Adecco Group AG
SIX:ADEN
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Ladies and gentlemen, welcome to the Q1 results 2022 analyst conference call and live webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions]
At this time, it's my pleasure to hand over to Benita Barretto, Head of Investor Relations. Please go ahead, madam.
Thank you. Good morning, and thank you, everyone else who's joined us.
With me today are Adecco's Group Chairman, Jean-Christophe Deslarzes; CEO, Alain Dehaze; and CFO, Coram Williams. First, Jean-Christophe will make a short comment on today's CEO announcement, and he will then leave the call. Alain and Coram will then review Q1 results, including an update on strategic progress this year and the group's outlook. Following these prepared remarks, we will open the lines for your questions.
Before we begin, I would like to draw your attention to the information on Slide 2. On today's call, we will be referencing both GAAP and non-GAAP financial results and operating metrics. This conference call will include forward-looking statements. These statements are based on assumptions as of today and are therefore subject to risks and uncertainties. Let me now hand over to Jean-Christophe.
Thank you very much, Benita. Hello to everyone. Pleased to be with you. Normally, as you know, I will not join the results call, but we are making an exception today. Since the Board announced the appointment of a new CEO for the Adecco Group, Denis Machuel. At this stage of the company's evolution, the Board believes now is the right time for CEO transition building on the strong foundations in place to drive flawless execution of the strategy and accelerated growth. At the same time, after 7 years at the helm, Alain had shared with the Board his preference to step down before the next strategic cycle.
I can attest that within the past year, the Board has conducted a robust search and a very thorough selection process before reaching the decision announced today. This transition is the culmination therefore, of a carefully planned succession process. And the Board is convinced that Denis is the right CEO to lead the company to even greater success.
Denis will indeed bring highly relevant CEO experiences and skills to the Adecco Group. Under his leadership at Sodexo, Denis turned around underperforming segments, including in the U.S.A., which at Sodexo is the company's largest market. He drove a digital and data transformation of the business and strengthened the execution leading to improved growth. Before becoming the group CEO at Sodexo, Denis held several global leadership positions within the company, including as what we call CDO or Chief Digital Officer of the group, and heading up the 2 global business units, 2 out of the 3 in the group.
And prior to Sodexo, Denis spent 16 years with Altran Group. He was the CEO of Altran Technologies and later assumed the executive leadership of Group Offshore Strategy and Operations. He knows how to nurture a culture of performance excellence. He has a strong track record of growth and value creation as well as relevant industry experience. Indeed, on the one hand, he has business services experience at Sodexo in a highly people-intensive business. And on the other hand, R&D experience at one of our competitors, which will also be invaluable during the AKKA integration process that is presently being carried out.
Let me stress now that the Future@Work strategy remains unchanged. At the same time, the Board has provided a clear mandate for management to drive exceptional execution and growth acceleration to which I can attest the new CEO is fully committed. To ensure a smooth handover, Alain will stay with the group until the end of June, at which time Denis will take over.
As this is his last investor call for the Adecco Group, before I close, let me offer some reflections on Alain's time as CEO. Alain put purpose at the heart of the company and positioned the company as a globally leading strategic partner for talent. Wherever you go -- you know that well, wherever you go within the group and outside making the future work for everyone is the purpose that makes our people proud.
Furthermore, under his leadership, strong foundations have been led for a bright future. So let me just give you a few examples here: the development of the Future@Work strategy, obviously, together with the Board; the establishment of the 3 global business unit structure, this verticalization, which is quite an undertaking; and led the foundation for the oversight of key acquisitions and divestitures to strengthen our portfolio. And obviously, I would also want to mention the digital transformation work.
I have personally appreciated our excellent collaboration during my time as Chair. And as you well know, the Chair, CEO relationship is critical in a company. And hence, I would like to thank you very much, Alain, on behalf of myself, but also on behalf of all the employees for your strong commitment and dedication to the Adecco Group. We obviously will have time to do so later within the group, but I wanted to express already my thanks here in presence of our important investor group. My Board colleagues join me in wishing Alain every success in his future endeavors.
And I will now step away from the call for the ordinary quarterly results review. I thank you for your time this morning. I wish you a great rest of the conference, and a great day. Thanks very much. And Alain, Coram, over to you.
Thank you, Jean-Christophe. Thank you also for your kind words, and a warm welcome to everyone on our call this morning.
