Adecco Group AG

SIX:ADEN

Earnings Call Analysis

Revenue Growth Amidst Static Margins

Revenues touched EUR 6 billion, up 3% year-on-year. Operational efficiency drove Akkodis' EBITA margin up by 50 basis points. Data response rose by 2%, while North America faced a 16% revenue drop due to decreased tech staffing. Notably, consulting revenues increased by 24%. The company's LHH division saw a modest revenue hike of 2% but faced an 18% decline in Recruitment Solutions. Despite this, career transition and mobility revenues surged by 84%. The EBITA margin climbed by 40 basis points to a solid 4%, underpinned by a 6% gross profit per FTE increase. Achieved G&A savings of EUR 24 million bolstered profit margins, with a year-end run rate saving target lift to EUR 90 million. Cash flow from operations leaped by EUR 172 million to EUR 282 million. Net debt was EUR 2,817 million, and the net debt-to-EBITDA ratio is projected to shrink to around 2.5x by year-end.

Leadership and Strategic Focus Enhance Adecco's Market Position

Adecco Group's third-quarter results tell a story of strategic discipline and leadership, culminating in a strong operational performance and significant market share gains. Productivity improved by 6%, and the implementation of prudent cost management led to EUR 24 million in savings in general and administrative expenses. This frugality enabled the group to elevate its annual savings target from EUR 60 million to EUR 90 million.

Investment in Human Capital and New Leadership

The quarter also marked an invigorating phase in human capital development, welcoming Daniela Seabrook as the new CHRO, who is slated to join on January 1, 2024. Daniela, with her extensive experience including a tenure at Philips, is expected to enrich the company's HR footprint significantly. Her focus on talent strategy and change management is anticipated to further strengthen the company's already robust HR foundation built by the departing CHRO, Gordana Landen.

Buoyant Financial Results Driven by Strong Execution

A peak at the financial scoreboard reveals revenues climbing to EUR 6 billion, marking a 3% growth on an organic trading days adjusted basis. Adecco performed commendably with a 14% year-on-year uptick in EBITA, excluding one-offs, to EUR 235 million and a 40 basis points improvement in EBITA margin which stood at a solid 4%. However, it wasn't all clear skies, as the company observed a 6% decrease in adjusted earnings per share (EPS) to EUR 0.85. These results reflect not only management's pricing insights but also their capability to adjust operations fluidly in varied economic conditions.

Robust Revenue Growth and Streamlined Operations

Zooming into Adecco's business units, the revenue growth story continues with a significant 4% increase year-on-year, reaching EUR 4.6 billion. Adecco led by example, outstripping peers with its revenue performance, thanks to strategic outperformance across multiple regions. Particular strengths were noted in flexible placement, outsourcing, and a range of industries from autos to logistics. Despite a few challenges, the company proved its agility in market strategy and operational efficiency, with a noticeable improvement in gross profit per selling FTE by 5%, painting a picture of a swiftly adapting enterprise.

Global and Regional Developments Across Business Units

Globally, Adecco Group made significant strides through their omni-channel offerings, winning major contracts in Europe and North America, showcasing their ability to synergize diverse business units. Regional performance varied, with growth in some areas like Southern Europe and APAC and contractions in others such as North America and France. However, these fluctuations were strategically managed, leading to overall gains in market share and profitability.

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, welcome to the Q3 Results 2023 Analyst Call and Webcast. I'm Andre, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.At this time, it's my pleasure to hand over to Benita Barretto, Head of Investor Relations. Please go ahead.

[Benita Barretto, executive]

Good morning, and thank you for joining the Adecco Group's Investor and Analyst Call. With me today, we have our CEO, Denis Machuel; and CFO, Coram Williams. Before we begin, we want to draw your attention to the disclaimer on Slide 2. We will reference GAAP and non-GAAP financial results and operating metrics on today's call. 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.With that said, we move to the presentation and I hand over to Denis.

