ManpowerGroup Inc (MAN) 2014 Q1 法說會逐字稿

Welcome to the Manpower first-quarter earnings conference call.

All participants have been placed in a listen-only mode until the question and answer session.

(Operator Instructions)

I would now like to turn the call over to Jeff Joerres, you may begin.

Good morning, and welcome to the first-quarter 2014 conference call.

With me is our Chief Financial Officer, Mike Van Handel, as well as our President and soon-to-be CEO, Jonas Prising.

I'll go through the high level results for the quarter and Mike will spend some time going through the details of the segments, as well as any forward-looking items for the second quarter and any implications to the balance sheet and cash flow.

Jonas will then add some color to some of the major geographies, as well as initiatives that we have.

And we will also talk about some of the most recent legislative trends.

Before moving into the call, I would like to have Mike read the Safe Harbor language.

Good morning, everyone.

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

These statements are based on Management's current expectations or beliefs.

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.

Any forward-looking statements in today's call speaks only as of the date of which it is made, and we assume no obligation to update or revise any forward-looking statements.

During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.

We include a reconciliation of those measures where appropriate to GAAP on the investor relation section of our website at www.ManpowerGroup.com.

Thanks, Mike

This first quarter was a very successful quarter for us.

We were able to create more momentum on the revenue side, and also continue very strong flow-through from an operational leverage perspective.

On our last call, we spoke about a bit of a revenue hesitation that we were experiencing in January as it started off quite soft.

As you can see from our growth rate of 3% in US dollars and constant currency, we were able to make up much of that ground in February and March.

As we stated in the call, the slow start to January did not match what we were hearing from our clients, as well as our team in the field, which is what gave us confidence in our outlook for the first quarter.

We remained selective in our revenue throughout the first quarter, and as price is an important part of what we are driving within our field operations.

Revenue of $4.9 billion in the first quarter is up $135 million from 2013.

This additional revenue, as I said earlier, had strong flow-through, which allowed us to exceed our profit expectations.

Our continued pricing discipline, and the continued benefits of the work that we did in 2013, and the recalibration and simplification of the business, delivered strong operating leverage to the bottom line.

Our operating profit was up 43% before 2013 restructuring costs of $127 million, giving us an operating profit margin of 2.6%, a 70 basis point gain on a year-on-year basis.

We had very nice performances, given the typical seasonal weaknesses that we would see in the first quarter.

As you can see the work that we have done in the past is clearly paying off as we move into 2014.

We will continue to focus on revenue and spend some time today giving the deeper view of the countries from a revenue perspective.

We will continue, however, to focus on good, profitable revenue as we are in an important time, and when we don't want to give up all the work that we've done to try to move and improve on our gross profit.

Our earnings per share of $0.86 is 38% above 2013 in constant currency, before prior-year restructuring charges, showing the very positive execution that we had in the first quarter.

As we move into the second quarter, we are seeing improving revenue in many of the major geographies that we operate in.

With that, I would like to turn it over to Mike.

As Jeff mentioned, earnings per share for the quarter were $0.86 per share, quite a bit stronger than our guidance range of $0.62 to $0.70 per share.

When we dissect the reasons for this outperformance relative to the midpoint of our guidance, it primarily relates to strong operational performance, which added $0.16.

We had a slightly lower income tax rate, adding $0.05 per share.

This was offset by negative currency impact of $0.01 per share, compared to our forecasted negligible impact.

The operational outperformance relative to expectations was primarily revenue driven, as revenue growth came in at 3% in constant currency compared to our guidance midpoint of 1%.

We did get some help from having more billing days this year compared to last year in some countries.

This added about 1% to our growth rate in the quarter.

That is to say on an average daily basis, first-quarter revenue growth came in at 2%, an improvement from the 1% growth we saw in the fourth quarter of last year.

Revenues exceeded or were at the high end of our guidance range for all operating segments, with the exception of Right Management.

Incremental gross profit from this additional revenue growth dropped to the bottom line as SG&A expenses remained well controlled under our recalibration and simplification plan.

As we discussed, the recalibration and simplification plan in 2013 was a big success, and we expect to continue to realize the efficiency benefits as we make our way through 2014.

While we continue to work on optimizing our delivery channels, a significant amount of cost recalibration actions were taken in 2013, and therefore, there are no restructuring charges in the first quarter of 2014.

As you assess our results for the current year, keep in mind that our first-quarter results in 2013 included a pretax restructuring charge of $34.8 million, of which $5.9 million was in the Americas, $1.2 million in Southern Europe, $17.1 million in Northern Europe, $2.4 million in Asia Pacific Middle East, $3.8 million at Right Management, and $4.4 million at corporate.

The gross profit margin for the quarter came in at 16.7%, just a tick above high end of our guidance range.

WIth an intense focus on price discipline, our gross margin was favorably impacted by 20 basis points for Manpower staffing and 10 basis points for permanent recruitment.

Our permanent recruitment growth accelerated in the quarter to 9% in constant currency, after a decline of 7% in the fourth quarter of last year.

We saw growth across all of our permanent recruitment offerings, with the strongest growth in our market leading global RPO offering close to 20%.

Our Experis interim gross margin was stable in the quarter, with gains in the Americas and Asia Pacific/Middle East being offset by declines in Southern Europe.

Our talent based solutions business negatively impacted overall gross margins by 10 basis points, primarily as a result of severance cost we incurred on an early contract termination.

Looking at gross profit by business line, our Manpower gross profit, which represents two-thirds of the total, was up 4% in constant currency, similar to the fourth quarter.

Within Manpower, we saw double-digit growth in our industrial vertical, which is a good indicator that economies are gaining some traction.

Our Experis business comprised 18% of total gross profit, and consisted of approximately 70% IT skills, 10% engineering skills, 10% finance skills, and 10% other professional skills.

