Hello, welcome to the Arcadis Q1 2023 Trading Update Call. My name is Laura, I will be your coordinator for today's event. Please note this call is being recorded, for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero you will be connected to an operator. I will now hand you over to your host, Christine Disch, Head of Investor Relations, to begin today's conference. Thank you.
Thank you, Laura. Good morning, good afternoon, everyone, welcome to our webcast. My name is Christine Disch. I'm Head of Investor Relations at Arcadis. We are here to discuss Arcadis First Quarter Results, which were released this morning. With us on the call are Peter Oosterveer, CEO, and Virginie Dupérat-Vergne, CFO. We will start with a presentation which will be followed by Q&A. We would like to call your attention to the fact that in today's session, management may reiterate forward-looking statements which were made in the press release. Please note any of these risks related to these statements which are more fully described in the press release and on the company's website. With these formalities out of the way, Peter, over to you.
Thank you, Christine, good morning and good afternoon, everyone. Thanks very much for joining us, and welcome to our first quarter results call of 2023. I am delighted to report that we've made a strong start to 2023, benefiting from continued growing client demand for our solution and our services, particularly in the North American market. Our net revenue for the quarter is up 37% to EUR 940 million, with accelerated organic growth of 12.3% and a very strong replenishment of that revenue with strong order intake of EUR 1.062 billion, which resulted in an all-time high backlog of EUR 3.2 billion.
The growth has been supported by all four Global Business Areas Resilience, Places, Mobility, and Intelligence, with particularly strong developments in environmental restoration, anything related to the energy transition, new mobility, and industrial manufacturing services and solutions. Our operating EBITDA margin consequently improved to 9.8%, up from 9.4% in Q1 of 2022. These results confirm that the operating model we introduced at the beginning of 2022 and the strategic repositioning and focus on high growth markets is delivering for us. Firstly, let's turn to our four Global Business Areas to see what is driving the growth of each of them this quarter. Our Resilience business has made a really strong start to 2023, with solid revenue and backlog growth across the entire solutions portfolio.
We saw continued good client demand in environmental restoration, where we have a leading position in PFAS, radioactive and incident response. We also continue to see strong growth for our energy transition solutions and environmental social permitting, particularly helping clients who require manufacturing facilities to navigate the complex planning and supply chain challenges inclusive of, for example, permitting processes as well as higher costs due to inflationary pressure. The one solution that continues to drive demand is environmental restoration, notably the cleanup of PFAS contamination. We have supported hundreds of PFAS projects around the world, in Australia, in Belgium, in the U.S., bringing advanced site characterization and incident response techniques. We rapidly assess sites and move them to a cleanup more quickly with our innovative products such as the fluorophite biodegradable cleaning application.
Our industry-leading expertise and use of digital tools, sensors and an immersive technology were also instrumental in securing a large five-year commission to support the U.S. Army National Guard with identifying sites where PFAS may have found its way into the drinking water, evaluate the risk to people in the affected areas, and provide a response to eliminate the threat. The market outlook remains strong for our Resilience business. We see clients facing supply chain challenges and skill shortages, especially in the energy market, which does create opportunities for a more extensive role for their trusted business partners like Arcadis, and we obviously stand ready to provide them with the required support to address their growing demands. Our Places business has also seen a strong start to 2023, with revenue growth of 8.7% and backlog growth at 1.3%.
As I mentioned at our full year results publication back in February, the acquisitions of Arcadis IBI and Arcadis DPS groups in 2022 have enabled us to strategically reposition our portfolio, focusing on high growth markets in North America and Europe, and pivoting to support clients who develop and build industrial manufacturing and life sciences facilities. In some specific industrial sectors, including automotive, semiconductor, and pharmaceuticals, we see greenfield projects on our radar, and we are well-positioned to seize these opportunities. In addition to supporting our clients with the CapEx programs, we now increasingly see them require asset management and asset optimization help as they need to accelerate decarbonization initiatives, and as a result, need to retrofit and upgrade their assets.
This obviously creates an opportunity for Arcadis to provide asset management intelligence and digital tools to both help them to reduce costs as well as meet their net zero ambitions. An example of work in that space is a recent win for an energy and resources client to provide overall planning, process engineering, and construction management services for the construction of their new renewable energy facility. The combination of our knowledge of the energy transition, combined with our experience in intelligent buildings, convinced this client to select Arcadis. In our Mobility business, we ended the quarter with continued strong net revenue growth of over 15% and a backlog growth of 1.8%, driven by strong performance in the U.S., Australia and the U.K. As you are aware, the order intake of our Mobility business is lumpy given the larger projects we pursue.
