ManpowerGroup CEO Jonas Prising and CFO Jack McGinnis held investor meetings last Friday, hosted by JP Morgan, in which the company discussed a broad range of topics including European sentiment, the prospective US turnaround and tech & touch investments being key discussion points.

ManpowerGroup stated that the 2018 year to date (YTD) has seen softening European economic data (e.g., Purchasing Managers’ Index (PMI), real Gross Domestic Product (GDP)) that has impacted staffing vendors. The group said that Continental Europe’s backdrop remains oddly soft.

“We do not believe that the main source of softening is Brexit related,” ManpowerGroup stated. “We acknowledge that ManpowerGroup (MAN) Italy (8% of MAN revenues) is facing tougher year-on-year comparisons and new labour laws create modest uncertainty. But we also feel that Italian temporary help growth remains solid and the new labour laws will ultimately be immaterial to MAN.”

“In the closely watched French market (27% of MAN revenues), industry temporary help data showed further year-on-year deceleration in August with softer PMIs into September. We believe expectations for European temporary help are low as a cyclical rebound has been somewhat pushed out,” the group stated.

ManpowerGroup also pointed to last week’s French budget proposal.

“As we previewed in our recent French Labour Subsidy Change Alert, the tax-free CICE (Credit d’Impôt pour la Compétitivité et l’Emploi) subsidy will be replaced by lower social contributions (taxable),” the group said.

“While 2019’s gross labour subsidy (6.0-9.9%) will likely be higher for MAN (vs. 2018), the tax impact and profit sharing (15-30%) will offset those gains, in our view. Note that MAN’s tax impact from the change was de-risked when MAN provided 2019 tax rate guidance (4Q17 results). The pro-business President Macron remains committed to subsidies to keep French labour competitive,” the group stated.

Turning to the US, the group commented, “MAN’s US turnaround reaching a key juncture. A critical component of MAN’s near-term outlook is hinged around the ongoing turnaround of MAN’s US business (11% of MAN revenues).”

“The US cyclical backdrop and labour environment is certainly serving as a tailwind,” the group stated. “We also believe that MAN’s US turnaround is gaining more traction under the leadership of Becky Frankiewicz (President, North America). Improving revenues and gross margin trends coupled with tech & touch initiatives are aiding the turnaround. MAN’s US commercial staffing should reach flattish year-on-year and revenues trends by 4Q18 and MAN’s US professional staffing business should not be far behind.”

Turning to the group’s tech & touch investments, the group stated, “Without a lot of hoopla, MAN continues to invest in tech & touch initiatives that impact both internal and external-facing operations. Creating efficiencies in the business has been a key theme for years (e.g., office count decreased by 1,000 in recent years). In this respect, we believe MAN remains forward-leaning and well positioned vs. its closest global staffing competitors as well as upstart digital competitors due to the high value of last mile delivery within human capital services.”

In the second quarter of 2018, MAN reported revenue of USD 5.65 billion, an increase of 4.5% in constant currency. In trading on Friday, ManpowerGroup traded at USD 85.96, up 1.98% on the day. Based on its current share price the company has a market value of USD 5.57 billion.