because there's too much uncertainty in the market right now.

Okay, as it relates to gross margins, we understand that a better perm mix would be very positive for gross margins.

But in terms of temp gross margins when you look at that, should we be looking for gross margins to go up over time more because of a geographic or business mix shift and maybe some of the pricing that has come under pressure might be more permanent in nature?

Or how should we look at temp gross margins?

I think when you look at temp gross margins, the reality is is that for us to flatten it out, in other words to get it to go sideways instead of down, we believe will be very good, meaning can we see a slight turn up?

You see a little of that in the US.

We saw a slight of that in France but we are talking little bps here.

We're not talking big numbers.

The point of it is that the mix of business, the SMB, yes, that will help.

Pricing will help.

Descoping or taking some -- purging some accounts out will help.

But as we see that, as that becomes more stabilized in this quarter, it was a little anomalies, had some little odd things in there -- but as that stabilized, then we get into our $1 billion plus Solutions business, which is GP is growing at 18% in that area.

Then you get the business mix overturning.

So what we are really looking at is stabilizing the staffing GP, hopefully bending that curve just slightly but not setting any wild expectations that we can make a big bend in that curve and then filling it in with a mix of business to get our overall GP going up as an organization.

Okay, thank you.

Jeff Silber, BMO Capital Markets.

Thanks so much.

Just wanted to circle back to Experis.

Mike, if you can remind us within Experis what the breakdown is maybe on a gross profit basis between perm and temp and also between US and non-US?

Between perm and temp, it's not too different from the overall mix, Jeff.

I can look up the exact number but it's pretty similar to the overall Company as a whole.

A little less in the US maybe than where we might be going.

A little bit less in the US in terms of where we are.

So that is how that would lay out.

And then your second question again was --?

That's versus non-US within Experis.

Geographically, so we would be looking at Experis US, we would be about 40% in the US basically and the rest would be Europe and Asia.

Okay great.

In terms of the weakness that you're seeing again, is it more on the perm side or the temp side?

Is it more on the US side or the non-US side?

I think revenue wise, we're seeing actually pretty similar both in Europe and in the US, we would see both of them being down in the mid single digits, so we are seeing fairly similar from that perspective.

I think you've got a little bit different backdrop in terms of what's occurring in the US.

I think there still is good activity in the market.

I think there's more strength in the US market.

In the US, it happens to be a little bit more of our client mix.

Yes, if you took out that financial part, we're actually growing nicely.

Yes, our SMB in Experis in the US is growing about 6%.

So in terms of -- I think in terms of how it's acting, it's actually healthier in the US.

We are seeing a little bit softer demand overall in Europe on the Experis side.

Great, just one quick follow-up.

Within financial services and then even more broadly within Experis in terms of the weakness.

On the skill set side, is it mostly in IT or are there other skill sets that you are also seeing the weakness?

I would say mostly IT.

Okay, great.

Thanks so much.

Mark Marcon, Robert W. Baird.

Good job on the expenses.

I was wondering if you could talk a little bit more about just the perm discussion that we are having and specifically can you tell us what percentage of GP perm comprises in Europe relative to the US?

Given the declines that you are seeing in Europe, how are you thinking about managing through that from an expense perspective?

So far we haven't seen perm drop off the map.

So I think that's an important point and that's across geographies.

We are seeing in some of the more distressed markets like in Italy but Italy we actually didn't have a lot of perm going on in Italy.

We have more going on in the Netherlands and the Netherlands is suffering a little.

So I would say the spread in pricing, the biggest differences is that the French perm is probably at a lower number because it's also at a little bit different category of individual that we would be placing.

But even within the French market, we have not seen it again fall off the cliff.

So the perm if I understood your question correctly, the perm from a margin and pricing and per mandate, if you will, it's fairly solid across the world.

There are some wage differences so we do an awful lot of perm in India and China and those are also a little soft.

China is going through a little bit of a soft time even though they are growing, so we're seeing a little of that.

Mike, do you want to add any other color on there?

No, nothing further.

I don't know if part of your question was just in terms of perm as the percentage of the overall business in Europe as well which would (multiple speakers)

That was exactly it.

That would actually be pretty close to the overall -- it's about 12.5%.

Northern Europe has a little bit more closer to 14% and Southern Europe closer to 11% of the overall GP.

Then what you would see is the US slightly lower than that overall average and then coming out of Asia Pac, Middle East, we would see a higher percentage.

Okay, I probably maybe just had a misimpression in terms of listening to the commentary.

I was under the impression that some of the Northern Europe and Southern European markets were falling off a little bit more in perm than what you were seeing on average.

I think if you look at what's happening overall so if you take in the Americas, perm overall was up 32% I think the number was, so we are clearly seeing some difference.

So yes, I guess the Americas perm was up 28%.

You would see Southern Europe perm down 17%.

Part of that was because of the French Pole Emploi contract.

So without that, we are down 3%.

Northern Europe perm was down 8% so clearly see some softening in perm.

That's all year on year and then sequentially, we felt perm fall off more so going from Q1 to Q2, which when you look at where our GP forecast was relative to where we came out, part of where we missed or I missed is I was anticipating a bit stronger perm performance particularly I didn't see Europe falling down quite as quickly as it did.

Do you -- if the weakness continued just from a macro perspective, do you have levers to adjust for that or how should we think about that?

Sure, so as you very well know, it's a little harder to adjust in Europe than it is in the US.

However, the way we have set it up, we have some levers but if you get down into the minus 20%, 25%, 30% range, you are in a little bit of challenge.