Let's now turn to Slide 4, where we'll begin our view of this quarter's performance with some group highlights. Starting with the first quarter financials, which show improved revenue growth and market share with strong progress in gross margin. Indeed, the group revenues were up 5%. Revenue highlights come from Modis, which was 14% higher. LHH Recruitment Solutions, up 15%, and Adecco APAC, up 15%.
Gross profit rose 9% organically with Permanent Placement activities remaining very strong, up 62%. Gross margin set a record for Adecco Group taking a step change upwards of 100 basis points to 21.1%. This has been driven by strategic actions to shift the portfolio, including AKKA, favorable solutions mix and supportive pricing.
The 3.4% EBITA margin was solid. As anticipated, it moved lower year-on-year due to Adecco investments plan, where we are investing in sales capacity to drive future growth, as well as the absence of nonrecurring benefits and a moderated contribution from LHH Career Transition business.
In strategic terms, the group made clear progress. Adecco's investment plan has begun to deliver with overall relative revenue improvement of 400 basis points sequentially. At LHH, 65% of revenues have been rebranded, and we will take full ownership of AKKA from May 12, 2022.
The integration of AKKA into Akkodis is gathering pace. We have good line of sight on 100% of 2022 targeted synergies worth approximately EUR 20 million, and we have taken the actions required to secure over 50% today.
We are also excited to announce that the team has secured its first revenue synergies from joint commercial wins underpinning our confidence in achieving the EUR 200 million revenue synergy target.
Turning to sustainability, the group's purpose and social impacts remain highly relevant. Considering the crisis in Ukraine, our thoughts are with everyone affected and we acted immediately after the war began to provide support to colleagues and associates who have family and friends in the region.
Our Eastern European operations are working to ease the pain of many people, building on the group's years-long experience in helping refugees we enter the workforce, earn money and rebuild their lives. And in March, Adecco launched a free-to-post jobs platform, which is now offering opportunities from over 1,300 companies to thousands of people who have been displaced by the war.
Let's turn to Slide 5, which provides a snapshot of Q1 financials. Revenues reached EUR 5.4 billion, growing 5% year-on-year on an organic trading days adjusted basis. Gross profit of EUR 1.15 billion were 9% higher organically. Gross margin was 21.1%, 100 basis points higher. EBITA, excluding one-offs, was EUR 185 million, with an EBITA margin of 3.4%, 80 basis points lower in line with management expectations. Basic EPS was EUR 0.56, down 28% year-on-year, reflecting mainly lower EBITA levels and higher integration and related costs from AKKA. Cash conversion was 79% with DSO of 51 days, the same level as in the first quarter of 2021. And finally, the pro forma net debt-to-EBITDA ratio rose to 1.6x following AKKA's acquisition.
Let's turn to Slide 6 and our concerted focus on gaining market share in Adecco. The business delivered encouraging incremental returns from its investment plan, driving overall relative revenue improvement of 400 basis points versus its key competitors. The main tailwinds and headwinds for Adecco growth in Q1 on a year-on-year basis were, first, manufacturing, with a 1.5% to 2% positive impact; and retail, with a 0.5% to 1% positive impact. Logistics, which was a headwind lowered the achieved growth rate to 2.5% to 3%, and Mexico's regulatory change had a 1% to 1.5% negative impact.
Aside this end market dynamics, the business as aggressively and successfully nurtured its growth levers. It has added meaningful sales capacity with 720 more FTEs related to Q4 2021, led by APAC, France and Italy. Adecco's client base expanded in double-digit terms as we drove greater sales intensity. High-value solutions activities were very strong, with perm up 64% and outsourcing up 34%. Career Centres, which are centralized apps for serving largest customers with greatest efficiency and productivity, were added in Japan, Italy, Spain, Benelux and Australia.
Adecco's digital platform, Adia and QAPA, advanced well, with combined revenues up 67% on a pro forma basis. And last but not least, pricing initiatives were supportive.
Adecco investment plan has begun to deliver, and there is much more to do. The business will continue with its agile investment plan, which is focused on structurally growing sectors and geographies, leveraging omnichannel and driving progression in higher-value activities. And we are very focused on the U.S. turnaround.
Looking forward, we expect to deliver higher growth and stronger margins, particularly as new employees reach full productivity.
Let me now hand over to Coram who will discuss the results in detail.
Thank you, Alain, and good morning, everybody. Let's move to Slide 7, where we provide insights into current market trends. Significant imbalances in the supply and demand of labor continue. Unemployment rates are trending towards historic lows and are extremely tight in certain sectors. The graph on the left of the slide shows U.S. unemployment rates by occupation, this March relative to March 2021. You can see a sharp decline in unemployment across all profiles from blue to white collar.
