AHEXF - Adecco Group AG (AHEXY) Q3 2023 Earnings Call Transcript
2023-11-03 08:23:03 ET
Adecco Group AG (AHEXY)
Q3 2023 Earnings Conference Call
November 02, 2023 04:30 A.M. ET
Company Participants
Benita Barretto - Head, IR
Denis Machuel - CEO
Coram Williams - CFO
Conference Call Participants
Andy Grobler - BNP Paribas Exane
Simona Sarli - Bank of America
Konrad Zomer - ABN Amro ODDO
Kean Marden - Jefferies
Rory McKenzie - UBS
Michael Foeth - Vontobel
Presentation
Benita Barretto
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 Deni.
Denis Machuel
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 €24 million of G&A savings. Consequently, the Group has increased its anticipated year-end savings run rate from €60 million to €90 million.
We're 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 a tireless leadership of HR where over her five years as Global Head she's built a strong HR foundation for the Group.
Moving now to the GBU highlight, 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 and of course 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 of 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 cost GBU and upselling capability. Walking from left to right; first, the Group was awarded a four-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 omnichannel approach, such that the client can leverage both the branch network and digital capabilities. The client was also excited by the possibilities in white collar for its subsidiaries from adding LHHs services. Also helping secure the deal, the client found Adecco’s on site workforce prediction and diagnostics capabilities better than competitors.
Second, illustrating across GBU collaboration. Pontoon won a three 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 financial performance. Revenues were €6 billion that’s 3% year-on-year on an organic trading days adjusted basis. Gross profit of €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 €235 million at 14% year-on-year. The EBITA margin was solid at 4% improving 40 basis points year-on-year. Adjusted EPS was $0.85, 6% lower year-on-year. Net debt to EBITDA ended the period at 2.9 times in line with management expectations and lower sequentially. The rolling last four quarter cash conversion ratio was 85%. It was strong results during your period of growth and transformation. And cash flow from operating activities was €282 million in the quarter at €172 million year-on-year. Let me now hand over to Coram who will provide more detail on the results.
Coram Williams
Thank you Deni and good morning everyone. Let me give you the context within each GBU beginning with Adecco on Slide 6. Adecco’s revenues reached €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 up 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 UK and Ireland, revenues were up 1% reflecting recent contract wins. The Nordics were impacted by new construction regulations under more challenging market. The EBITA margin reflects lower volumes and adverse client mix, partly mitigated by solid pricing and right sizing, with an approximately 10% reduction in headcount made in the latter part of the quarter. The DACH regions 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 right size 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 were 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 was 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 GBUs 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 €59 million ahead of the targeted in year synergies of €50 million to €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 UK and across both permanent and flexible professional placement. 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 was subdued. Both units continue to be challenged by the tech sector downturn. LHHs 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 Q3s 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 points year-on-year improvement was driven by a combined 30 basis point negative impact from gross margin and other items. Improved productivity with the group's gross profit per selling FTE up 6% which have a 30 basis point positive impact and G&A savings of €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 €150 million target in run rate terms in mid-2024. And today, we upgraded our anticipated year-end run rate to €90 million from €60 million previously.
Moving to Slide 11 and starting with cash flow. The rolling last four quarters conversion ratio was 85% up sequentially and a strong result during a period of growth and transformation. Cash flow from operating activities was €282 million in the quarter, up €172 million year-on-year. DSO was 54 days improved by one 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 €2.817 million at the end of Q3 2023. The net debt to EBITDA ratio excluding one offs was 2.9 times, an improvement versus the 3.2 times 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 2.5 times.
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 off substantially upon successful delivery of our savings program. Importantly, our financing structure is solid. Leverage is not constraining the business's 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 debts, and an undrawn €750 million revolving credit facility. In addition, the company has no debts 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 macro-economic 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 2023 levels. And with that, I'll hand back to Deni.
Denis Machuel
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 7th, 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.
Question-and-Answer Session
Operator
The first question comes from the line of Andy Grobler with BNP. Please go ahead.
Andy Grobler
Hi, good morning. Can I ask a couple please. Adjust firstly on the savings, you could just help us kind of quantify the incremental savings into 2024. So in terms of how much contribution to EBITDA 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 two? Thank you very much.
Coram Williams
Thank you, Andy. This is Coram, I'll take the savings question and then Deni 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 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 dropped 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 will be 90 million. You know that we made most of the -- 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 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
And as far as the digital platform, we're quite optimistic first in the -- and happy with the performance that we see today. QAPA is growing double digit, SOI [ph] is growing also high double digits. So all this is very promising. On top of that, we see very good both clients and end 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 there next week. We are 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 [indiscernible] that fast 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 prospective job opportunities, upskilling and reskilling possibilities. So we are accelerating our digital transformation. We have now on board since the beginning of September, Caroline Basyn, our CDIO and we see good momentum there. So very promising on that thought.
Andy Grobler
Okay, thank you very much.