Growth in Experis gross profit grew nicely in the quarter, up 5% in constant currency, following a 4% decline in the fourth quarter of last year.

This growth was driven by Experis interim gross profit, which is up 2% in constant currency, driven by growth in Northern Europe and the Americas.

Experis permanent recruitment also grew nicely, up 12% in constant currency, driven by growth in Southern and Northern Europe as well as Asia Pacific/Middle East.

Our ManpowerGroup Solutions business represents 10% of total gross profit and includes Recruitment Process Outsourcing, MSP, Talent Based Outsourcing, Borderless Talent Solutions, Strategic Workforce Consulting, and Language Solutions.

Our ManpowerGroup Solutions business produced good growth in the quarter of 6%, following a decline of 8% in the fourth quarter of last year.

This growth was primarily driven by our RPO and MSP solutions, which are resonating very well with clients, as they adapt to more sophisticated workforce models.

Our Right Management business comprised 6% of total gross margin and was down 5% in the quarter.

I'll comment on Right Management in my segment review.

Our SG&A expense for the quarter came in at $690 million, a decline of $11 million or 1.4% in constant currency, excluding the restructuring costs from the prior year.

We were able to reduce SG&A in the quarter despite the 4% decrease in gross profit as result of strong expense controls, combined with the impact of cost recalibration actions taken in the prior year.

This improved our SG&A efficiency as a percentage of revenue from 14.7% to 14.1%.

This inherent operating leverage is an important part of our objectives with last year's recalibration plan.

Now let's turn to the operating performance of our segments.

Revenue in the Americas came in at $1.1 billion, a reported US dollar decline of 2%, but an increase in constant currency of 2.6%, which is at the higher end of our guidance range.

On an average daily basis, the Americas revenue grew by 0.6%.

Operating unit profit performance in the quarter was very strong with OEP increasing 26% in constant currency, excluding prior-year restructuring charges to $26 million.

OEP margins expanded by 40 basis points to 2.4%.

Within the Americas, the staffing gross margin was up slightly, driven by margin expansion in Experis, and permanent recruitment fees were up 6.4% in constant currency.

SG&A expenses were well controlled and down on prior year, which resulted in the strong operating leverage and OEP margin expansion.

Turning to the US market, which represents two-thirds of segment revenues, our revenues came in on forecasted $720 million -- $721 million, despite the severe weather conditions.

This is an increase of 2.1% on reported revenues and flat revenues on an average daily basis.

As you would expect, the weather particularly in the Northeast and South impacted demand for our services in the quarter.

We estimate this weather impact to be approximately 1% of total US revenues in the quarter.

Our OEP in the quarter increased to $13.4 million or 34%, excluding prior-year restructuring.

This resulted in strong OEP margin expansion of 50 basis points to 1.9%.

Our US gross margin was down slightly compared to the prior year as result of a modest decline in Manpower staffing gross margins, partially offset by improvement in Experis interim gross margins.

SG&A costs were well below the prior year, given the impact of the 2013 recalibration actions, which aided in strong operating leverage.

Turning to our brands in the US, the Manpower brand represents 55% of revenue.

Manpower's revenues were up 3% in the quarter and 2% on an average daily basis.

As I mentioned earlier, weather impacted growth in the quarter and impacted the Manpower brand by more than 1.5%.

Consistent with last quarter, we saw good growth in the SMB market and our national accounts, both of which grew in the mid-single digits.

This was offset by declines in our large global accounts, primarily resulting from our own pricing decisions.

Our Experis business represents 37% of US revenues and was down 3% from the prior year.

Within Experis, we have seen modest growth in our finance and engineering verticals.

However, this was offset by a 2% decline in IT revenue.

Experis gross margin continues to benefit from trading out lower-margin business for higher-margin business, as interim gross margins improved during the quarter.

Our ManpowerGroup Solutions business represents 8% of the US revenues.

Our US Solutions business had an exceptional quarter, with revenues up 25% and business line contribution up 43%.

This was driven by very solid growth in both the MSP and RPO solutions business.

Turning to other countries within the Americas segment, revenue growth in Mexico remains stubborn, up less than 1%.

While demand in Mexico remains soft, revenue trends have been slowly improving and we have landed some good sales opportunities, which have helped offset some of the declines in a few of our larger multi-national accounts.

Argentina's revenue growth of 12% continues to be driven by inflation as billable hours were down 6% in the quarter.

Our team in Argentina has done a good job managing profitability in an extremely difficult economic environment.

Growth of the other countries in the Americas segment improved to 3% in constant currency, with good growth coming from Brazil, up 15%, and Columbia, up 10%.

Revenue in Southern Europe came in at $1.7 billion, an increase of 3.8% in constant currency, or 3.3% on an average daily basis.

This exceeded the high end of our revenue guidance range, due to better-than-expected revenue growth in France, Italy, and Spain.

OEP came in at $68 million, an increase of 46% in constant currency, excluding prior-year restructuring charges.

OEP margin expansion was very strong, up 110 basis points to 4%.

The primary drivers of the profit performance was an expansion of the staffing gross margin and strong operational leveraging resulting from stable SG&A costs.

Another positive in the quarter was a return to growth in permanent recruitment fees, which were up 2% in constant currency following a decline of 7% in the fourth quarter of last year.

I'll discuss these elements further in my specific country discussion which follows.

Let's start with the French market, which represents 71% of Southern Europe revenues and 25% of Company revenues.

French revenues came in at $1.2 billion, an increase of 2.3% in constant currency.

On an average daily basis, French revenues were up 2.1% in the quarter, a very slight improvement from the fourth quarter of last year.

Many of you will recall that, on last quarter's call, I indicated that French markets started the year off quite slow, but we expected it to get back on track given the tone of the market and discussions with our clients.