Electrification and decarbonization solutions continue to be our clients' top priority, backed by, amongst others, federal investments. We also see an increasing demand for digital solutions to solve complex mobility challenges, which does drive substantial synergy opportunities between our Intelligence and our Mobility global business area. Speaking about cross-selling, we continue to identify revenue synergy opportunities with Arcadis IBI in North America and the U.K. These opportunities range from rapid bus transit projects, autonomous vehicles and traffic planning to advanced air mobility solutions. The actual example on the slide is such a project, where in New York, we continue to build on our long-standing relationship with the city authorities by having been selected by New York's Metropolitan Transportation Authority to support the $700 million historical capital investment program in public transit.
We, together with our joint venture partners, will provide general engineering and consulting services, including program management, to support rail and bus transit upgrades, with the aim to deliver more than 50 different infrastructure projects by 2024. Finally, thanks to the creation last year of our fourth GBA, Intelligence, we are now much better positioned to serve our clients with innovative, sustainable and technology-enabled solutions, cementing our position as a digital leader in our industry. As such, we are seeing and new products driving revenue growth across all of our Global Business Areas, notably in Mobility as I mentioned before, with solid demand from large clients such as Queensland Urban Utilities and Departments of Transportation of Florida, Nevada, New York State, North Carolina, Pennsylvania and Utah, all looking for traffic, transit and travel solutions.
In addition, we also support clients in modeling their asset behavior and help them to prioritize complex decisions that are impacted by factors such as cost, reliability and safety. Our Enterprise Decision Analytics solution is assisting them in delivering balanced investment plans that deliver high return on investment and sustainable outcomes. The recent SMART, Strengthening Mobility and Revolutionizing Transportation Stimulus package funded by the U.S. Department of Transportation, creates further opportunities for Arcadis and the Intelligence GBA, in particular, to exploit its experience with connected vehicle projects, sensor deployments, curb management, and smart traffic signal technologies. Also here, again, an example in Q1, where we have been selected by the North Carolina Department of Transportation to procure, implement, operate, and maintain the connected vehicle applications for a pilot project across 31 signal intersections in the city of Raleigh.
The objective of the three-year pilot is to improve operations and safety for all road users, with an emphasis on transit users and pedestrians. This is a very significant project that combines the advisory solutions and deployment capabilities of Arcadis IBI Group with our Intelligence and Mobility GBAs in advancing the future of mobility while improving community and societal benefits. As market and customers' demand for digital solutions, advanced analytics and software as a service model grow, our Intelligence GBA will be a clear differentiator for Arcadis. I'm confident that this will translate into strong revenue streams over the coming quarters. With that, I'll hand it over to Virginie to talk through the financial results in a bit more detail.
Thank you, Peter. Good morning and good afternoon, everyone. In the first quarter of 2023, Arcadis Group delivered a record net revenue of EUR 940 million, corresponding to a very strong organic growth of 12.3%. Our operating EBITA was EUR 92 million in the first quarter, compared to EUR 64 million in Q1 2022, the operating EBITA margin was up at 9.8%. The negative free cash flow generation of EUR 108 million during the quarter reflects the combination of two elements. First, a year-on-year increase in line with our usual seasonal net working capital pattern applied to a significantly larger business volume, increasing around 40% year-on-year. In addition, investments in net working capital from the very strong revenue growth, largely back-end loaded in the quarter.
As a consequence, our net debt slightly increased to EUR 1.072 billion from EUR 1 billion at the end of the year. Now let's move on to the next slide to talk about our debt maturity profile. Late February, we issued our inaugural Eurobond of EUR 500 million with five-year tenure to partly refinance the EUR 750 million bridge loan. The senior unsecured fixed rate notes have an annual coupon of 4.875%, an investment grade rating of BBB- with a stable outlook from Standard & Poor's. Apart from the remaining part of the bridge, we have no material upcoming debt maturity. Now, let's talk more about the trends on the following page. Our quarterly net revenues, at EUR 940 million, show a very strong year-on-year organic growth of 12%.
In Q1, growth was driven by all the GBAs, with an exceptionally strong performance in North America. During the quarter, the currency impact was 0.5%. The strong net revenue generation was accompanied by a very solid order intake performance, reflecting the business momentum in the quarter. At of the end of March 2023, order intake was at a record high of EUR 1.1 billion. With almost no cancellations in the quarter, this resulted in an organic backlog growth of 3.9% quarter to date, with a positive contribution of all GBAs. The operating EBITA margin improved to 9.8% versus 9.4% one year ago.
Day sales outstanding was 70 days of the end of the quarter, and our net working capital as a percentage of annualized gross revenue was at 12.9% on the back of our disciplined net working capital management and absolutely in line with Q1 last year. Turning now to the performances of our four Global Business Areas. Our Resilience business first goes on being very strong across each market, including North America, the U.K., and Brazil. We tapped some opportunities to increase our cross-selling capacity on the existing clients of Arcadis IBI. An example to this would be a recent win we had for the existing IBI client, City of St. Thomas in Canada, to perform planning and engineering of 1,500 acres of land, combined with Resilience solutions. Our focus remains to be very selective in our bidding strategy, facing such a strong market.