[Denis Machuel, executive]

Thank you, Benita, and a warm welcome to all of you who've joined the call today.Let's turn to Slide 3, which provides highlights from the quarter. The group delivered a good operational performance with strong market share gains and an uplift in margin, reflecting the discipline with which we are managing the business. Productivity rose 6% and the group secured EUR 24 million of G&A savings. Consequently, the group has increased its anticipated year-end savings run rate from EUR 60 million to EUR 90 million.We are also pleased to announce today the appointment of a new CHRO and member of the Executive Committee, Daniela Seabrook. Daniela will join the group on January 1, 2024. She brings extensive international HR leadership experience, most recently as CHRO of Philips, with a particular focus on talent strategy, culture, change management and organizational effectiveness. Daniela will work with our outgoing CHRO, Gordana Landen through January. Gordana has chosen to retire at the end of January, and we are grateful to Gordana for tireless leadership of HR, where over her 5 years as Global Head, she's built a strong HR foundation for the group.Moving now to the GBU highlights, the Adecco business achieved relative revenue growth, leadership of plus 930 basis points in Q3 with margin expansion delivered through pricing discipline, productivity gains and good cost control. Adecco's productivity reached 2021 levels in terms of gross profit per selling FTE and reached 2021 and 2019 levels in terms of gross profit per FTE. Akkodis and LHH made strong contributions to the group. In Akkodis, revenues in consulting rose 8% and the EBITA margin expanded 50 basis points, reflecting effective management of the significant downturn in the tech staffing market and strong synergy capture. LHH delivered an 8% margin, up 430 basis points with outstanding growth in career transition of 84% year-on-year.On Slide 4, let's look at a couple of recent achievements that showcase the group's cross GBU and upselling capability. Working from left to right. First, the Group was awarded a 4-year contract with a major French government institution, which renewed and extended existing staffing and training services to new on sites and added outsourcing and perm solutions. The team won this significant contract because of the strength of Adecco's omni-channel approach, such that the client can leverage both the branch network and QAPA digital capabilities. The client was also excited by the possibilities in white color for its subsidiaries from adding LHH's services. Also, helping secure the deal, the client found Adecco's on-site workforce prediction and diagnostics capabilities better than competitors.Second, illustrating cross GBU collaboration, Pontoon won a 3-year MSP contract with a major payment service provider in North America. Using a vendor accountable model led by Pontoon, Adecco and Akkodis will serve as primary suppliers for general staffing and tech staffing. The client particularly appreciated the group's robust processes which drive more visibility into the candidate pipeline. And they appreciated the depth of Akkodis' tech expertise.Third, Akkodis won a significant contract with a global autos leader to support their transition from staffing augmentation to leveraging an outsourced managed service center. The client particularly valued Akkodis' expertise in vehicle engineering.Let's move to Slide 5, which provides a snapshot of Q3's financial performance. Revenues were EUR 6 billion, up 3% year-on-year on an organic trading days adjusted basis. Gross profit of EUR 1.2 billion was 1% higher organically year-on-year. At 20.8%, the gross margin was healthy 10 basis points lower on an organic year-on-year basis, reflecting firm pricing discipline and current sector and services mix. EBITA, excluding one-offs, was EUR 235 million, up 14% year-on-year. The EBITA margin was solid at 4%, improving 40 basis points year-on-year. Adjusted EPS was EUR 0.85, 6% lower year-on-year. Net debt-to-EBITDA ended the period at 2.9x in line with management expectations and lower sequentially. The rolling last 4 quarter cash conversion ratio was 85%, a strong result during a period of growth and transformation. And cash flow from operating activities was EUR 282 million in the quarter, up EUR 172 million year-on-year.Let me now hand over to Coram, who will provide more detail on the results.

[Coram Williams, executive]