This impact did occur, as we saw improving trends in average daily revenues throughout the quarter.

We believe our growth in the quarter slightly exceeds of the overall market, and this was mostly driven by strong execution on the smaller SMB accounts.

OEP in France was $51 million, an increase of 65% in constant currency.

This resulted in an OEP margin of 4.2%, an expansion of 160 basis points.

This margin expansion was driven by an improving staffing gross margin as well as strong SG&A leverage.

Our staffing gross margin improvement was a result of strong price discipline and focus on differentiating our high-quality services.

Additionally, our direct cost was lower due to the enhanced CICE payroll tax credits.

Revenue in Italy improved 2% in constant currency to $275 million.

On an average daily basis, Italy revenue was up just over 4%.

While the Italian market continues to be difficult, we have seen some improvement in demand as clients are opting for flexible labor solutions.

The modest growth in the market, we are seeing some pricing pressure, and as result we are carefully balancing growth with profitability.

During the quarter, we were able to effectively manage gross margin and SG&A cost control, resulting in OEP of $12.6 million and an OEP margin of 4.6%.

Our revenues in Spain were up 32% in constant currency or 23% on an organic basis.

Our Management team in Spain has done an excellent job identifying quality revenue opportunities and delivering profit growth to the bottom line.

Revenue in Northern Europe well exceeded our forecasts, coming in at $1.5 billion, an increase of 4.6% in constant currency.

It is evident that many of the markets in Northern Europe are coming out of hibernation with average daily sales growth in the quarter of 3.3%, representing the third consecutive quarter of improving revenue trends.

OEP in Northern Europe was $38 million or an increase of 37% in constant currency when excluding the prior-year restructuring items.

This resulted in an OEP margin of 2.6%, up 60 basis points from the prior year.

Our gross margin was down slightly in Northern Europe, primarily as result of business mix changes with the Manpower staffing and modest pricing pressures.

Our permanent recruitment business showed good traction in the quarter, turning positive on a year-on-year basis with growth in the UK, Germany, and the Netherlands.

Our SG&A cost were well controlled and below the prior-year, benefiting from the recalibration actions we took last year.

As a result, the growth in gross profit flowed right to the bottom line.

Within Northern Europe, Manpower represents 74% of revenue, Experis 22%, and ManpowerGroup Solutions 4%.

During the quarter each of the brand offerings saw improving revenue trends from the prior quarter, with Manpower up 3%, Experis up 9%, and ManpowerGroup Solutions up 2%.

Strong profit growth at Manpower and Experis contributed to the overall segment profit growth.

Now let's have a look at the main countries comprising Northern Europe.

In the UK, which represents 33% of Northern Europe, revenue accelerated nicely to 9% in constant currency.

On an average daily basis revenues were up 6%, a significant improvement from the 2% growth we saw in the fourth quarter last year.

While we continue to be selective on new large account opportunities within the Manpower brand, we've also seen improving demand within Experis.

Brook Street also had a strong quarter on the SMB side, and our UK permanent recruitment business accelerated to 26% organically.

In the Nordics, which represents 21% of Northern Europe, revenue growth improved to 1% in constant currency.

We have witnessed the Swedish market making its way slowly back to growth, however, price competition from some of the smaller players in the market persists.

Our German market, which represents 12% of Northern Europe, achieved a growth of 7% in constant currency and 6% on an average daily basis.

We continue to see improving opportunities in the German market on both the temporary and permanent recruitment side.

Revenue growth also improved in the Netherlands which reported an increase of 4% over the prior year, compared to a decline of 1% in the fourth quarter of last year.

The Netherlands profitability was strong in the quarter with solid gross profit performance and SG&A cost reductions.

In Belgium, revenues were up by 5% in constant currency.

This was partly due to business mix, as demand for services from our logistics clients started the year off slow, and because we stepped away from a few large key accounts due to aggressive pricing.

Revenue in Asia Pacific/Middle East came in at $574 million, which was a decline of 1% in constant currency, but much better than the 4% to 6% decline we were forecasting, particularly as a result of better-than-expected revenue performance in Japan and Australia.

Asia Pacific/Middle East OEP improved by 31% in constant currency, excluding prior-year restructuring items, to $20 million.

The OEP margin expanded 80 basis points to 3.5%.

This good profit performance was a result of improving growth in permanent recruitment and solutions, as well as a reduction in SG&A expense.

Our Japan operation represents 37% of Asia Pacific/Middle East segment, and had a revenue decline of 2% in constant currency.

On an average daily basis, revenue was up 6% from prior year, which was a slight improvement from last quarter.

As you may recall from last quarter, our Japan revenue growth was impacted by a large contract with a client taking the business in house.

Excluding the impact of this contract, revenues were up slightly in constant currency.

Although the Japan market remains sluggish, we're seeing good opportunities, especially in the areas of higher value solutions and permanent recruitment.

Our ManpowerGroup Solutions business in Japan was up 9% in the quarter, and our permanent recruitment was up 24% in constant currency.

Our Australia business was down 1% in constant currency or 4% on an average daily basis.

After several difficult quarters, the Australian market seems to have bottomed, however, it still remains difficult.

While topline contracted, profitability was up due to strong cost calibration and good growth in our RPO business.

Revenue growth from other countries in Asia Pacific/Middle East was mixed with very strong growth in India, up 22%, Korea up 16%, and Taiwan up 11%, offset by revenue declines in China and a few other markets.

Revenue declines in China are primarily attributable to the change in staffing regulations in July of last year, which puts a number of restrictions on the market, including the amount of temporary workers our clients can use and length of assignment.

Despite this topline contraction, we were able to improve profitability in China due to growth in our permanent recruitment business, as well as SG&A cost reduction.

Revenue at Right Management came in at $73 million, a decline of 4% in US dollars in constant currency.