With this in mind, we invest more time in further advancing the pipeline accuracy. Our Places delivered strong revenue, now making up 41% of the total portfolio, especially in our key markets, North America and Europe. During last quarter, we've seen some signs of gradual pickup in the Chinese market. We remain, however, highly selective, focusing on our repositioning towards project management for international key clients. Furthermore, we launched our architectural and urbanism business, which is now up and running as part of the Places GBA, and sees strong momentum as it launches its first commercial event. We have already quantified substantial synergy opportunities in the pipeline and have booked first sizable synergy projects in our order intake, which Peter will elaborate on in a bit. Turning to Mobility.
A very strong net organic growth, mainly driven by the large project backlog we need to execute in the U.S., in the U.K., and in Australia. As Peter highlighted, we are happy to see some project wins to be materialized that would have been out of reach before. The increased collaboration with Arcadis IBI and Intelligence GBA strengthens our market positioning, and we can now compete for more sizable projects together. It gives us comfort to have a high revenue visibility for Mobility for the remainder of the year. Finally, our new GBA Intelligence delivered EUR 21 million revenues in the first quarter, while recording the same amount of order intake and collaborating to several bids in the other GBAs. The Intelligence management team is set up and works to set a fit-for-purpose organization, consolidating the various organizations and fostering innovation.
With this, I would like to thank you and hand on back to Peter.
Yes, thank you, Virginie, for taking us through a more detailed review of our financial progress in the first quarter. As I mentioned to you when we released our Q3 results back in October of last year, one of the key priorities in my last seven months at Arcadis was to ensure a seamless integration process for both Arcadis IBI and Arcadis DPS. I'm pleased to report that we're well on track with the integration, and while doing so, we didn't lose our focus on our clients, and even more specifically, our focus on synergy opportunities.
As Virginie noted a minute ago, the architecture and urbanism business is now up and running as part of the Places GBA and is attracting strong interest which we expect to further grow as we launch our first commercial event in Toronto later this month, promoting the enhanced range of architectural design services and solutions. The Intelligence GBA management team has been appointed and is underway integrating organizations, products and services. At Arcadis DPS, work is continuing to progressively embed the business into the Places GBA, creating additional strength in the industrial manufacturing and life sciences sectors. Our sales pipeline is looking incredibly promising, with over 250 synergy opportunities identified, opportunities we individually would have not pursued, and a number of them already converted into order intake during the first quarter.
This includes, for example, the design and construction management for a semiconductor facility in Europe with Arcadis DPS and a new industrial manufacturing plant expansion with Arcadis IBI for Bridgestone Americas. We're also seeing the benefits of bringing Arcadis IBI and Arcadis DPS clients into our already successful key clients program. One such example is QuadReal Property Group, a Canadian real estate company operating on a global scale. Arcadis IBI currently works for QuadReal as program managers and designers on the Vaughan Metropolitan Center project, one of their flagship developments in Toronto. As QuadReal owns and manages assets in 25 global cities, this relationship holds the potential to develop into a true Arcadis global key client relationship, providing more synergy opportunities. I want to take this opportunity to thank those Arcadians who've been actively involved in the acquisition and integration process over the last 12 months.
As presumably many CEOs will agree, the integration of a new business, let alone four, can be intense, it can be challenging, and fraught with structural and cultural hurdles. I'm delighted to see how all Arcadians, inclusive of those who joined us through these acquisitions, have risen to the challenge and delivered strong progress. To wrap up our Q1 trading update, let me please summarize. Despite the ongoing global geopolitical challenges, we are blessed with continued strong client demand, resulting in good revenue and order intake growth, especially across the North American markets. These strong conditions have also had a positive impact on our operating EBITDA of EUR 92 million for the quarter and an improvement of our operating margin from 9.4 last year to 9.8% this year.
The integration of Arcadis IBI, Arcadis DPS, and the two smaller acquisitions is progressing well with synergy wins materializing and a growing number of further opportunities in the pipeline. That all gives me confidence to confirm that we are well on track to deliver our strategic priorities at the close of 2023, those we committed to you during our 2020 capital markets day. I close the book on my six-year tenure as CEO of Arcadis, an extraordinarily rewarding and fulfilling journey. I don't want to do that without reflecting on a few of the major chapters. I believe that our organization is now very different from the one I joined in 2017. Together, we have invested in our people and our culture, are a much more diverse and inclusive company now, and brought back the pride and engagement of the Arcadians.
We prioritize the very important relationships with our clients and enjoy the results of our key client program. We significantly improved our focus on successful project execution through the launch of the Make Every Project Count program and a broader use of the Global Excellence Centers. We did endure the pain of the Oracle implementation across the company, but now see that running a large enterprise without it would be impossible. We lead the way with our net zero commitment. Increasingly we see that our clients trust us and ask us to assist with their sustainability strategies and solutions. We transformed our operating model with the introduction of the Global Business Areas. We and our clients benefit from a much improved global sharing of experiences, capabilities, and knowledge. Last but not least, we changed and optimized our portfolio with exciting new acquisitions while divesting non-core areas.