This is driving real talent scarcity. When Adecco surveyed its branches in Q1 to ask about talent scarcity, it found 44% of the top 25 job profiles to be very scarce in terms of candidate availability. Meanwhile, despite the war in Ukraine and global supply chain issues, employer demand has remained exceedingly strong.
Adecco's survey established that talent scarcity and 75% of job profiles was a consequence of higher client demand. For example, during Q1, the Adecco business saw record highs in terms of requests for talent from technology, finance and manufacturing clients.
This combination of low unemployment rates, the propensity among workers to change jobs that we've highlighted in previous quarterly commentary and continued strength in employer demand is driving significant wage inflation in the global economy. The group is at the center of these developments, with specialists in sourcing, attracting and retaining talent at scale, while providing our clients with an unrivaled array of services fit for a talent scarce landscape. We will continue to benefit both strategically and financially. Talent scarcity and wage inflation provide a supportive trading environment for us.
Let's now look at the results at the GBU level, beginning with Adecco on Slide 8. Adecco's revenues increased by 4% year-on-year on an organic trading days adjusted basis. Flexible Placement was up 2%, with strength in manufacturing, retail, food and beverages and chemicals. Headwinds came from logistics, easing activity in the energy sector and a modest decline in autos.
In Logistics, we're seeing the inevitable rebalancing of demand as consumers return to the high street following a prolonged period of COVID restrictions.
In addition, from Q3 '21 results onwards, the Adecco business has been impacted by the end of certain contracts in the U.K., which we took over in the depth of the COVID crisis when another supplier went bankrupt.
As Alain noted in his earlier remarks, the strategic focus of Adecco on higher-value activities has delivered. Permanent Placement was up 64% and other services such as Training & Outsourcing were up 30%, led by Outsourcing. Gross profit margin was sector-leading driven by positive mix and dynamic pricing.
SG&A increased around 15% year-on-year, reflecting higher investment in digital and a 14% year-on-year increase in headcount.
Reflecting investments in the absence of nonrecurring benefits when compared to Q1 2021, the EBITA margin was solid at 3.7%, and 70 basis points lower year-on-year as expected.
Moving to Slide 9, which shows Adecco at the regional level. In France, revenues grew 9%. Encouragingly, France grew ahead of the market in the last few weeks of the quarter, closing a growth gap that had persisted through much of 2021.
In Northern Europe, revenues were 8% lower and on a relative basis, sequentially improved.
U.K. and Ireland revenues continue to show impact from the tough comparison period we just mentioned in Logistics. Excluding this impact, Northern European revenues were 4% higher.
In the DACH region, revenue performance improved on a relative basis when compared to Q4 2021.
Revenues from Germany were up 1%, weighed by logistics and autos. Excluding the logistics impact, Germany's growth was up 12%.
Revenues in Southern Europe and EEMENA rose 8%, exhibiting continued strength on a relative basis. In Italy, revenues were up 15%, and in Iberia, revenues were up 7%. Growth was led by manufacturing, consulting and the food and beverage sectors, partly mitigated by a tough comparison in logistics, which particularly impacted EEMENA.
In the Americas region, revenues were 6% lower. Latin American revenues were 4% lower, weighed by the legislative change in Mexico. Excluding this impact, revenues in Latin America was stellar, up over 35%.
In North America, revenues were 8% lower. There was modest further sequential improvement in the U.S. as the turnaround efforts steadily gains traction. While we expect the turnaround to take time, the business observed better trends in key operational metrics such as client visits per FTE, order fill rates and gross profit per FTE.
Last, but not least, APAC excelled, with broad-based and very strong revenue growth at 15%. APAC was boosted by strong demand for Outsourcing and Permanent Placement activities. Japan was up 15%, driven by health care. Australia was up 20% due to strength in Logistics.
Let's turn to Slide 10 and LHH. Revenues were up 1%. Recruitment Solutions performed very well, again, taking share in a buoyant market for perm supported by its recent growth investments and firm pricing. Perm revenues were up 68%, with the U.S., France and Germany leading the way. Gross profits rose 37%.
In total, 265 FTEs joined Recruitment Solutions in the quarter to drive future growth, and productivity improved further by 4% year-on-year. This excellent performance in Recruitment Solutions was somewhat mitigated by the countercyclical Career Transition business, for whom revenues were 35% lower. While subdued revenues in Career Transition have stabilized on a sequential basis with cost-out actions already taken delivering.