Within Right Management, 70% of our revenue is generated from outplacement services, which have softer demand in times of economic recovery.

The other 30% of the business represents talent management.

We expect to see improving demand through our talent management offerings, as markets improve and companies become more confident in investing and coaching in people development.

Despite the topline contraction, Right was able to deliver OEP of $8 million, an increase of 41% in constant currency, and an OEP margin of 11.3%.

Our cost recalibration efforts and our improved delivery solutions have had a dramatic impact on Right's productivity.

Now let's take a look at our cash flow and balance sheet.

Free cash flow defined as cash from operations less capital expenditures was a use of $24 million in the quarter, compared to a use of $75 million a year ago.

Historically, the first quarter is a weak quarter from a cash flow standpoint, as receivables start to seasonally ramp up in March and any liabilities are settled, including bonuses.

Favorably impacting free cash flow in the quarter was an improvement in our accounts receivable day sales outstanding by one day, compared to the prior year, and a reduction of capital expenditures from $13 million last year to $8 million this year.

During the quarter, we used $9 million of cash related to acquisitions, and $17 million for common stock share repurchases.

As of the end of the quarter, we had 7.8 million shares of common stock authorized and available for repurchase.

Our balance sheet at quarter end remained quite strong, with little change in the capital structure since year end.

Our cash balance at year end was $697 million and total debt was $530 million, bringing our net cash position to $167 million.

Our total debt to total capitalization was stable with the prior year end at 15%.

This year end there have been no significant changes to our credit facilities.

We have 350 million euro note outstanding that comes due in June of 2018, and we have a $600 million revolving credit agreement that comes due in October of 2018.

As of quarter end, there were no borrowings outstanding under our revolving credit agreement.

Lastly, I'd like to discuss our outlook for the second quarter.

As we have been discussing, revenue trends have been slowly improving across many of our geographies.

Our revenue guidance anticipates that we will see a continuation in improving revenue trends and a modest acceleration from what we saw in the first quarter, and in the month of March for that matter.

We are forecasting constant currency revenue growth to range between 2% and 4% in the quarter.

It's important to consider the number of billable days when reviewing revenue trends in the first quarter to the second quarter of this year.

Billing days helped the first-quarter reported revenue by about 1%, and hurts the second-quarter reported revenue by about 0.5%.

In other words, at the midpoint of our guidance, 3% constant currency revenue growth is actually 3.5% on an average daily basis.

This compares to average daily revenue growth of 2% in the first quarter.

So while we are forecasting reported revenue growth in the second quarter to be similar to the first quarter, you can see that average daily revenue represents a meaningful step-up in growth from the first quarter.

Within the operating segments, I expect low- to mid-single-digit constant currency growth in the Americas and Souther Europe and Northern Europe, and forecasting Asia Pacific/Middle East to be about flat and Right Management to decline slightly.

Our gross profit margin should range between 16.7% and 16.9%, a slight improvement over the prior year at the midpoint.

I expect expenses to continue to be well controlled, which should drive good operating profit margin expansion.

The operating profit margin should fall in the range of 3.4% to 3.6%.

I'm estimating an income tax rate of 39%, which should result in earnings per share from $1.26 to $1.34.

Foreign currencies are estimated to favorably impact revenue by about 2%, and my earnings per share guidance assumes a favorable impact from currency of $0.02 per share.

With that, I'd like to turn the call over to Jonas for further comments.

Thanks, Mike.

As Jeff stated earlier on the call, we are pleased to see that our efforts in simplification and driving profitable growth are showing good progress.

Our simplification focus has enabled us to stay very focused and disciplined on where deploy our resources and also accelerate our progress on both technology and delivery models.

We have used some of the freed up resources to invest in sales and recruitment efforts, and we'll continue with this disciplined approach of profitable growth, balancing pricing pressures with topline growth.

One of those areas of investment is our sales teams, global as well as country based, as our major clients continue to show an appetite across our range of offerings, and especially our larger clients.

I just came back from a trip to China and Japan, and was very pleased to hear how companies are looking to us for our global capability deployed locally, and how solutions and offerings are deployed across geographies with the same client base, and in some cases leapfrogging into emerging markets.

I hear this as I speak with clients in almost all geographies, as they are looking for strategic agility, which is a way of saying that they want to be able to make organizational changes so they can respond to market changes more quickly and are looking for us to do not only our traditional staff augmentation offerings, but also our solutions offerings such as RPO, MSP, and TBO, and this is really exciting to see and should bode well for structural growth in many markets.

As I look at the US market, we can see continued good, stable demand for almost all our service offerings.

After some rough weather at the beginning of year, we have seen demand and volume stabilize and improve across most of our brands.

Having said that, we are still not satisfied with our Experis growth.

This is particularly true on the IT side, as we have seen improved growth in finance and engineering, and to that end we have increased our investments of IT recruiters and we'll continue to feather in resources we need to better meet the good order flow we see from our clients.

Europe is continuing to recover slowly and we are starting to see moderately improving momentum in a number of markets that have previously been struggling.

France, Italy, and Spain are all starting to improve, joining most of the Northern European markets who have already seen a modest recovery.

The important French market has shown some signs of modest growth recently, and our view is that we will see continued improvement, although at a slower rate.

Staffing services will have a disproportionate portion of initial employment growth, so when employment starts to occur in a more significant way in France, we could see our growth at a more sustained rate when that occurs.

France is currently debating the introduction of the responsibility pact, which aims to both lower labor cost and overall reduce government spending to the tune of EUR50 billion.

The new Prime Minister, Valls, has now made this program known and these ideas will be debated in the coming months, then we will see if and how those proposed changes have an effect on our business in France.

It seems clear that CICE is a building block, which is well aligned with the overall objective of reducing labor cost, and in all of the legislative proposals we have seen so far, CICE remains an important component, which is positive from our as well as the French labor market perspective.