Thank you, Denis, and good morning, everyone. Let me give you the context within each GBU, beginning with Adecco on Slide 6. Adecco's revenues reached EUR 4.6 billion, a solid increase of 4% year-on-year on an organic trading days adjusted basis. Adecco continued to firmly deliver on its ambition to gain market share with relative revenue growth 930 basis points ahead in Q3, the fifth consecutive quarter of outperformance versus peers. Growth was driven by resilient volumes in flexible placement with revenues up 2%. Revenues were strong in outsourcing, up 12%. Permanent placement revenues were down 2%, reflecting a tough comparison period and slowing sequentially. Growth was led by global customers with strength in autos, public sector activities and logistics. Manufacturing was robust, while IT technology was weak.Gross margin was healthy reflecting firm pricing discipline and continued benefit from dynamic pricing strategies with an over 3% positive spread, although the sector and solutions mix was slightly less favorable. The solid EBITA margin at 4.1% reflects gross margin developments, G&A savings and improved productivity. Gross profit per selling FTE rose 5%, while selling FTEs reduced 3% year-on-year, reflecting the agility with which we are managing the business.Moving to Slide 7, which shows Adecco at the segment level. In France, revenues were 2% lower year-on-year on an organic trading days adjusted basis, reflecting a subdued market backdrop. Construction, healthcare and autos did well, while IT technology and retail were weak. In Northern Europe, revenues outpaced the market but declined by 1%. In the U.K. and Ireland, revenues were up 1%, reflecting recent contract wins. The Nordics were impacted by new construction regulations and a more challenging market. The EBITA margin reflects lower volumes and adverse client mix, partly mitigated by solid pricing and rightsizing, with an approximately 10% reduction in headcount made in the latter part of the quarter.The DACH region's performance was solid, with revenues up 6%. Revenues in Germany were strong, up 10% and outperforming the market. In Switzerland and Austria, revenues were 1% lower, performing well against a tough market backdrop. Growth was led by autos, logistics and professional services. The EBITA margin of 4.2% mainly reflects the current sector mix and FTE investments. Southern Europe and EEMENA grew 9%, with Italy up 7%, Iberia up 11% and EEMENA up 12%. All segments gained market share. In sector terms, growth was led by logistics and autos.In the Americas, revenues increased by 1%. LATAM was up 23%, led by Argentina and Mexico. North America was 8% lower, with the U.S. 10% lower, ahead of competitors in a challenging market. Autos and consumer goods were solid, while IT technology and financial services were subdued. The EBITA margin improved 110 basis points to 1.4%. U.S. operations returned to profitability in line with management expectations and supported by recent actions to rightsize headcount and other G&A savings.Last, but not least APAC. Revenues were very strong, rising 21%. Revenues were up 13% in Japan, up 9% in Asia and up 19% in India. In Australia and New Zealand, revenues was 73% higher, boosted by a significant new government contract that is delivered by Adecco and powered by Akkodis. In summary, Adecco delivered a strong relative growth performance with market share gains in all regions and solid profitability.Turning to Akkodis on Slide 8. Akkodis' revenues were 3% lower year-on-year, on an organic trading days adjusted basis, reflecting a sharp reduction in tech staffing activity. Tech talent revenues were 19% lower, while consulting revenues remained strong, growing 8% organically. By segment, in North EMEA, revenues were 2% lower. Germany was up 1%, impacted by ongoing talent scarcity. Data response was up 2%, reflecting a tough comparison and some easing of demand in its specialist high-tech markets. In South EMEA, revenues were up 8% and France grew 9% led by aerospace. North American revenues were 16% lower, impacted by the sharp slowdown in staffing activity for tech talent, particularly in permanent placement. Consulting was strong with revenues up 24%. Relative to competitors, performance was solid. APAC revenues rose 4%. Strong growth in Japan, where revenues rose 9%, was partly offset by revenues in Australia, down 7%, reflecting headwinds in tech staffing.Akkodis' EBITA margin expanded by 50 basis points, reflecting strong synergy delivery and agile management of staffing activities. North America delivered a 55% recovery ratio in the quarter. The GBU's productivity in terms of gross profit per FTE rose by 3% and the merger integration remains on track. In EBITA terms, total synergies secured for 2023 are projected at approximately EUR 59 million, ahead of the targeted in-year synergies of EUR 50 million to EUR 55 million.Let's turn now to Slide 9 and LHH. Revenues in LHH were up 2% year-on-year. Recruitment Solutions revenues were 18% lower with subdued market activity, particularly in the U.S. and U.K. and across both permanent and flexible professional replacement. Gross profit