Learning & Development, which includes the talent development business previously within legacy LHH as well as General Assembly and Ezra, grew 3%. Ezra was a particular highlight, with revenues 122% higher.
Finally, the Pontoon & Other segment was 11% higher. Within Pontoon, MSP and RXO solutions combined, advanced revenues by over 40%. And revenues from hired were up 145%. The EBITA margin of 7.5% mainly reflects softness in career transition. That said, margins have improved sequentially and are now within LHH's through-the-cycle corridor of 7% to 10%.
Turning to Akkodis and Slide 11. As a reminder, the year-on-year revenue figures on this slide are all calculated on an organic and trading days adjusted basis, which means that they do not include any contribution from AKKA. The business reported broad-based revenue strength, up 14%. Tech Consulting grew 7%, Talent Services rose 17% and the Academy was 50% higher in the quarter.
In the Americas, revenues were up 19%, and in EMEA, up 12%, led by Talent Services activities.
In APAC, revenues were 9% higher, benefiting from a continued focus on consulting in Japan.
Germany was affected by higher sickness rates and a highly competitive market for talent in both Modis and AKKA. AKKA contributed around EUR 150 million of revenues to the total EUR 759 million reported result. On a stand-alone basis, AKKA's first quarter growth was up around mid-single digits driven by France.
Akkodis' EBITA margin of 6.7% was 70 basis points higher year-on-year, reflecting positive country mix and pricing actions as well as the contribution from AKKA, which was consolidated on the 24th of February.
Let's move to Slide 12, which provides an update on the acquisition and integration effort for AKKA and Modis. Integration plans have moved quickly forward since we attained control. By achieving 100% ownership in mid-May, we will be able to move even faster. The graph on the right of the slide provides for the first time a breakdown of where synergies will be delivered in 2022. The team has good line of sight on actions that will deliver 100% of the 2022 target of EUR 20 million. In the last 2 months, we have taken action that secure over 50% of these synergies.
We're also pleased to have secured the first joint commercial wins. For example, from a global auto leader, Akkodis won a contract with Expanded Scope to provide specialized digital engineers, showcasing the combined firepower of AKKA and Modis. From a global industrial customer, Akkodis leveraged a strong existing relationship with AKKA to extend the scale and skill set of the contract to include Modis engineers. These wins further support confidence in our ability to deliver the intended EBITA uplift.
Let's return to the group results on Slide 13. First, let's consider the main drivers of gross margin on a year-on-year basis. Flexible Placement had a 10 basis point negative impact, weighed by the absence of nonrecurring benefits when compared to the prior year period. Permanent Placement had a 130 basis point positive impact, reflecting higher volumes as well as fee levels. Career Transition was 80 basis points lower, while contribution from Other Services, including training, upskilling and outsourcing, was 30 basis points higher.
Overall, the gross margin was up 70 basis points on an organic basis and up 100 basis points in reported terms, including 15 basis points of accretion from M&A primarily AKKA. At 21.1%, it is another new record level for the Adecco Group. It showcases the improved quality of the group's earnings. 55% of gross profits come from Flexible Placement, 45% from sectors outside General Staffing.
Moving to the EBITA bridge on the right hand of the slide. Gross margin expansion was fully mitigated by SG&A, which was 15% higher year-on-year. There are 3 main drivers for the EBITA margin move from 4.2% to 3.4%. First, planned investments to accelerate growth, mainly in Adecco, which brought margin down by approximately 40 basis points. Second, a lower contribution from Career Transition of approximately 30 basis points. And third, the absence of nonrecurring items, specifically support scheme benefits received in Q1 2021 and highlighted at that time of approximately 20 basis points.
Looking at Q2, investments will continue to drive higher SG&A on an organic year-on-year basis, but the rate of increase will moderate from Q1. In other words, Q1 2022 represents the peak level of incremental investment, and therefore, margins will improve in subsequent quarters.
Let's move to Slide 14. The group's Q1 conversion ratio was around 16% and Adecco's conversion ratio was 23.5%. As we said at the Q4 results, it typically takes approximately 6 months for new employees to become fully productive. Looking to H2, all else being equal, as employees become fully productive, growth will accelerate and margins will improve.
Let's turn to Slide 15 and the outlook. The group's trading momentum indicates healthy demand for Talent Services in a talent scarce and wage inflationary environment. Whilst recognizing challenges from the war in Ukraine as well as further COVID lockdowns in China that are exacerbating global supply chain issues.