A number of markets: Italy, Japan, Spain to name a few, have initiated reviews of their labor markets, and in some cases, the laws specifically governing our industry.

And as those make their way through the respective processes, we will continue to monitor them and respond to any changes that may impact our operating environment in those countries.

As you can tell from my comments, our assessment is that the market will continue to improve gradually.

We are pleased to see that our approach in terms of simplification and pricing discipline has worked very well, and at the same time, we know we still have more work to do on the growth side to ensure that we take advantage of all opportunities for profitable growth, and that's something that we are very focused on.

Over to you, Jeff.

Thanks Jonas.

We are proud of what we were able to accomplish in the first quarter.

It was a solid performance in many of the geographies and we still only have tepid revenue growth, considering what we've seen in past recoveries.

This gives us a solid indication that we are on the right trajectory, and that, as we've said in the past, this is a different kind of recovery.

But a recovery that we believe has potential of yielding a longer, protracted, slower growth environment, but yet growth that we will be able to leverage based on our recalibration and simplification efforts.

As commented on, we are experiencing an uptick in revenue in many of our important geographies and business lines with the US, the UK, and Italy being the most notable.

While we have worked hard balancing pricing and revenue growth, we are not fully satisfied with our growth in some of our geographies.

This is where we will spend some -- a lot of time and focus as Jonas spoke about.

Our pipeline is solid in our lines of business and geographies, and we are working hard at maintaining our pricing and gross margin, which is important as we move into this next phase of recovery.

There have been key and exceptional performances on the revenue side led by Spain and India, with over a 20% increase in revenue followed by Brazil, up 15%, and the UK up 9%.

These countries also had extraordinary increases in profit performance, along with France, the US, Germany, and Holland.

We are experiencing a greater interest in the solutions business from several of our key clients as they are ensuring that we are focusing on the proper areas to help them in their business.

This gives us greater opportunity to assist them and helping them win, while at the same time, growing our solutions business based on our first to market in many of these areas and our larger scale performances in the solutions business.

The transition of CEO is going extraordinarily well, as you would expect, with Jonas being in the business now for over 15 years, and with he and the team being instrumental in constructing the current strategy.

So as a result, there are no major upheavals or surprises, and the Company and Management team across the world are staying focused on the client and the market, which is the way we absolutely want it to be.

I would like to thank so many of the investors for supporting me over the last several years, as well as the sale side analysts.

This has been an incredible ride, and I'm very proud of what we've been able to accomplish and even more excited about what the future holds for us.

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

(Operator Instructions)

Hamzah Mazari, Credit Suisse.

Your line is open.

Good morning.

Thank you.

You had previously mentioned that there's some more work to do on the delivery side of your business, as well as on technology post the cost simplification plan.

Maybe give us some color as to how early you are in that process, what's currently been done, what's yet to come that could be upside for the business?

It is a good question, we had four what we called buckets in the recalibration and simplification, and clearly technology and delivery were a little further behind, but not equal at all.

Technology is nearly done, we continue to work on it, and now we are looking at driving up new applications, trying to really get some of the efficiency and productivity.

We have stated in the past that we are about 10%, if you will through the delivery; we want to be very cautious in this to make sure that it maintains the revenue and maintains the quality of service that we have.

So I think you would be seeing it rolling out through this multi-channel strategy of delivery of both candidates, as well as overall service over a longer period of time.

So we clearly think of it as large upside, but it is not going to come in big chunks, so it is not like next quarter's a big chunk.

We think it's over the next 18 to 24 months is where you would see the impact of that.

Okay.

Great.

And just a follow-up.

Could you give us a sense of what revenue growth would have looked like if you had not been so price disciplined?

So how much business are you walking away from, do you think?

And maybe give investors a sense as to the business that you are walking away from, how much lower margin is it relative to what you're currently doing?

Thank you.

Sure.

If we talk to our sales people, we are walking away from billions of dollars.

In a more realistic fashion, it is less than that, of course.

And the fact is that it is a -- competitive out there, and some of these are relatively easy because they might come in at 3%, 4% GP with a -- 90-day payment terms.

So we have done some calculations, and it would clearly put us in the US market on the Manpower side, it would put us right in line or above market, and we feel pretty good about that because you can see the flow-through of some better profitability.

The multi-channel strategy is also important for us, because what we really want to drive through that is to be able to maybe participate in some lower slower GP business with a much less -- lower cost structure, but we are still working on that.

So I think it would be unfair to quantify it because some of it is too anecdotal, but when we do inspect what we've passed on, it feels the right thing to do, and we are not passing on so much that we feel as though we are at all becoming irrelevant in the marketplace; far from it, I think our stature of who we are is actually going up as a result of it.

Good.

I appreciate it.

I will turn it over.

Thanks.

Next question.

Paul Ginocchio, Deutsche Bank.

Yes, thanks for taking my question.

Sorry if I missed it, did you give an exit growth rate for the first quarter or did you comment on what March was on an average daily basis?

And then second, Jeff, do you think you've seen a slight increase in the [slope] of the revenue acceleration recently?

Thanks.

Yes, Paul, we didn't give a specific number with respect to March.

So on an average daily basis, the quarter overall was up 2% in constant currency, 3% on a reported basis.

January and February looked about the same in terms of year-on-year growth.

And March accelerated to about 2.7% growth on a year-on-year basis, so when you look ahead then to what I'm forecasting for the second quarter, the midpoint of the growth is 3.5% on a constant currency average daily basis.

And so certainly I'm anticipating that we are going to see some improved growth as we get through the second quarter.

The first part of April looks like things continue to move positively, and April is always a little bit tricky when you have Easter in there, and so we are not seeing a lot of data so far in the second quarter.