was 22% lower and 14% lower, excluding the U.S. Management is strengthening operational discipline and protecting capacity to capture profitable growth when the market rebounds. Performance in career transition and mobility, CT&M, was excellent. Revenues rose 84% led by the U.S. The segment continued to win new clients worldwide, particularly among SMEs and its pipeline is solid. Learning and Development revenues were 21% lower with General Assembly and Talent Development challenged by continued headwinds in their end markets. Ezra performed very well with revenues up 34%. Its pipeline is strong. In Pontoon and other, revenues in Pontoon were 4% higher with both MSP and RPO slowing. Revenues in Hired were subdued. Both units continued to be challenged by the tech sector downturn. LHH's EBITA margin up 430 basis points to 8% benefited from segment mix, mainly higher volumes in career transition and firm cost discipline.Let's turn to Slide 10. Here, we review the drivers of the group's gross margin and EBITA on a year-on-year basis, starting with Q3's gross margin. Currency translation effects had a negative impact of 10 basis points. Flexible placement had a negative impact of 30 basis points, reflecting the current sector mix. Permanent placement had a 70 basis point negative impact, but career transition had a 100 basis point positive impact. Outsourcing, consulting and other was 10 basis points positive and training up and reskilling was 20 basis points negative. In total, the gross margin was 10 basis points lower on an organic basis and a healthy 20.8% on a reported basis. The EBITA margin at 4% was solid. The 40 basis point year-on-year improvement was driven by a combined 30 basis point negative impact from gross margin and other items. The improved productivity with the group's gross profit per selling FTE up 6%, which had a 30 basis point positive impact. And G&A savings of EUR 24 million, which had a 40 basis point positive impact. Savings were delivered in corporate, shared functions and from delayering and simplifying regional and country structures.The Group's SG&A expenses improved 50 basis points to 17% of revenues. On a year-on-year basis, SG&A was 1% lower compared to 2% higher in Q2 and 7% higher in Q1 this year. We remind you that the group's G&A savings path can be uneven quarter to quarter. Nonetheless, supported by the group's task force, management remains focused on implementing the G&A savings actions and are confident that we will deliver the EUR 150 million target in run rate terms in mid-2024. And today, we upgraded our anticipated year-end run rate to EUR 90 million from EUR 60 million previously.Moving to Slide 11, and starting with cash flow. The rolling last 4 quarters conversion ratio was 85%, up sequentially and a strong result during a period of growth and transformation. Cash flow from operating activities was EUR 282 million in the quarter, up EUR 172 million year-on-year. DSO was 54 days, improved by 1 day versus the prior year period. On a year-on-year basis, cash flow was positively impacted by the timing of working capital with favorable payables and tax balances and supportive customer collections, as well as normalized collection activities in AKKA, which was disrupted by the cyber incident in the prior year period. On a full year basis, the group expects good cash generation supported by disciplined working capital management.Net debt was EUR 2,817 million at the end of Q3 2023. The net debt-to-EBITDA ratio, excluding one-offs, was 2.9x, an improvement versus the 3.2x ratio of Q2. We expect to continue to delever in Q4, so that by year-end the net debt-to-EBITDA ratio will be around 2.5x. Looking further ahead, we are firmly committed to deleveraging as we drive further productivity improvements, G&A cost reductions and we reduce the level of one-offs substantially upon successful delivery of our savings program. Importantly, our financing structure is solid. Leverage is not constraining the business' ability to invest organically in growth and pay dividends. The group's interest costs are very serviceable, with 79% of net debt fixed at attractively low rates, no financial covenants on any outstanding debt, and an undrawn EUR 750 million revolving credit facility. In addition, the company has no debt maturing until December 2024.Let's turn to Slide 12, and the group's outlook. The group exited the quarter with growth consistent with Q3 levels and volumes in October were resilient. Looking forward, the diversity of the group's activities and geographic footprint provides opportunities for profitable growth and market share gain, while recognizing elevated geopolitical and macroeconomic pressures. We remind that the group has a tough comparison in certain sectors this Q4, particularly autos, which in the prior year period contributed north of 100 basis points to year-on-year growth. We intend to continue to manage the business in an agile way to maximize share gain and productivity. We expect the group's gross margin and SG&A expenses as a percentage of revenues in the Q4 period to be around Q3 '23 levels.And with that, I'll hand back to Denis.