All of this has resulted in improved and much more predictable performance, and crucially, earned us the trust and confidence of our shareholders. I'm sitting here reminiscing about the fact that we have achieved a lot through the past two strategy cycles and can collectively take pride in our results. There's also still so much more Arcadis can accomplish in the future. I believe that I speak on behalf of all Arcadians when I say we feel a responsibility to do more, to create a more livable and sustainable world for all citizens, and to safeguard the future for the next generation and those to come thereafter.
I am absolutely convinced that the future of Arcadis is bright, and I'm very comfortable handing over the reins to Alan Brookes, who, supported by the rest of the organization, will absolutely do a stellar job in attracting and retaining talent, in delivering profitable revenue growth and future success for the business. Our shareholders will meet next week at our annual general meeting to vote on Alan's appointment. I wish him, Virginie, and the rest of the Arcadis team my very best for the future. It's been both an honor and a privilege to lead Arcadis over the past six years. I do owe my fellow Arcadians my depth of gratitude. They have been immensely supportive from the moment I joined Arcadis. I will forever remember their sincere passion and drive to improve quality of life.
I'm equally excited to now start to devote more time to my wife and our three daughters as payback time has arrived, providing me with an opportunity to work on the overdue debt I racked up with them over the many years. I want to thank you all for your support over the years, for the many great interactions, for your challenging questions, but most of all, for your continued interest in Arcadis. Thank you for letting me indulge a little. Now over to Christine for questions.
Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from Martijn den Drijver at ABN AMRO. Your line is open. Please go ahead.
Thank you, operator. Good morning, afternoon, gentlemen and ladies. My first question relates to the annual salary increases that you've implemented in April. What type of increase should we assume, should we take into account? Will you be able to match that with rate increases in the course of the second quarter and third quarter? In relation to that, can you tell us a little bit about attrition and recruitment levels in the quarter? That's question one.
Yeah, I'll take the second part, and maybe capture also the first part, Martijn. Thanks for the question. Our attrition continues to come down, which of course is positive. We have always combined any feedback on attrition with another important KPI which we measure quarterly, which is the engagement. We did see a significant improvement of our engagement in 2022, and I'm happy to report that since we have the score of the first quarter this year, that our engagement or the engagement of our people, I should say, you know, continues to go up. Those two together, the still downward trends on the attrition and the improving and continuously improving engagement gives us, you know, a lot of comfort that people enjoy working for Arcadis.
You know, on the salary increases, from a competitive perspective, you know, we are not disclosing the exact percentages, but assume, to be on the safe side, that of course, we pay market rates. We keep a close eye on what's happening, in the world. We'll be able to pass it on to clients. We have been quite successful to do that, in 2022. With the buoyant market we have, we expect to continue to be able to do that.
Perfect. Thank you. Moving on to the second question, which relates to DPS and IBI. I know you probably don't want to do share actual growth rates or EBITDA margin, but has the trend been any different at DPS and IBI relative to what they reported prior to the acquisition, which was for IBI, EBITDA margins between 11% and 12%, DPS 7%-8% with high double-digit growth? Any color you can give on the performance of DPS and IBI in the quarter?
Hi, Martijn. This is Virginie. On DPS and IBI, I think that we can recognize quite a nice quarter. They are contributing, you know, in line with what we expected. More or less, one of them just being just a little bit relative, the other one being just a little bit dilutive, which has almost no impact, you know, at the end of the day, on the average margin of Arcadis as a whole.
Mm-hmm.
We see strong momentum going on in terms of activity. There is definitely in the, let's say so-called historical business of Arcadis, a strong momentum also which is, which is pushing, which you can see largely in Mobility and Resilience, which are not absolutely pure original businesses coming from Arcadis. At the end of the day, I think that the vast majority is historical business on that side.
Okay. If I can sneak in one more. Can you elaborate a little bit on the backlog growth in the quarter year to date? That seems somewhat muted relative to the reported organic growth in the quarter, but also the statements about strong/robust demand in all GBAs. Perhaps you could share, why those numbers differ so much?
I'm not sure, you know, that I think that the numbers differ so much. I think that, for me, what is important is that the size of the company has drastically been changed in one year to the other. I don't really, you know, and that's the reason why we would not disclose the more or less organic backlog year-on-year, because it doesn't mean a lot. Where would I put, you know, the synergetic projects in or out, and progressively that will become quite a burden. I think that the very important thing is to realize at end of the year, you know, we have included these two acquisitions in, and then commercially we now start the year, you know, on an inclusive count where everything is together.