But certainly when you look back at the trends overall for the last couple of quarters, we've seen some very slow progression, but progression, and we anticipate that to continue into the second quarter.

Great.

If I could just take one more.

When do you expect, I guess a revenue impact or something, that we could see from potentially using these new contracts?

I think the CCD contracts, or the longer-term contracts with [temps] and companies in France?

It is still early on as they're going through some form of compact, if you will.

So there's a lot to try to bring down those labor costs, so we would see that between what we are able to do with CICE, and what they are able to do with some of these longer-term contracts, no doubt it is about driving down the labor cost.

So we think it will have some impact overall on the market.

Very small on us but probably won't have much of an impact in the next few quarters.

Thank you.

Sara Gubins with Bank of America.

Hello, thanks.

Good morning.

You talked about $40 million in additional savings from prior cost actions coming through in 2014.

I'm wondering if most of that came in the first quarter or if it should be more evenly spread out throughout the year?

Sara, I would say it is more first-half loaded, as you probably would guess, and a little bit more in the first quarter than the second quarter.

So if you take that $40 million and break it up, there's probably around about $20 million or so that comes in the first quarter.

Second quarter would be slightly less, and then it just feathers out the rest of the way in the second half of year.

Okay, great.

Then could you talk through what's driving the expectation of growth margin expansion in the second quarter?

Nice to see, but different from what we have been seeing, so some more details on that would be helpful.

Yes, I think when you look at -- I think one of the things that helped the first quarter was permanent recruitment, and permanent recruitment was up 9%, so we are starting to see some better traction on the permanent recruitment side, which is kind of anticipated as the markets start to move forward.

There's a little bit more hiring going on, but I think at this stage what you see I think -- employees are becoming more confident in where they are and more confident in making changes.

So maybe it is more churn in the market than new job growth per se, but we're clearly seeing a little bit more activity, certainly on the RPO side, which did very well in the quarter.

We planted a lot of seeds and have done a lot of contracts over the last several quarters.

We are starting to see those blossom a little bit.

There's just opening up, there's still a long way to go yet, but we are starting to see those come through.

So I think as we look at opportunities, one that we've talked about has been [perm] recruitment, and still today if you look at where we closed out last year, we are still almost 20% down on our 2008 peak in perm.

And we've done a lot really to build that capability up in the last several years, including what we've done on the RPO side.

So we see that as a good opportunity.

That's going to be a contributor to our second-quarter gross margins overall.

Great.

And then just last question.

As I think about a cycle, normally we'd expect volumes to pick up and then pricing and perm; it sounds like pricing is still pretty challenged in the market, and that you're being pretty careful about what business you take because of it.

Do you think that as we see improving volume trends, pricing should ease, and maybe you'll even get some pricing power or is there some reason that it might be different this time?

I think the overall will clearly happen.

It is just that there's more nuances within the marketplace, so I think the lower-end transactional staffing is most likely going to remain competitive, whereas our Experis business, we typically would see a 12 to 18 month lag where we start to get a little bit more pricing pressure because any kind of slack in the labor market is picked up.

So the dynamic is there.

Our sense would be is -- you will see in the macro numbers, it will be a little while, but it is not going to be all boats are risen because of this, because there are still some alternative ways of doing some very low-end transactional work and we don't see pricing -- being able to have much pricing power, if any pricing power, in that.

Thank you.

Thanks, Sara.

Tim McHugh, William Blair.

Good morning, it's Stephen Sheldon in for Tim.

FIrst, you mentioned in your commentary some strong pricing discipline in France, so I just wanted to ask have you have seen any notable change in pricing trends there either from competitors or from the impact of the credit?

If you look at it in general, we are kind of pricing as usual, if you will.

On the large accounts it's a very much of a pro forma detailed pricing environment, taking into lots of factors on the small side of the market, medium business side of the market, it remains competitive.

We're maintaining the discipline because what we want to be able to do, particularly if you're looking at CICE, we want to be able to reduce labor costs across the French, and do our part within the French society, and make sure we are doing some of the things to enhance the labor market.

But for the most part it is not -- this has gone crazy price competitive.

I've been doing this for 15 years, every single quarter it's price competitive in France, and I think it is about the same right now.

I don't know if -- Jonas, do you have anything to add to that?

I think it is exactly like you say, Jeff.

It is a very competitive environment in a market that's not really showing any substantive employment growth, and as such it is competitive today and it will stay competitive, and we are very disciplined in our approach.

And just as we do in all geographies, we look very carefully at the trade-off between profitability and topline growth.

And I think there's no reason to believe that will change any time soon.

And it's just as you mentioned earlier in your answer to Sara, there are client segments where this will never change, and it will always be competitive, and our discipline there will be extremely important because we can increase our topline growth, but we also know that the margins to do that would drop below a level that we think would not be beneficial to us.

Okay, thanks.

That's helpful.

And then one more, if I could.

Just looking at the UK, the acceleration there was really encouraging.

I was wondering how did the -- I know you talked about the overall Company, the growth trends by quarter or by month, but how did the growth in the UK kind of trend throughout the quarter, and looking into the beginning of the second quarter?

Yes, I would certainly say we saw a similar pattern where things just gradually improved as we went through the quarter, so overall the backdrop in the UK I think is improving.

We saw some good demand on the Experis professional side, we saw that improve.

We saw -- as I mentioned in the prepared comments, we saw perm pickup nicely to north of 20% growth on the perm side.

So on the Manpower brand side, we are seeing some good opportunities, but still similar to other comments, it is price competitive.

We've got to be selective in the type of business we are doing in the UK, and we are being selective.

So I would say the market certainly is starting to see a little bit of traction and moving in the right way.

All right, great, thanks.

Thank you.

Kevin McVeigh, Macquarie.

Great, thanks.

And congratulations to Jeff and Jonas.

The French gross margins look great, it's kind of the highest I've seen in quite a while.