[Denis Machuel, executive]

Thank you, Coram, and let me conclude with Slide 13. In the third quarter, the group delivered strong market share gains and improved profitability. We are steadily improving our business. With our teams focused on delivering profitable growth, relentlessly serving our clients, and methodically executing on our simplify, execute and grow plan. Together with our leadership team, I'm looking forward to sharing more on our plans to further strengthen the Adecco Group's performance at our Capital Markets Day next week, November 7 in London. Each GBU will present its strategies for profitable growth, and the Akkodis team will showcase a handful of their latest technologies and prototypes to those joining us in person.Thank you for your attention, and let's now open the lines for Q&A.

[Operator]

[Operator Instructions] The first question comes from the line of Andy Grobler with BNP.

[Andrew Grobler, analyst]

Can I ask a couple, please? Just firstly, on the savings, if you could just help us kind of quantify the incremental savings into 2024? So in terms of how much contribution to EBITA this year and how much you expect next year, given some kind of lumpy phasing, as you mentioned?And then secondly, just on digital platforms, I just wondered if you could update us on where you are on that. One of your competitors was quite optimistic about growth in those platforms over the next 12 months and I just wondered if you could share your thoughts on kind of where you are and where you expect to be over the next year or 2.

[Coram Williams, executive]

This is Coram. I'll take the savings question and then Denis will pick up on the digital platforms. So, I mean, firstly on the savings program, I think we're very pleased with the progress that we're making. You saw us deliver EUR 24 million of year-on-year savings in G&A in Q3. And our SG&A as a percentage of sales is obviously down 50 bps to 17%. I'm glad you picked up on the point I made about the lumpiness, because when we look at Q4, we expect to continue to make progress. But there is some phasing in corporate costs, which usually comes through in Q4. And I think that means that whilst we continue to take the actions that we need, you'll probably see a lower absolute amount drop through to the P&L in Q4. That doesn't mean we're not on track. It just means there's phasing in our corporate costs. I think I'd continue to expect Q4 to be down year-on-year, and particularly in percentage terms, probably a little bit more than the 1% that you've seen in Q3, but absolute numbers will be a bit lumpy.Stepping back, run rate by the end of the year would be EUR 90 million. You know that we've made most of the actions in the second half. So that gives you a sense of what to expect in terms of the drop through for the full year. And then in terms of 2024, we're very much on track to deliver the EUR 150 million of run rate by mid-2024. And we'll guide you as to what drops through to the P&L early next year.

[Denis Machuel, executive]

And as far as the digital platform, we are quite optimistic in -- first in the -- and happy with the performance that we see today. QAPA is growing double-digit, Ezra is growing also high double digits. So all this is very promising. On top of that, we see very good, both client and users or candidate satisfaction on those platforms, which is very satisfactory. We'll have a deeper dive on both of them during our Capital Markets Day next week. We're also expanding QAPA in other geographies. And as you might have noticed, we have announced a partnership with Microsoft to develop a career platform that will leverage the power of generative AI. That platform will be firstly dedicated at blue collar workers, which is definitely an underserved population in terms of how we accompany them into their career perspective, job opportunities, upskilling and reskilling possibilities. So, we are accelerating our digital transformation. We have now on board since the beginning of September, our Caroline Basyn, our CDIO, and we see good momentum there. So very promising on that part.

[Operator]

The next question comes from the line of Simona Sarli with Bank of America.

[Simona Sarli, analyst]

So I will take one by one. I have 2. The first one is indeed a follow-up regarding your SG&A cost and your guidance of SG&A as a percentage of revenue being broadly in line with Q3. That would imply, based now on some quick calculation, that still sequentially in [Technical Difficulty] substantially up, so probably more than EUR 70 million. I understand that there is a little bit of seasonality around corporate cost, but that would be probably a EUR 20 million sequentially. So I'm not sure to fully understand why there is not a higher drop through on the P&L coming from your SG&A cost savings.Second question, actually, I will leave it to this one and then I will go with the second one.

[Coram Williams, executive]

Sure, I'll pick that up, Simona. I mean, just to reiterate the points that I've just made. We're very firmly on track in terms of the savings program, but Q4 always have some seasonality in corporate. It moves around, we have movements in bonus provisions, et cetera. So, our guidance is clear. We're saying we'd expect it to be similar in terms of percentage to revenues. That might be a little bit cautious because the plan is on track, but you do have to factor in the seasonality. And I think the easiest way to model how to get there is to think about it in terms of the year-on-year movement. So in Q3, we were about 1% down.On our SG&A, I'd expect us to be a little bit more than that down. Not massively, but just modestly better than the 1% down. So hopefully that gives you a sense of how to model it.

[Simona Sarli, analyst]

And second question, you made a point at the beginning of the presentation that currently gross profit per selling FTE is pretty much back to the 2019 level. How much more room you have for further productivity gains? First question. And secondly, for every, let's say, 1% improvement in productivity, what would be the drop through in the P&L?

[Coram Williams, executive]

Simona, I'll take that one as well. I mean, obviously, we're very pleased with the improvements in productivity. It's been a strategy that we've been pursuing for a number of quarters. Productivity for the group is up 6% overall. All of the businesses have contributed to that.Gross profit per selling FTE in Adecco is at 2021 levels. I think there's probably a little bit more to go for, but do remember that 2021 was a lean year in terms of sales resources. And overall, on a gross profit per FTE, where we're back to 2019 levels, I think we're pretty happy with that. But clearly, as we drive further cost savings and we have got more to come, then you'd expect us to improve on that modestly.I think getting into the gearing on that productivity is quite tough because it very much depends where it occurs within the business, which part of Adecco, whether or not you get some in Akkodis and LHH. So I'm not going to put a firm figure on that. But we do think there are further modest productivity gains to go for.

[Operator]

The next question comes from the line of Konrad Zomer with ABN Amro Oddo.