We see that in a single quarter, we've been able to grow the backlog by 3.9% in a moment where we deliver a record revenue growth. Meaning that, we have, you know, used quite a large part of our backlog in the same quarter. In the meantime, we've been replenishing it, you know, even more than what we've been using. You also know that quite a number of the things that we generally get as order intake and also including in our backlogs does not add significant amounts. I think that Peter has been disclosing a few example of projects, you know, today, which are important projects we wanted to highlight. Let's think about the people.
I think it's probably nothing in the backlog as we speak, because this is by design the way it works. It will come through service orders over the five-year period, you know, it is mentioned. I think that if we think about the Intelligence project in the North Carolina one, which is quite a sizable and large project, it's obviously not included in the EUR 20 million order intake because same thing, you get additional service orders are getting in. For us, you know, it's a very, very positive momentum, and that's why we want to insist and highlight that what matters is our capability of being selected.
Okay. Thank you. Peter, big thanks from my side as well. Been a pleasure. Absolutely. Thank you.
Oh, thank you, Martijn.
Thank you. We'll now move on to our next question from Quirijn Mulder at ING. Your line is open. Please go ahead. Quirijn, maybe you would want to unmute your audio, please.
Yes. Quirijn Mulder from ING in Amsterdam. Hello. Thanks for picking up my questions. Peter, thanks for everything. My question is for you. You mentioned 250 initiatives or opportunities. Can you give me an idea about what you expect the size of these opportunities is in total to give an idea about, let me say, the cross-selling effects? My second question is on the acquisitions of IBI and DPS. It looks to me that the order book is somewhat smaller than it was at the end of the year. Maybe that's partly FX, but maybe there's also some organic impact there. Can you maybe elaborate on that? That were my first two questions.
Yeah. Thanks, Quirijn. I'll take the first one. Obviously, you know, we're not, for competitive reason, wanting to necessarily disclose, the exact number on those 250 synergy opportunities, which we expect to actually go. Suffice it to say that it is a sizable number with three digit before the comma.
Sorry to jump because I was, the question is for Peter, I will take it, whatever. On the backlog side, Quirijn, I think that on the IBI side, we are still absolutely going. On DPS side, we had, you know, a growth of 35% last year in terms of order intake. It's very solid at the moment, we go on, you know, getting a large number of projects. If we would calculate, you know, or compare the order intake year-on-year, I'm not sure it's in Q1, I suspect that we are not going to grow that by 35% again, you know, from one year to the other, potentially for two reason also.
It's also that they now, you know, are a largely part of the Arcadis family, so the selectivity also applies to everyone as we can imagine. We want really to focus on those projects, you know, that helps us get where we want to go and get into the higher part of the value chain also.
Okay, thank you. Then with regard to the raise in profitability, 40 basis points.
Can you give an indication, whether this all the GBAs were up in terms of, organic growth of the EBITA margins?
I think it's, there is no major difference. We do not report by segment, as you know, on Q1. There is nothing to significantly highlight that would be a problem anywhere. I don't see any point, you know. We grow fast, and we grow a lot, that's also supporting, you know, the operating EBITA performance, as you can imagine.
No, but you can imagine that Resilience with its growth and, let me say also the better order intake, et cetera, and the inflation being passed on, that it is certainly supportive to the let me say, higher EBITA margins, and that's probably also the case for Mobility. That leaves the Places where that is also joining this 40 basis points increase. That was my question.
Everyone is contributing to it. I think, you know, Okay, obviously, you know, Resilience is not different from what it has been in the past quarters. We have a very nice performance of our architecture and urbanism business, if that is your question.
Okay, thank you.
Yeah, Qurijn, maybe to add to it, we're holding everyone to the same consistent standard within Arcadis. There's no distinction between the GBAs.
Okay. No, but let me say, there's a big acquisition in Places, so that has a major impact there.
Yes, it's frankly, the performance is really okay, everywhere. Maybe the only one which is still, you know, not sure that there is anything to really. It's quite comparable to last quarter, I would say.
Sorry?
Quite comparable to last quarter.
Yeah, no, I compare. Let me say, I see the improvement of the 40 basis points in EBITA margin. That is, that is where it is. Let me say also, we have seen a massive improvement last year with Places especially somewhat suffering from the other two divisions because of, let me say, investing in people, as you might know. That's interesting to know whether these trends continued. Let me say that now, or that it is changing somewhat because of the change in... Let me say, if you look at the numbers of Resilience, for example, that is growing quite fast. That is, given the leverage, operational leverage that should be higher, for example.
That's the reason that I want to have some feeling on, let me say, the different divisions, whether the margins are going up.
Well, I'm reason why I'm referring you to Q4 2022. You have the entire parameter, and I say it's not really different from what we've been doing in Q4 2022.
Okay. Thank you. Thank you. That's clear.
Thank you. We'll now take our next question from Anthony Manning of Bank of America. Your line is open. Please go ahead.