Driven by recent growth investments, the group expects its year-on-year revenue growth rate to improve in Q2 when compared to Q1's result. EBITA margin is expected to improve sequentially while being lower year-on-year, reflecting agile investment, particularly in Adecco. We expect returns within the financial year, such that incremental investments will not be dilutive to Adecco's margin on a full year basis and will deliver accelerated growth.
And with that, I'll hand back to Alain.
Thank you, Coram. To conclude on Slide 16. Our strong management team is fully focused and 2022 priorities are clear. First, particularly in Adecco on ensuring investment in sales supported by digital, deliver higher organic growth in a profitable way; second on continuing to progress the Adecco U.S. turnaround; third, to substantially complete the integration of AKKA and Modis and deliver targeted synergies; fourth, to grow the value of LHH integrated solutions offering; and finally, to continue leveraging digital and the benefits that the group's unique ecosystem offers.
In conclusion, the group has made good progress in the first quarter of 2022 towards delivery of its 2022 ambitions, and the management team is confident that there is more to come.
So before we start the Q&A session, I would like to take this opportunity to say thank you to the investor community for your ongoing engagement in the Adecco Group. I have enjoyed all this course and sharing insights about the group's development in the many meetings we had over recent weeks, months and years. Our investor proposition has never been better. With the Future@Work strategy and portfolio, the business is prime to create super value to accelerate growth and improve margin and deliver solid cash flow, with a progressive dividend policy for our investors. Its purpose to make the future work for everyone has never been more relevant.
And finally, I would like to express my thanks to the management team, to the Board and every one of my colleagues for their hard work and commitment during my nearly 13 years within the group.
On behalf of the executive team and the company, thank you, Alain. I'd like to add a few words on my own before we open the line for questions.
I've worked with Alain since joining the group in the depth of the COVID crisis. It's not been the most straightforward couple of years, but my partnership with Alain has been a real source of strength throughout this period. His detailed understanding of the group's operations, its opportunities and challenges, his true passion for people and performance, and his unwavering commitment to push the group forward are well known, but remarkable, nonetheless. He supported me in my induction, and he's been an inspiration throughout. So it's my turn to say a sincere thank you, Alain, and I wish you the very, very best for your future.
Let's now open our Q&A session. Operator, we're ready for the first question, please.
[Operator Instructions] The first question comes from Andy Grobler from Crédit Suisse.
Could I just ask 3? Firstly, and slightly predictably, could you talk through exit rates from the quarter and volume growth in April? Secondly, could you split out the kind of wage inflation element of growth in Q1, and do that across the divisions because I suspect that varies quite significantly?
And then thirdly, the Chairman mentioned earlier that about the commitment to the Future@Work strategy, does that mean that there won't be a strategic review once Denis arrives? And then just for Alain, thank you for all your work over the years and good luck in whatever the future may bring.
Thank you, Andy. Warm thank you. I will start with your last question, in fact, and then Coram will elaborate on the first 2. So as it has been stated by our Chairman, Jean-Christophe Deslarzes, this change of management has nothing to do with any kind of strategic change. On the contrary, you have heard in confirming that we are further driving our Future@Work strategy. And this is -- this will continue as it has been, let's say, endorsed and decided by the Board. So it's no strategic change.
Thank you, Alain. Let me pick up, Andy, on exit rates and wage inflation. I mean on exit rates, given what happened on the 24th of February, given the war in Ukraine, I'm not -- I actually think it would be slightly misleading to go into short-term trends because they are moving around. So what I want to try and do is to give you a bit of a sense of what we see in terms of the reaction and then talk about how that impacts on our guidance.
I mean obviously, in Ukraine and Russia, we have no direct exposure. There was a short-term effect or there has been an effect in Q1 on autos because it is an area which has -- which, obviously, is most affected by the supply chain challenges. But you should remember that automotive is actually now less than 4% of the Adecco revenue. So it is a much less material impact than it has been in the past. The outbreak of war had an immediate negative effect on client and customer confidence, and it did impact volumes briefly in March.
But actually, what we've seen then is that the majority of customers have adjusted, they've responded to that. And as I flagged in my comments in the presentation, there is a healthy demand for our services across the board. We've recognized the impact of the war in our guidance. And we are absolutely clear that the investments that we've made in Q1 and that we will continue to make in Q2, will have a beneficial effect on the growth rates that we're seeing, and they will accelerate.