[Konrad Zomer, analyst]

I have a few. The first one refers to Slide 16 in your presentation and it's about the one-off costs you expect for Q4 and it looks like they are going to be broadly twice the amount that you took in Q3. Can you maybe explain to us where you see that significant rise coming from? My second question is on your revenue split by sector. You mentioned autos as an industry which has held up really well in quite a large number of regions like France, Northern Europe, Southern Europe, DACH. The recent news flow coming out of the auto industry is a lot less positive than it may have been a few quarters ago. Do you think that might impact your revenue growth in this particular segment going forward? And my last question on the synergies to cost savings. It's great to see you upgrade your guidance from EUR 60 million to EUR 90 million by the end of this year, but you confirm the EUR 150 million by mid-2024. Is that you being cautious? Or does it look like that might also be in line for an upgrade maybe at the start of next year?

[Coram Williams, executive]

I'm going to take all of those. So on Q4, in terms of our guidance for one-off costs, you're absolutely right. We're highlighting EUR 40 million relating to the G&A savings program. And we're also flagging around EUR 10 million still to come on AKKA integration and related costs. Where will we incur those? Well, as I mentioned in the script, we are driving savings in corporate. We're driving savings in shared functions, so things like finance and HR, particularly as we mutualize those functions and move towards shared services, but we're also simplifying and delayering the organization structure. It's not completely linear process, so you see the one-offs move around quarter-by-quarter. Will we try and bring it in for a little bit less than the EUR 40 million? Yes, we probably will. But for the moment, we want to keep the momentum going on our G&A savings program and therefore that's what we're planning on spending.I'll pick up on your third question at the same time. The reason that we've upgraded from EUR 60 million to EUR 90 million, I think is because we've made very good progress. We've moved faster than we might have originally anticipated on the savings program. At this stage, I want to stick to the EUR 150 million because that's what we've got clear plans for, that's what we're committed to and that's what we will deliver in run rate terms by the middle of 2024. Obviously, if we can do better, we will try, but I want to stick to the EUR 150 million because that's what the plan show.And then on the auto sector, it's about 70 -- it's about 7% -- sorry, about 7% of Adecco GBU revenues. It is up nicely in Q3, so we're up double digits. If you look at the sector, the order books continue to be healthy. They are catching up post COVID. They are catching up from the semiconductor crisis. And what we're hearing is that, that demand continues to be healthy and will drive Q4. But please remember the point that I made in this -- in my remarks, which is that the comparative gets tougher in Q4, quite a lot tougher in Q4 because it drove 100 basis points of growth for the group. So I think we will see a slowdown in the growth rate. And there probably are some risks to 2024, given the commentary that you referred to. But as you've seen, we have a broad spread of industries and we are able to flex and adjust to whatever demand we see in the market.The one other point I'll make on this is, autos is not just confined to Adecco. We have a strong automotive business in Akkodis. Demand is driven by the R&D work that, that automated sector has to undertake. And there's a lot of it because of autonomous driving, the green transition, electric vehicles, et cetera and we would anticipate that, that demand continues to be strong. So I hope that gives you a sense?

[Operator]

The next question comes from the line of Kean Marden with Jefferies.

[Kean Marden, analyst]

I've got 2. Firstly, for Deni, would you mind just giving us an overview of change initiatives in the Americas year-to-date, what's gone well and where you still need to make some progress? And then one for Coram, so you made the point that you've got no refis until the end of 2024, so you have that EUR 500 million EMTN notes. Do you need to refinance that before the report accounts are published, so that your auditors give you a sort of going concern sort of chat list sign-off. And therefore, that's something that you might need to refinance it in sort of the first quarter of next year?

[Denis Machuel, executive]

And let me pick up the first one and then, of course, Coram the second one. So let me give you an overall perspective on the 3 GBUs in Americas and I think that Americas is more North America. You know that LatAm is doing super well and it's mostly a -- an Adecco business and it's growing super fast. On the North America piece, I start with Akkodis, the tech staffing is definitely subdued. The market is down and we are preferring more or less in line with peers. We've made all the adjustments that are when necessary to get this recovery ratio of 55%, which Coram was mentioning earlier. At the same time, consulting is growing 24% and the structural piece that we put, we put good people. We have -- we put experts there. We've -- so we're strengthening that business. It's yet far from having the volume of the tech staffing, but it's very promising. And one day, I don't know exactly when, but tech staffing will recover, of course.Now if I go to LHH, career transition is super, super strong. It's a big -- the big chunk of that business is in the U.S. We're capturing market share. We are the world leader. The recruitment solution piece, permanent recruitment, especially pressured and -- but we are -- we're making the best use at the moment of the market downturn to review performance, work on cost, improving operational discipline. So we're also doing a lot of good sustainable actions to make sure that we can recover in the U.S. on the recruitment solutions business when the market kicks back.Now the Adecco business, which is a big area of my focus, yes, I mean, the U.S. revenue is declining 10% year-on-year. However, for the past 2, 3 quarters, we have outperformed competition. I wouldn't call it a success because everybody is down. So it's not fantastic, but it's encouraging. We have a new leader there, who's going to attend and be with us in London next week at the Capital Markets Day. And Geno, that's his name, has really done a good job by reorganizing the business, making sure that we have the right people at the right place. We've recalibrated our cost base. We have put people closer to our clients in a geographical organization rather than the previous sector-based organization. We've created a branch revitalization program, which is improving branch productivity and profitability. And we have definitely worked on our culture and bringing back that winning spirit, which is necessary to win on the market.So I think -- and we see on a few operational KPIs that also Geno will talk about next week that I mean, there's fundamental changes, this sort of back-to-basic approach is delivering encouraging results. So of course, we are -- I think we are on a right track. There's still a long way to go. But the fact that we are profitable this quarter is encouraging.