Good afternoon. Thanks for taking my questions. Congratulations, Peter. First of all, could I just get an update? You know, you said that North America has been particularly strong. Could you kind of give us some insights on how Europe's performing as well across the board and certain end markets? You know, there's obviously been growing concerns around real estate. How's that been doing from your opinion? Secondly, just on kind of the working capital and how we should think about that going forward, you know, obviously it seems like a good performance. Again, no change year on year, but incorporating the two large acquisitions you've done, I would expect there's more of an impact there.
Could you just kind of give the an idea of where we should model net working capital going forward?
Yeah. Thanks, Anthony. I'll take the first question, then Virginie will take the second question. You are obviously picked up well on the fact that we mentioned North America a couple of times as particularly good for us. That doesn't mean to signal, or it didn't imply to signal that we're not happy with the performance in Europe. The performance in Europe is actually pretty strong as well. You know, part of what has helped us, and not just this quarter, but I think will increasingly help, is the fact that we've refocused ourselves and have over the last two years actually shut down a few of the smaller non-core operations in Europe.
We can now safely say that the countries in Europe, and that is on continental Europe, in addition to the U.K., of course, predominantly the Netherlands, Belgium, France, Poland, and Germany, that they've all contributed quite nicely to the good performance as well. In addition to that, I should also mention Australia, which has been a really good market for us as well. The focus on lesser markets, but markets with, you know, significant growth potential is definitely paying off for us, and hence the significant growth. It is clearly led by North America.
Maybe I will jump on the net working capital question, Anthony, thanks for this one. I think that if we have a look of what we've been doing last year, based on where we are today and based on our discipline on working cap, I think that quarter on quarter, you know, we are more or less turning around this 12 point something, 13%, you know, which is to be where we are at the moment. With definitely a first part of the year where we go a little bit above, so we are at 12.9 Q1.
If you go back to last year, you see that it was absolutely the same %, and I expect, you know, us to grow again a little bit, as we've been last year, a bit above in Q2 again. That might be a little bit increased this year by the fact that we have a change in law in the U.S. in terms of taxes, so we'll have to push additional cash tax out. This has no impact at all in terms of P&L. It's just a timing difference in things that you could immediately deduct in the past, and that you would progressively deduct over five years now. That creates, obviously, a strong impact in the first year, which is happening.
I suspect that tech companies, you know, are more touched than we will be. Hence, you know, for the small Arcadis, I think that it's meaningful enough to be mentioned, and that will hit Q2. Q2, I expect that we go back again, you know, to the 30-ish + % that we've been having last year. Then progressively Q3 and Q4 getting down again because the pattern of our cash generation is such that our net working capital grows there. Our business has been increasing 40% quite mechanically, you know, with the acquisition of these two companies. Obviously the volume on the face of our balance sheet have been increasing correspondingly.
Then, as we can expect, magnitude and the absolute value of the figures we are pushing in front of us, whatever they are, you know, are as such. Then we see that V curve, you know, which is touching down, Q1 and, then Q2, and then getting up again, which is just a little bit larger this year due to the fact that our figures are changing.
Really useful. Thank you.
Thank you, Anthony.
Thank you so much. We'll now move on to our next question from Hans Slagers of Kepler Cheuvreux. Your line is open. Please go ahead.
Yes. Good afternoon, ladies and gentlemen. Few questions from my side. First, coming back on the acquisitions, DPS and IBI. Of course, last year you have shown quite strong growth. Could you give some feeling on the organic growth of those two operations in Q1? More important also in seasonality with respect to cash flow and margins, is it relatively comparable to Arcadis? I know IBI, let's say, always has a weaker Q4, but is there any other, let's say, seasonal impact to mention for the other quarters for those two acquisitions?
On integration of those two, you already mentioned revenue synergies that you have identified, but looking at the cost synergies, of course, you have given some numbers at the moment of the acquisitions, but have you, let's say, identified additional cost synergies or, let's say, saving potential or is it even less than you expected? Could you give me some feeling on that? My second question is on the growth you're showing. Is there any difference between growth from the private sector compared to the public sector? If you can give me some feeling on that. My third question is on increase in the number of employees. Could you give me some feeling that the last year was about 5%. Is that still that level or is it even increasing?
Could give some feeling on that.
We'll take them in reverse order, Hans, if you don't mind, I'll start with the last one, and then I'll ask Virginie to answer the other three. On the people side, you know, generally speaking, our business model, of course, is one whereby the growth of employees, generally speaking again, keeps pace with the growth of the company, because fundamentally what we do is we sell services and there's a strong correlation between, you know, revenue growth and people growth.
That being said, you know, part of the reasons for changing the operating model, has been, in addition to being able to serve our clients better with the global knowledge of Arcadis. Part of it is also to ultimately be able to use the pool of, global Arcadians for the benefit of global Arcadis. That means that there is potential for optimization across the countries, which we didn't have really in the past. I'm not saying that that will all of a sudden be a change of the trend, the trend whereby, you know, revenue growth keeps pace with, people growth or vice versa, if you like.