Final point I'd make about the sort of current macro environment is you have to remember that the way different geographies are responding is quite different. So for example, APAC, which, as you know, is an important market for us, is not impacted at all from what we're seeing, particularly in Ukraine, and we've delivered very strong growth. And the U.S. continues to be a source of strength in market terms. So that gives you a sense of sort of what we're seeing in terms of current trading.
On wage inflation, as I mentioned in my comments, the factors that we continue to see across the globe of lower participation rates, lower unemployment, people choosing to move careers, change their lifestyles and the demand for workers is all driving wage inflation. It means there is a significant imbalance between labor, supply and demand. That is strong in all of our units. So in many cases, it's up high single digits, for example, in Akkodis and in LHH.
Adecco, as we've seen before and as we've discussed before, is more nuanced than that. In the areas where there are not collective labor agreements, we also see high single-digit wage inflation. But in the areas, particularly in Continental Europe, where there are collective labor agreements which tend to create a lag in the way that inflation flows through, it's fairly modest. So for example, in France, that's what's happening in terms of wages and, obviously, that drives our pay rate.
The other positive that I would flag is that we are using dynamic pricing tools, we're using our AI capability to really identify where there is scarcity in talent and to judiciously adjust prices accordingly, so that we reflect the value of being able to identify and deliver that talent to our clients. Which means that actually the spreads between bill rate and pay rate are also improving across the board.
The next question comes from Paul Sullivan from Barclays.
Three for me. So just following on from that, so how broad-based is the acceleration that you're guiding to? And is it more -- should we take away that it's more Adecco specific due to headcount investment versus market? And then secondly, Alain, I'm sorry if this is unfair, but why leave now in the midst of such strategic change?
And then finally from me, Coram, can you unpick the contribution from AKKA in Q1 and the organic compared to the old Modis, how do we think about that? And can you provide some color on the full year EBITA contribution relative to the previous AKKA consensus expectations given changes in accounting and stuff like that?
So I will start to your questions regarding myself, Paul. Look, as stated by the Chairman, I have told to the Board that I wouldn't, let's say, take responsibility or I wouldn't -- not undertake a new strategic cycle. And it means that the one who will lead this strategic cycle has to be in the company to prepare it and so on. So -- and based on that, you have heard, there has been a thorough search and selection process driven by the Board, and then the timing and the candidate has been decided both by the Board and the Governance Nomination Committee. That's how the process has run.
And let me pick up on your other questions, Paul. So in terms of the investment, as we've said, when we talked first about the investment plan during the Q4 results, we are very much following an agile and focused investment approach.
So using AI, using the data that we have on countries and sectors, we target our investment very clearly where we know and -- where we believe and know that we can get a good return. So if you look, for example, Adecco has been a significant recipient of the investment. FTEs are up 720 on a sequential basis. The areas where that investment has been made are largely France, Southern Europe -- so for example, particularly Italy but also Spain, and APAC.
And you can really see the impact of that investment, even though it hasn't reached full productivity you can see the impact of that investment on the growth rates, because all of those have strong growth rates. And we're particularly pleased with France, because as I mentioned in the -- in my commentary, actually in the last few weeks of Q1, we actually accelerated beyond the market, which shows you how effective that targeted investment actually is. It's not just in Adecco, though. I think there's one other area I'd like to highlight, which is Recruitment Solutions. And there's several hundred FTEs have gone into that in Q1. And again, you can see the impact on the growth rates there because they are really, really strong, and we're taking share. So very agile, very focused, really aimed at the areas where we've got growth and already starting to generate returns.
In terms of AKKA, on the sales side, all of the growth rates that we quoted were organic. In other words, they are the underlying Modis business excluding AKKA. So the 14% growth rate, which I unpacked in terms of territory and in terms of service line is an organic Modis growth rate. And you can see it's very strong. As I mentioned, AKKA itself delivered mid-single digits revenue growth in Q1, which we feel good about. And it was particularly strong in France and also data response, which is the digital R&D business that it has.
On the contribution, actually, the accounting impact is very, very modest. I mean, really, a couple of million at most. So that's not going to have a big impact on the full year position. I'm not going to give a guide to the full year at this stage for obvious reasons, but we are confident about the trajectory. We've given you a sense that Akkodis profit corridor through the cycle should be 7% to 10%, and we will be within that.
And as I mentioned in my commentary, we are making very good progress in terms of delivering the cost and the revenue synergies, which should give you extra confidence that we will be in that corridor through the cycle, and it will improve over the next couple of years.
Okay. But you're not prepared to sort of give any specific commentary on AKKA contribution relative to consensus. Is that because it hasn't fully closed yet? Or are you just not going to do that going forward?