[Coram Williams, executive]

Let me pick up on your question, Kean, about the EMTN program. To be clear, we actually refinanced that during the year. So it is not falling due next year. The first maturity that we have is the EUR 500 million bond in December 2024. And just to remind you, I think that's a sign of the solidity of the balance sheet. So 79% of the interest rates fixed at attractive rates, no covenants and good liquidity because of the EUR 750 million undrawn RCF.

[Kean Marden, analyst]

Sorry to follow-up on that comment, yes, that was the note that I was referring to.

[Coram Williams, executive]

Yes.

[Kean Marden, analyst]

So often auditors needs basically line of sight over the financing situation for the next sort of 12 months. So is that something that you'll need to refinance in early 2024? Or can you push the refinance until late '24? Or in fact, do you not need to refi because you already have capacity in place elsewhere?

[Coram Williams, executive]

So to be clear, we have refinanced it, we -- it does not fall again in 2024. So we do not need to do that. And the auditors will look at growing concern every year and there's no problem with that discussion.

[Operator]

The next question comes from the line of Rory McKenzie with UBS.

[Rory Mckenzie, analyst]

Sorry again, two questions, please. The first is a couple of detailed points on growth. So within the organic growth, can you give us an estimate of volumes and therefore the remainder being waived or fee inflation within that 4% organic growth. And then [ Mr. Check ], is it fair to say that the Australian contract added just over 1% to group revenues this quarter? Then secondly, just to come back on the cost savings. Can you maybe help us understand what the G&A savings were sequentially? Just trying to split that EUR 50 million sequential reduction in SG&A into those savings plans and then trying to understand what may be happening to the selling costs, if you like. I guess maybe we're a bit confused as to whether your plans and guidance for Q4 imply there are going to be some re-additions to that kind of selling costs and maybe therefore headcount additions coming back in now to support top line, whether it's just kind of pure seasonality that you're wanting to?

[Coram Williams, executive]

Let me take each of those. So in terms of volume and price, the volumes were roughly flat. The price was obviously driven by wage inflation and we've seen low to mid-single digits on that. It's -- we're seeing wage inflation across the business. It continues to be strong, driven by talent scarcity. And if you're breaking it down by market, then it is in the territories where we do not have such regulation, it's running slightly higher than low to mid-single digits. But in the territories where we have collective labor agreements, it's pretty much in line with that low to mid-single digits. And the other point is we are making absolutely the most of this through our dynamic pricing strategy. And you see that because the spread between pay rate and bill rate has increased in all of our G7 countries in Adecco bar, the U.K. and that's about the mix.On [ DFR ], I think you're probably overstating the effect of that Australian contract. It's lower than that at a group rate. Maybe the easiest way to think about it is to look at the APAC growth rate, which was just over 20%. If I exclude DFR, then it is -- it's probably in the mid-teens. So hopefully, that gives you a sense of the size and scale. In terms of the movements on G&A, then the sequential movement from Q2 to Q3 was actually quite significant. It was about EUR 50 million. A lot of that was from G&A from the savings program. But remember, the year-on-year point, I think it's key, which is the EUR 24 million that we've delivered.And then in terms of how to think about Q3 to Q4, I've tried in previous answers to give you a sense. So year-on-year, think of a little bit more on SG&A than the 1% down that you've seen. And sequentially, I would work on the basis from Q3 to Q4 that we go up slightly by, say, EUR 10 million to EUR 15 million. And it's all about the phasing of corporate costs. So hopefully that gives you a handle on how to model it?