Clearly one of the reasons why we moved to the operating model was to be able to more efficiently use the resources we have across the globe. I think that could also be further enhanced by an even deeper use of the Global Excellence Centers, because they typically have a higher utilization compared to the non-Global Excellence Centers. We have opportunity to further improve that.
Hi, Hans.
Yes, hi.
Questions. In terms of organic growth of Arcadis DPS and Arcadis IBI versus the previous portfolio of Arcadis, if organically we do 12%, then as you can imagine, based on the fact that they've been growing faster their backlogs than us last year, they are above in terms of organic growth respectively to the initial portfolio. I think that's a given. That is a part of the pace of the strong revenue that we see
Obviously, the dollar is less supporting that in terms of absolute value, so there is a little bit of dilution in the absolute value numbers compared to what we would have had 1 year ago with the translation rate that we had at that time. In terms of private versus public, no real major change. I would say we are still, you know, with this pattern where we see Mobility being 70/30 Public versus private, Places being more or less the reverse. Then Resilience being 50/50. Maybe there, you know, as we've been growing fast and such, we have 60% private.
I would remain cautious there because this is also where we have had such a large project like the one that we referred earlier, you know, for the US Army. Which is almost zero in backlog, but at the end of the day, it's a large number that is going to fall through, and that we are fully aware of, and we need to take into our secure the revenue that we understand we are going to have to deliver in the future months. No big change there. Rather a strong growth almost in both side, public versus private.
Sorry.
Sorry.
Go ahead.
I think that another one was around cost synergies?
No.
On cost synergies, obviously, a few of them, you know, we are starting to extract that sort of a little bit, you know, of the performance, in some cases. As you can imagine, at the moment, we go on pushing more integration costs than getting cost synergies out. Whatever we are on track to deliver, you know, what we want to, to achieve and it's rather going pretty well. As I expected, you know, we have quite a large opportunity to, to work for a while, you know, going on extracting what we can extract to have really the fit type of organization that we want to have.
Nothing major to report in terms of impact at the moment. But on track and, you know, I'm having a team tracking on a daily basis, a very detailed plan, you know, knowing what's going to be out at what moment. What number of people or of contract it represents, how we've been re-negotiating that type of contract and things like this. And making sure that we do not recreate, you know, an additional cost somewhere else. That's under control.
Thank you. Peter, of course, I want to thank you very much for your cooperation over the last few years. I wish you all the best and specials to your family, of course.
Well, thank you very much, Hans. Really appreciate it.
Thank you so much. We'll now take our next question from Luuk van Beek of Degroof Petercam. Your line is open. Please go ahead.
Yes, two questions left. One is on Intelligence, which was last year, still a bit, the margin was still a bit lower because you were still in the integration process. Can you explain where you are now? If we should expect normal margins going forward? Where are you in that integration process and preparation? The second is on the seasonal pattern of DPS and IBI. That is a bit different from your own business. Was there any particular impact on the margin in this quarter?
Thank you for your question, so Luke, in terms of Intelligence margin, obviously we do not disclose the margin per sector of this quarter, so you know nothing. As I said earlier to Quirine, you can go back to Q4, you know, and more or less rely on something not greatly different from what's been done there. We are setting up this organization. It's still at the moment, you know, the sum of two different organization. It will take a bit of time just to be optimized and that we extract the right cost synergies.
Obviously, for the moment, it's probably weighing on them a little bit, while I admit also that the goal is helping them. Definitely, that is a given. You know, we are not going to guide on that one just to say that it's as we expected, it's not worse and it's, yeah, doesn't take more time than we thought. That I think is probably the key element.
Okay.
Yes, in terms of seasonal pattern, we've not seen a lot of difference, you know, in Q1 versus what we had in the rest of the group. It's been quite aligned.
Okay. That's clear. Thank you for the answers. Also thank you, Peter, for the contribution you made the last years and the discussions we had.
Thank you. We'll now take our last question from Andy Murphy at Edison Group. Your line is open. Please go ahead.
Good afternoon and thank you for taking my questions. I've got three, if I may. First of all, in the U.K., just wanted to understand a little bit about why the U.K. was so strong in Mobility, but much more, you call out in Places it was in the Places division, somewhat weaker growth. Just wondering whether that's, you know, government versus private funding or some other aspect in there. Secondly, on your key client program and Make Every Project Count programs, can you perhaps update us on those a little bit and talk us through how that is contributing to the margin? Finally, on the order intake, I was just curious on your comments that cancellations were very low. I think you might have said almost zero.
Just wondering if you can give us a little bit of color around why the cancellations might have been so low in the quarter? Thank you.
Yeah. Well, thanks, Andy. We'll, we'll take them backwards as well. I'll start with the cancellations. Yeah. We think it is important.