We'll give you plenty of color on how it's trading. I think at this stage, given that it only came in, in the 24th of February, we've only really got a month of contribution. And obviously, we haven't -- although we've made really good progress on the MTO and we're excited to take it on in the middle of May, we haven't closed that yet.
The next question comes from Hans Pluijgers from Kepler Chevreux.
Yes. First, Alain, I want to thank you for the very long cooperation we already had, already the time before you were at Adecco from your Solvus time. So I wish you all the best. And certainly, maybe we will meet in the future. And again, I wish you all the best and thank you.
After [indiscernible], Hans.
A few questions -- first of all, on the investments and especially looking at the U.S., There you saw, let's say, the trends are only slightly improving. Are you, let's say, happy with the developments in the U.S.? Or is it going in line with what you're expecting? Or do you still -- do you need to take some additional measures to really close the gap with the market?
And then more in general on the investments, did you do also something extra in Q1. And looking at your earlier guidance for H2, we suspect that you were looking for an improvement in the margin year-on-year for H2, resulting that for the full year you would, let's say, broadly stable in the margin year-on-year. Is that still applicable? Or do you believe, let's say, a little bit more or less confident that it will -- that trend will be visible?
Thank you, Hans. Let me take both of those. I mean on the U.S., just to be clear, it wasn't an area of major headcount investment for us in Q1. We have previously highlighted that we've invested and that we would keep the headcount broadly stable, which is what we've done. We're very focused on the turnaround in the U.S. And you'll recall from previous conversations that we've had, that really it's about making sure that we are shifting the legacy sector focus that we've got and moving towards higher growth sectors and areas in the market. And it's also about bedding down the new operating model, particularly in the -- with the Career Center. That's a model that we have successfully implemented elsewhere, and we're in the process of implementing in the U.S.
That turnaround is absolutely heading in the right direction. And you see that because we've got sequential improvement again this quarter, it's modest, but it is coming through. And as we've touched on in the script, there are a number of operational metrics which show that the turnaround is heading in the right direction. Sales growth in the verticals that we are targeting is good.
So for example, Professional Finance, which is an area that we see as a real opportunity in the U.S., is up 15%. And perm, which is also our focus is up 79%. So the areas that we're focusing on are starting to bear fruit. Other metrics like the order fill rate, like the gross profit per FTE, like the number of client visits per FTE are all heading in the right direction.
The thing I would say, and we've said it before, is that this will take time. So it is not something, given the scale of the turnaround both in terms of the sales focus and in terms of bedding down the model, it is not something that will happen overnight. But we are pleased with the progress that we make, and it shows that we are heading in the right direction in the U.S.
In terms of the margin development for the year, I mean, just to be clear, we're absolutely delivering what we said we would. So we added 720 FTEs to Adecco in Q1. As you know, it takes time for those FTEs to reach full productivity. So they typically do deliver some level of productivity in their first quarter by the 6-month mark, they are at full productivity.
And so if you think about the timing of this, the FTEs that we've added in Q1 will create extra growth in Q2 and will really contribute then in H2. And further FTEs that we're likely to add in Q2 will deliver some productivity benefit in Q2 and Q3, and full productivity in Q4. So as the year goes on and as we bring the new employees to full productivity, that will accelerate the growth rate on the top line.
And then in terms of the margin, as I mentioned in my commentary, Q1 was peak investment. So this is the highest level of increase that we will see in SG&A. There will be some further incremental investment in Q2, but the year-on-year growth rate in SG&A will come down. It was at 15% in Q1. I think you should take a couple of points off that for Q2. And then H2, it will decline. It will decrease further, which means accelerated growth in H2, improving sequential margins in Q2 and further improvement in margins in Q3 and Q4. And the final point, which Hans you mentioned in your question, it will be neutral to the overall Adecco margin for the full year.
The next question comes from Anvesh Agrawal from Morgan Stanley.
A couple of questions really just on the SG&A again. Can you just unpick what was the SG&A impact in Q1 from AKKA? And how should we assume for how much we should assume for Q2, really? I mean, you are confident of sort of keeping the margin flat for the full year, but AKKA is sort of accretive and then there will be some synergy benefit. So just trying to get a sense of the underlying margin provision really?
And then just given the geopolitical uncertainty, did you have any sort of rethink on the pace of SG&A investment going forward? I mean, you would expect the FTEs to sort of deliver the productivity in the second half, but how much of that is sort of contingent on the cycle continuing?