[Rory Mckenzie, analyst]

Yes, that's all really helpful detail. Maybe then just lastly, to helpful out at this point, your FTEs were still reducing sequentially through Q3? Do you expect that number to be down further in Q4?

[Coram Williams, executive]

I mean the point about FTEs, I would expect our G&A FTEs to reduce because that's clearly part of driving the savings. At this stage, I don't want to make a prediction on selling FTEs because we adjust to the market conditions that we see. And you've seen, we've been cautious in Q3 on selling FTEs. We've reduced in the U.K., in particular, we've reduced in France. And I suspect that's probably the direction of travel you'd see in Q4. But where we see growth, where we see opportunities to take further share, then we'll invest. So -- but definitely on G&A expect a further reduction.

[Denis Machuel, executive]

And if you look at what we've done in Q3, our selling FTE are minus 4% year-on-year, but non-selling FTE is minus 7%. So that gives you an idea -- I don't think you should immediately translate for next quarter, but that gives you an idea of the agility that we have and the balance that we try to always have between the dynamic of developing the business and also the streamlining of what we do in the rest of the structure.

[Operator]

The last question comes from the line of Michael Foeth with Vontobel.

[Michael Foeth, analyst]

Two questions. Just the first one is on this Australian contract. I think it's pretty interesting, the -- what you mentioned delivered by Adecco powered by Akkodis, could you give a bit further insight on how that's structured and what the duration of the contract is? And the second question is, could you give us a sort of a general understanding between the mismatch of the negative momentum in tech staffing in general and the talent scarcity that everybody is talking about in the digital transformation and in the tech sector in general.

[Denis Machuel, executive]

So on the Australian contract, which we're very happy about so far, actually, the business unit has contracted where DFR is Adecco. We are -- it's -- you could qualify as the ultimate RPO because we are -- the whole defense forces ask us to do the whole recruitment process for every single person that will enter into the military for the next 7 years. It's a 7-year contract. Hopefully, we'll be able to extend it afterwards, but the first thing is 7 years. The fact that -- so we run the whole thing. We go to the candidate market. We strategize the recruitment aspect of things, we do everything. The final decision-making is, of course, done by the military people. But we really do the whole organization. I mean it's a very important contract. It's powered by Akkodis because the technology that we used and it's -- you can imagine, we've digitized a lot of the processes, we've created a fantastic career opportunity portal where people can really navigate with artificialities on the [indiscernible] possible future, et cetera. So this -- and so the tech inside is powered by Akkodis and so the 2 teams have joined forces to create this absolutely integrated service that's getting very good traction. So we're very pleased with the way it's going so far. We're super -- we have a very close relationship with our clients and it's promising. And that's really this complementary of the 2 businesses that have made us unique on that market.Now on the mismatch, I'm not sure we can talk about the mismatch. Yes, definitely, particularly in the U.S., the tech staffing market is down. And as I said earlier, we're performing more or less in line with our peers. What happens is that particularly global -- the big tech piece, big tech clients are recalibrating. They're recruiting massively during COVID and post-COVID, they are more recalibrating than anything else. And so the -- so that -- and of course, the tech staffing piece is the most flexible one. So when you recalibrate, the first thing you do is you act upon that. And the fact that the tenant scarcity cast piece speaks into the speed at which people can also find a job. And the good news is in having this one LHH, which also [ Gayle ] is going to talk about next week is that we drive really the people that are managed by our career transition teams directly to our recruiters. And we see -- I would take quite a solid momentum in how they find quickly a job.So again, it's more linked to the actual context than to this strong, I think, underlying and structural growth sector that tech represents. So yes, there's a particular context, but definitely [ tanescacity ] and particularly when you talk about artificial intelligence skills will remain, I think, a fundamental positive trend for us. And also in terms of value creation, as I was mentioning, our consulting business is very solid. I think it says also, it explains why we had to do this move to acquire AKKA because it brings that a bit less cyclical, more sticky with our clients that business. And we grew 24% in the US with the consulting business. France is growing 9%, so that says something about the solidity of that business, even though it's also a bit impacted by the overall take down turn. But on the long run, we're very, very positive on that business.

[Operator]

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Denis Machuel, CEO, for any closing remarks.

[Denis Machuel, executive]

Thank you very much. And again, thanks to all of you for having attended. As you could see, we delivered a strong quarter. Of course, the outlook is still full of opportunities and challenges. We're going to -- we are going to be able to discuss on all this next week. You will have a deep dive on Akkodis, all GBU presence will be there. And I'm sure we're going to have very rich exchanges. So looking forward to that moment and until then, take care. Have a great day.