To mentioning that we see a buoyant market, that there's very few cancellations because, you know, that is what sometimes happens in our business. It is a strong market, and we simply felt that it was important to also illustrate that strong market is evidenced also by the fact that we see very little cancellations. Hence the comment. On the key client program and Make Every Project Count. Yeah, maybe a bit of history, and I'll not try to make it too much of a, of an historic journey.
both of these programs were initiated in, back in 2018 when became apparent that we had quite something to gain from both a more stronger commercial mindset and a better discipline on project execution, as well as focusing on less clients and trying to do more for less clients. The improvement we've seen over the last couple of years is coming from those programs. In addition, there's a couple of other things which we did, including the Global Excellence Centers, which is also a contributor to the margin improvement. To make it a bit more specific on the key client program, when we started the program back in 2018, we had about 250 key clients.
We have, of course, criteria, which makes a key client a key client. Out of the 250 at that time, we had about 25 global key clients, and the rest is simply local or regional key clients. Over time, we've actually reduced the number of... I should say that the 250 key clients we initially had were responsible for about just over 50% of the revenue and a disproportional percentage of the profit. Disproportional, of course, should be interpreted as higher. Over time, we have tweaked it further, fine-tuned it further, and we ended with 150 or so in 2022. Still responsible for over 50% of the revenue and still responsible for a disproportional percentage of the profit.
The focus on lesser clients with stronger relationships and the ability to do more for these clients has clearly worked. Now, with the acquisitions, and actually already before the acquisitions, we felt that we needed to broaden the funnel, and had already, before the acquisition, decided that we would actually add a category to the, let's say indigenous, Arcadis clients, about 20 which were added. Those were particularly clients where we felt that we had an opportunity to further grow that account, even though they wouldn't necessarily meet all the criteria, particularly the criteria for revenue, but it had potential for growth. Now, of course, with the acquisitions, we're actually bringing clients which, DPS and IBI have brought to Arcadis into the key client program as well.
Some of them were same, some of them we already had in our key client program, others are being added to it, and that could easily be another 30 or 40 clients we'll add to the key client program. Again, the focus and the goal will remain the same, trying to do more for the same clients, benefiting from the leverage, benefiting from the relationships, and support. It's been a significant contributor to our improved margin. I think it will continue to be a significant contributor to further improve margin. The same is true for the Make Every Project Count program. Both of them, I can safely say we have not exhausted, excuse me, the potential of both of them. Virginie, you wanna take the first question?
On the U.K.?
On the U.K., yeah.
On the U.K,, I think that maybe just to give a kind of helicopter tour, what is important to keep in mind is that it's been a very strong quarter on the Resilience side. Absolutely, definitely. It's not different from some other regions in the world, but I think it's important to note. On the Mobility business, we have quite a number of large projects in backlog which are currently under execution. This come, you know, with the generation of revenue, obviously. That goes also generally with additional service order and such that were generally expected and go on feeding, you know, the order intake and the backlog.
By comparison, I would say that by comparison on the strong demand on the U.S. side, on the Places we thought that we qualified that as rather a softer demand might also come from the fact that we are quite more selective. We have decreased, you know, our exposure to some sectors, as we said earlier, like commercial real estate. Hence, we have quite a number of large projects. We also, in industrial manufacturing, do execute some large projects from the U.K., while in fact, you know, the plants are going to be delivered somewhere else in Europe or even in the world, because we have quite a large competence center over there.
That, I think, is the thing to keep in mind. The fact that the local demand, you know, is not exactly so big as it is in the other sectors, has not a lot of impact on us because we are globalized now. Then we use our competence center to rather serve the project where they are.
Okay, great. Thank you very much.
Thank you, Andy.
Thank you. That's all the time we have for Q&A. I will now hand it back to your host, Peter Oosterveer, for closing remarks. Thank you.
Thank you, operator. Yeah, just going to quickly summarize. I know we're at the top of the hour. I will start with reinforcing what we've said a couple of times, is that we are enjoying very strong markets despite the geopolitical challenges. That, of course, is quite helpful, to put it mildly. Secondly, it is also really encouraging to see that the focus we have on our clients, and Andy, you raised the question about the key client program, that our clients do know how to find us. I'm really, really pleased with the progress we've made in the relationship with the clients and how the key client program has helped to fuel the growth.
I am turning the reins over to Alan with the absolute conviction that our foundation is extremely solid. As a result, I look at the future, and I will continue to follow Arcadis, obviously, with a very bright future, let's put it that way. I'm also extremely thankful, and I'm extremely proud as well. I'm proud of the results we have created, and I'm also proud of the growth we have created. Last of, and not least, I'm extremely proud of the support I have enjoyed from my fellow Arcadians. They are a pretty unique bunch of people with a lot of passion and a lot of engagement as well.
All of that gives me tremendous confidence that Arcadis will continue to do very well in the future. Thanks again for all of your support, for your interest, and stay safe and healthy. Thanks, everyone.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Continue to stay safe. You may now disconnect.