I'll take both of those. I mean on the geopolitical point, I'd like to stress again the investment plan that we're pursuing is agile. We very much focus on the areas where there are opportunities, both in terms of sectors and in terms of territories, for us to capture share and drive growth. And so all the way through, we are modulating our investment to make sure that we're putting the additional FTEs where we can get the growth. You see that in Q1 despite the macroeconomic effect. And you've seen the growth coming through in France, the growth coming through in APAC and the growth coming through in Southern Europe in Adecco. And also Recruitment Solutions, where, in all of those cases, we've seen strong growth. So we will continue to invest in this agile way and we'll manage the geopolitical risk. It is absolutely built into our guidance.
The other thing that I would -- and I just want to come back to this because I mentioned it in one of my earlier responses, but the geopolitical risk is not spread equally around the world. And that's clear, for example, in APAC, given the strength of the growth there and the opportunity that we have there, it's an obvious place to continue to invest. In terms of AKKA, for the reasons that I mentioned when responding to Paul, we're not going to go in at this stage into guidance on SG&A. We'll unpack a little bit more next quarter.
The SG&A guidance that I've just given you is very much on an organic basis so that you can see the comparison between the 15% that we've seen in Q1 and my sense that it will be a couple of points lower in Q2. But we're very clear that we are driving Akkodis towards the margin corridor that we've described in the Capital Markets Day of between 7% and 10%, and we're confident that we're on track for that for the full year.
Sorry, just -- I appreciate you not sort of wanting to give details. But your margin guidance to have a neutral impact from this investment at the full year level, is that on underlying business? Or that includes AKKA within it? So are we looking at flat margin year-on-year including AKKA at a group level or excluding AKKA?
Yes. So just to clarify, the flat margin that we're talking about is in the Adecco GBU. So it is intended to show you the shape of the year in terms of margins. The investment goes in, in Q1 and to a slightly lesser extent in Q2, but then we get the accelerated growth and the leverage that, that brings and lower incremental investment in the second half and that means that we can put the investment in, in the full year. We get the benefits on the top line and the margin is flat within the Adecco GBU.
The other GBUs, as we know, are driving good growth and they have higher margin corridors, 7% to 10% in both cases, and the inclusion of AKKA is margin accretive for the group as a whole. We've been clear on that all the way through.
Okay. Thank you very much, Anvesh. And we come now to the last question. So I don't know who it's from?
The last question for today comes from Konrad Zomer from ABN AMRO.
And thank you, Alain, for your great contribution to the group. My first question is that you've made it quite clear that for the full year your margin will continue to be in the corridor as earlier reported. But at the Capital Markets Day, you strongly suggested that it would end up towards the upper end of the corridor, i.e., closer to 6% than to 5% for the group. Is that a statement that you can still confirm today?
And my second question is, if the additional investments roughly represented 40 basis points on the margin, it implies a total investment for the year of maybe EUR 80 million to EUR 90 million. That could mean, let's say, EUR 20 million to EUR 25 million for Q1. But if your main issue in the U.S. is the business mix instead of a lack of headcount, why would you need additional investments there because that's not necessarily going to change the business mix?
Thank you, Konrad. The margin guidance that we talked about at the Capital Markets Day is obviously midterm guidance. And we've talked about the 3% to 6% for the group as a whole, which is underpinned through the digitization and the market share gains in Adecco and also the margin corridors that we see in LHH and Akkodis of 7% to 10%, and we absolutely stand by that guidance now just as we did at the Capital Markets Day. So there's no change to that. The drivers are all there, and it's a mix of the factors that I've just described.
I think you have to separate the investment from the U.S., on your second question. So to be clear, we have made the investments in the U.S. The U.S. is now about making sure that we shift the sector mix and that we settle down the operating model, but it's not about putting significant additional FTEs. It's about optimizing and really making sure that the machine is working as effectively as it can.
The investment plan is focused on other territories. For example, in Q1, we put the investment into France, we put it into Southern Europe and we put it into APAC and Recruitment Solutions. And that's really about identifying where there is opportunity for growth, adding the FTEs and making sure that they're productive. So I'd like to separate those 2 things. They're both drivers of growth, but they are different.
Thank you, everyone, for your questions. I'm afraid we do need to wrap here, but it's very much appreciated that you've joined today's call. I am here in IR for any further questions and follow-up. And Coram and I will be on the road fairly soon. So if you would like to see us, please also let me know. And have a good rest of the day. Thank you.
Thank you all. Bye-bye.
Thank you.
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