Mike, how should we think about that kind of progression, and not to get too specific on the quarter but just directionally kind of Q2 through Q4?

Yes, when you look at -- from a gross margin standpoint you end up with things moving a little bit as you get into the summer months in France, typically as we end up doing some larger type projects using students and that type of things, the mix changes a little bit, you get the summer holidays.

So there's always a little bit of a sag as we get into the summer months.

But then from an operating margin standpoint, of course volume picks up and we are able to leverage and scale a little bit.

So what I would expect is that we are going to see as we -- certainly as we go from here to the third quarter improving operating margins.

And then the fourth quarter oftentimes in France, tails off just a little bit from where the third quarter was, and it is really just -- really what you see there is the leverage coming through of the fixed cost as volume is changing overall.

I would just add that the only wild card in there which we really haven't seen a great effect yet, and to Jonas' comments, it's about a little bit of the health of the hiring market is what would perm would do for us in France.

And right now we haven't really seen it add enough to get excited about, and we may not throughout the year.

But as we monitor whether it be PMI or some of the other data, that would be the wild card to see if that would move at all.

Yes, I think that's good point.

I think the French record from a perm perspective I think has a lot of opportunity just looking at it historically, and then I think in the environment that they are in, when demand picks up a little bit, I think that's a market that certainly should come back.

Got it.

And then in terms of ACA in the US, are you seeing any impact yet as people are thinking about that healthcare impact on some of their workers and flexibility overall?

I'm going to let Jonas take that one.

As I look at our client base and I talked to our teams in the field, it is really -- we are not seeing any effect of the Affordable Health Care Act at this point in terms of employer behavior.

Besides some anecdotal in some, if any, smaller employers may be shifting their preferences more towards part-time.

But I think as a general reflection of -- some of the rules have changed.

We are still waiting for some of the finalization, is it 30 hours, is it 40 hours, does it stay the way it is.

And the fact that the penalties for employers are becoming more postponed.

So far in summary, we've not really seen any material changes in our client preferences, and the small amount of client conversations that I've had that would indicate that they would be concerned are mostly coming from smaller employers.

As we have stated in previous calls, our view would be the change should be a net positive, however, the dimension of that positive impact is yet to be determined.

It might have a slightly beneficial effect or a little bit bigger effect, but so far we are not seeing any changes in client behavior from that perspective.

Lots of questions, but in terms of numbers, not so much.

Understood.

Thank you.

Andrew Steinerman, with JPMC.

You mentioned adding and investing in sales.

Could you give us a sense of where we are in that process?

I remember earlier a comment about adding and recruiting, I think that might have been Experis-centric, but just wanted you to just pull together comments on adding in sales and recruitment in terms of internal personnel at Manpower.

Yes, you're actually right, Andrew.

My first question, my first comment on the recruiter side was specifically around the US and with the IT side where we are seeing continued good demand and we are adding some capacity there, because we know we have some work to do and we're hopeful that those additions to capacity will start to -- hopeful that they will start to paying off in the coming quarters, as you know it takes a bit of time to get recruiter productivity up.

As it relates to the sale side.

The one aspect is as I mentioned in my comments earlier, traveling and talking to clients we are seeing an increased appetite for global relationships, more larger scale solution projects that we would like to be able to pursue.

So we are adding the capabilities on our global side, as clients are really looking to build relationships across regions as well as global relationships.

So that's one.

Then as you would expect, as demand starts to improve, we're feathering sales resources in at the geographies where we are seeing employer confidence improve, markets stabilize, and where we have opportunities.

So then we feather those in at a local or a regional level.

Thanks.

When you pull that all together, you do think overall over the near term that Manpower's revenue growth will be at least at, if not above market, given the global opportunities you're talking about maybe perhaps in balance with the discipline that you're also talking about?

Right?

Yes, I think we are clearly going to pursue the opportunities that the market presents to us while supplying our pricing discipline.

So as Jeff mentioned earlier in the comments, on the overall we are very clear that we get all the opportunities that are available to us, and then we make some informed choices on which ones to pursue and which ones not to pursue.

And as part of that, we are adding the resources to make sure that we have the capacity to do so.

We know we've been off in market share, we track that as closely as anyone else, but it is not to the point where we are disturbed.

We would like to be above market share, but there is a certain trade-off when you look at the profitability.

So we look at it between our pipeline, by business line, by geography.

We look at where we are situated in each of those countries and feel that based on the resourcing and what we are doing in other areas, that yes, we should be at market.

Does it take one quarter or two?

Some of that is a little bit hard to determine.

But if we can keep that price discipline, keep that flow through, and get it, we know that rings a double bell and we are interested in that.

It is just going to require some work.

Sounds productive, thank you.

Mark Marcon with Robert W. Baird.

Good morning.

Let me add my congratulations to both Jeff and Jonas.

Wanted to ask a little bit more about France and specifically the CICE.

I know it is hard to break out, but I'm wondering if you could give a little bit more commentary with regards to the contribution and particularly how much of the incremental step up that is in effect in 2014 relative to 2013 we were able to keep?

I will take a run at that.

Clearly as we all know there's a difference between the 2014 and 2013 calculation, but the 2013 calculation wasn't the purest calculation either, because you had that additional month in there and a couple of other things.

And so really we look at it right now from a CICE is that we are in run mode.

This is how we are running after it.

We've got regular pricing disciplines.

We want to make sure we are enhancing and working with the labor market.

And it is encouraging that we, given the backdrop, we see this as been around for quite some time based on what the current administration is doing.

We are in negotiations.

We continue to be in negotiations to try to balance all of that in the marketplace.

So anything between the last year's and this year's, are we able to keep some of that?

In some cases yes, in some cases not as much, in some cases it can be delayed.

So it is right now almost like a regular discussion about pricing.