But if we go back, which doesn't seem that long ago, we go back into the '08, '09, we were actually deploying -- redeploying some of those perm recruiters into other positions.

So it is harder.

You do reach a point where it almost becomes a bench model for recruiters, which is not healthy.

But we don't see that happening in the near term because we still see enough business happening on the ground in Europe to really support the basis of recruiters that we have now.

Yes, I think we're still a ways away from that, but last time in the depths of the downturn, we were deploying them and having them work on outplacement assignments, so there's a little bit of hedging that we can do as well there.

Super, and two longer-term questions.

One would relate to Italy just if you could comment with regards to what you are seeing on the SMB pricing front there relative to the last downturn?

Is it something where you typically -- this happens at this point in the cycle but then you are able to recoup it later on and therefore the profitability of the market probably is unchanged?

And then secondly, I know it's early and there's not a lot of clarity but to the extent that you've got some commentary, what do you think about this summit that Hollande had in France and the likely ramifications of it with regards to labor?

Okay, I'll take the first one and I'll leave the second one for Jeff.

I think from an SMB pricing standpoint, I think one of the things you do have in Italy is it does on the SMB side enjoy some higher margins than perhaps other markets that we might have, not all markets but certainly some of the other markets.

And so it is typical in a downturn that you are going to see more pressure on the SMB side.

The smaller players are struggling to stay alive and they just want to get the volume so you do see that come under more pressure typically in a recession and I think we are seeing the early signs of that in Italy.

Then you do see -- you also do see SMB come up.

It is much more elastic.

It can bounce back much more so.

So I would expect that that should come back.

Will it come back to the same level?

Chances are it probably will not, but we continue to drive efficiency and productivity within these markets as well.

So I know implicit in your question was how are we thinking about the overall margins once Italy gets back on their feet, what do we think about that?

We still think it's a country that will deliver good margins.

We've got a very efficient team there.

They do good work and even in a tough quarter like this, our overall operating margin was 4.6%.

So they still are producing okay, but certainly not at that 6% to 7% operating margin we like to see but I certainly wouldn't rule that out at this stage.

Then regarding the summit, it's hard to figure out what was and what will be some of the outcomes.

So you heard about his repeal on overtime taxation or lack of or no taxation on the 35-hour work week.

It goes all the way back to before the elections where we talked about.

Many of his policies as stated and as may roll out can and will increase some activity and stimulate the economy, which we would be a beneficiary of.

The notions of taxation and some of those others, those actually have potentially longer-term implications, whether you want to be on the side of negative or positive implications, those are longer-term.

So the summit and others when we see coming out of there, right now there is kind of some subsidy changes a little here, tax change a little there on the margin.

Mike, I think the best we can assess is let's call it a breakeven, a push and a take on it.

But overall, we could find ourselves with a little bit of stimulus in France and as a result, get some business out of it.

But I think it's too early to tell.

I still think we've got to make it through the fall before we can see how this stuff really falls and what would be the ramifications of it.

Great, thanks for the insights.

James Samford, Citigroup.

Great, last question.

I just wanted to sort of focus on I guess visibility really quickly here.

We've touched on most of the subjects here.

But I think you commented that we were sort of in a chaotic world right out.

How do you feel about the visibility now versus maybe it was in '08?

And are your clients giving you any feedback as far as -- or at least in terms of maybe length of engagement or your pipeline as to how they're thinking about fiscal cliff and political issues in the US?

It's a really good question and it feels completely different.

In '08, there felt like the world may come to an end and we would just have empty buildings.

Of course we knew that wasn't going to be true but it really felt.

And when you talked to customers, the conversations were how do we shudder our doors as fast as possible and figure out how to get out of Dodge, if you will?

The conversations are very different now.

They actually have healthy plans.

They're just saying I don't know when I can implement these plans.

They are looking at expansion.

They're looking at the ways to understand maybe the landscape of this new global connected world but they are not going to implement the plans.

They're not going to implement the plans for two reasons.

One is massive amount of uncertainty in the US, more than ever before and a lot of uncertainty in Europe and then China just doesn't seem to have that good old-fashioned 10% GDP that we would like to see.

But it's also coupled with they look at their own demand for their products or services and it's a bit tepid if not anemic in some cases.

Others it's fine and the ones that have actually good demand are very nervous because they are trying to squeeze out as much as they can without adding anything else because they want to make sure that this uncertainty goes away.

So there is a bit of latency that's occurring here.

The conversations with clients large, small and medium are a very different nature than what we would have seen and heard back in the last beginning of the downturn.

That's perfect, thank you.

Okay, then just one last comment because I actually planned on it coming up in a question and it didn't so I am just going to state it out there.

And that is Mike mentioned some good performers in there.

And what I don't want to have lost in here is the amount of investment, energy, and execution that we've done in emerging markets.

We finished on an OUP basis at 3.3% in the second quarter of 2012 versus 2.8% in the second quarter of 2011.

These emerging markets are working for us.

These emerging markets are paying off the investments and are now able to take their own cash if you will and reinvest and continue to grow their operating profit.

So it still is hard to offset some of the things that we are experiencing in France and in Italy and the Netherlands, but you can see that that Asia-Pacific region and the Middle East is starting to get to the size and execution and relevance that in fact it can start to offset if not grow on top of.

So I just wanted to make sure we don't miss that in a lot of the other details.

With that, we want to thank you for your attention and we apologize for running 11 minutes over, but we thought that the questions were worth of us making sure that we could answer them.

Thank you.

The conference now is concluded.

Thank you, everyone, for your participation.

All lines may please disconnect.

Have a great day.