And therefore we are becoming less -- it's less easy to say wow, what did that flow through all the way down, because it is so ingrained in how the market is going.

But as you can see from the GP numbers and some of the profitability, we are doing a nice job of maintaining what we think is appropriate.

Remember Mark as well, part of the intent of the CICE is the investment side, which we are investing in workforce development and workforce programs as well, so there are a number of factors.

So there might be some things on the margin and the pricing side that are helpful.

There are things on the other side on the SG&A side that are coming through, and so you've got number factors in there.

When you look at the quarter, certainly France had a very strong quarter.

The operating margin did expand nicely.

Some of that was coming off the GP line but some of it was coming off of SG&A leverage as well, because one of the things we saw was even though growth was fairly modest at about 2% in constant currency, they were able to leverage that and they've done some nice work around efficiency and driving productivity in that market as well.

Great.

And then just as a follow-up to that, it sounds like you still have the capacity to continue to experience significant leverage within France, and it sounds like we are just at the inflection point in terms of things finally starting to pick up over there.

Would that be close to the way that you would look at things?

We would like to think so.

So it is hard as I'm sure you looked at every data possible to really find that inflection point, we are seeing some nice continued pickup, the PMI data across the euro zone was -- had some good results to it.

And you can see that based on what we've done to be more efficient and productive, what we've done with pricing, how we are doing with revenue, there is some really, really strong flow through in France.

So if we can get into a mid-single digit growth, yes, it's going to be very exciting.

The challenge is, is when and what gets you there.

And there needs to be some clearing.

There is a lot of confusion over there.

You've got a President who has 18% approval ratings, you've got a lot of discussions that are coming up in Parliament, so that's holding back confidence, both business confidence as well as consumer confidence.

If that starts to fade a bit and break, yes, it is good leverage story.

But right now we are keeping our eyes focused on the here and now.

Great.

And then just as a relates to the policy discussions over there, it sounds like you are fairly confidence that the CICE is going to remain in place and it's in a similar structure for the foreseeable future.

That's correct.

If you read closely it is what else can we add to it, not what can we take away.

So that's how we are looking at it right now.

Fantastic.

And then just as it relates to the US and specifically Experis and the addition of the recruiters, is it your anticipation that we may -- you started doing that last quarter, talking about it last quarter; would you anticipate that by the end of the third quarter we may end up starting to see some impact from that, or do you think it will take longer?

No, I think you will see some impact from that.

How much is yet to see, but we can see some of that impact happening, and some of the Manpower side we will see on the Experis side.

Great.

Next question.

Randle Reece, Avondale.

Good morning.

When I speak to businesses in Europe, there are an increasing number of people talking about what's going on in the Ukraine.

Just wondering if you believe that has affected business sentiment at all or could in the near future?

It clearly has.

It could be a large impending event, already has caused a lot of consternation.

Everyone there will be watching very closely as to what's happening with the flow of Petro, particularly German operations and some of the others more dependent upon it.

I would say though that the world has gotten used to some pretty severe shocks and are more in the mode of, let's see if this is really severe or not.

Because we've had a lot of those across the world.

So it is creating a hesitation, and that hesitation right now is not dramatic but it is there.

But we need to continue to watch that because if it ramps up and turns into an energy fight, then I think it does have a little bit more of an impact.

But right now it is more of a hesitation impact as opposed to a real serious GP impact.

Jeff, I hope that the rest of your life and business doings go well.

I don't want to let you get away without this question.

I was wondering if you could describe in the major markets around the world, how you believe labor regulation and flexibility have changed from the time you started as CEO of Manpower to now?

It is a provocative question.

I would say to generalize it, which I think is the best sense overall is that -- but the labor market has become much more sophisticated and much more knowledgeable.

And the understanding of what we can do in helping and agility, we were a non-part of the discussion 15 years ago when I started as CEO.

We are now with Labor Ministers, we are with union officials talking about how to do this.

So I think that the data-driven part of the labor market is critical.

And this idea of a company having multiple work models is absolutely real and that was not the case 15 years ago at all.

It was really casual temporary help with a little strategic element to it, and now definitely in 60%, 70% of our client, it is a strategy.

It is part of a decision and how it goes and that means we've had to step up our game, whether it be the solutions business or offering something different.

It is amazing because when you are in the middle of it, each quarter doesn't seem to change much, and then you look back and say 5 years ago, 10, and 15, and it is been pretty incredible to see the sophistication involved in this, which I think has also helped our competitors and us just become better and better at this which I think bodes well for the future.

I see corporate HR departments, the people responsible for recruiting, those numbers are probably smaller now than they were before the great recession.

They're dealing with more employees, the hiring volumes haven't recovered to what they were historically, it makes one wonder what's going to happen if and when economic activity improves enough that they are forced to hire at a greater rate.

And there you are sitting there having built up an RPO business and permanent placement business, it seems like your positioning has improved.

I applaud you for that.

Here it's a relatively soft quarter when you think of recoveries, and we're over 13% of our GP coming from permanent recruitment, and RPO being a big part of that.

It is it is exciting and Mike mentioned it.

We planted 20 to 30 seeds, if you will, new RPO accounts every quarter for the last 2, 2.5 years.

They are now starting to produce because we are their HR department when it comes to recruiting and hiring, and that -- almost couldn't have imagined that 15 years ago, and today is how do you double that business, how do you triple it, you can really get your mind pretty excited about that.

So I do appreciate it, it has been a fantastic 15 years.

And I say with great confidence that as we look into the future and see how things are set up from a secular trend, from how businesses are looking at our organization, there's no reason to think that what we saw before looks pretty boring and slow compared to what we will see in the future for this Organization.

So it is exciting.

Thank you.

Thanks everyone, we appreciate it.

And talk to you soon.

Thank you.

This does conclude today's conference.

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