Denis Machuel
Thanks, Andy.
Operator
The next question comes from the line of Simona Sarli with Bank of America. Please go ahead.
Simona Sarli
Yes, good morning, and thanks for taking my questions. So I will take one by one, I have two. 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 Euro million goes substantially up. So probably more than 70 million. I understand that there is a little bit of seasonality around corporate cost, but that would be probably a 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 costs savings? Second question, actually, I will leave it to this one and that I will go with the second one. Thanks.
Coram Williams
Sure, I'll pick that up Simona. I mean, just to reiterate the points that I've just made, you know, we're very firmly on track in terms of the savings program. But Q4 always has some seasonality in corporate. It moves around, we have movements in bonus provisions, etc. 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
Thank you. And second question, you made a point at beginning of the presentation that currently gross profit 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? Thanks.
Coram Williams
Thank you, 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 are 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 echo, 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.
Simona Sarli
Thank you.
Operator
The next question comes from the line of Konrad Zomer with ABN Amro ODDO. Please go ahead.
Konrad Zomer
Hi, good morning. Thank you for taking my questions. 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? And 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, the cost savings. It's great to see you upgrade your guidance from 60 million to 90 million by the end of this year, but you confirm the 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? Thank you.
Denis Machuel
Thank you, Conrad. I'm going to take all of those. So on Q4, in terms of our guidance for one-off costs. Now, you are absolutely right. We're highlighting 40 million relating to the G&A savings program, and we're also flagging around 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 a 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 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 60 to 90 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 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 150 because that's what the plans show.
And then on the auto sector, it's a 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 are 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 a 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 refer 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 markets. 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 automotive sector has to undertake. And there's a lot of it because of autonomous driving, the green transition, electric vehicles, etcetera. And we would anticipate that that demand continues to be strong. So I hope that gives you a sense.
Konrad Zomer
That's very useful. Thank you.
Operator
The next question comes from the line of Kean Marden with Jefferies. Please go ahead.
Kean Marden
Thank you. Morning all. I've got two. 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 €500 million EMTM notes. Do you need to refinance that before the report and accounts are published so that your auditors give you a sort of going concern, sort of a checklist sign off and therefore that's something that you might need to refinance in sort of the first quarter of next year?
Denis Machuel
Hi Kean, and let me pick up the first one and then of course Coram can take the second one. So, let me give you an overall perspective on the -- in Americas. I think that Americas is more -- North America, you know, that LatAm is doing super well and it's mostly an adequate business and it's growing superfast. On the North America piece, I will 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 were 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've put good people, we've put experts there, so we are 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 report, of course.
Now, if I go to LHH, a career transition is super, super strong. It's a big -- the big chunk of that business is in the U.S. We are capturing market share. We are the world leader. The recruitment session piece, permanent recruitment is especially pressured but we are making the best use at the moment of the market downturn to review performance, work on cost, improving operational discipline. So we are 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 two, three quarters, we have outperformed the competition. I wouldn't call it a success because everybody's down, so it's not fantastic, but it's encouraging. We have a new leader there who is going to attend and be with us in London next week at the Capital Market 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 in the market. So I think -- and we see on a few operational KPIs that also Geno will talk about next week, but I am this fundamental changes, this sort of back to basic approach is delivering encouraging results. So, of course we are -- I think we're on the right track. There's still a long way to go, but the fact that we are profitable this quarter is encouraging.
Coram Williams
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 €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 750 million undrawn RCF.
Kean Marden
Sorry to interrupt. That was the note that I was referring to. 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 2024 or in fact do you not need to refi it because you already have capacity in place elsewhere?
Coram Williams
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.
Kean Marden
Thank you very much.
Operator
The next question comes from the line of Rory McKenzie with UBS. Please go ahead.
Rory McKenzie
Hi, good morning all. It's Rory here. 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 weighed or fee inflation within that 4% organic growth and then just to check, is it fair to say that the Australian contract added just over 1% to Group revenues this quarter? Then second leads 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 50 million sequential reduction in SG&A into those savings plans and then trying to understand what's maybe happening to the selling costs, if you like, I guess maybe we're a bit confused as to whether your plans and guidance in Q4 imply there are going to be some new additions to that kind of selling cost and maybe therefore headcount additions coming back in now to support top line, whether it's just kind of pure seasonality that you are pointing to?
Coram Williams
Sure. Thank you, Rory. 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. We are 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 UK 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 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 50 million. A lot of that was from G&A from the savings program, but remember the year-on-year point I think is key, which is the 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, then the 1% down that you've seen. And sequentially, I would work on the basis from Q3 to Q4 but we go up slightly by say 10 million to 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
Yeah, that's all really helpful detail. Thanks, Coram. Maybe then just lastly to help with this point, your FTEs were still reducing sequentially through Q3, do you expect that number to be down further in Q4?
Coram Williams
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 you 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 UK 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. But definitely on G&A expect a further reduction.
Denis Machuel
And if you look at what we've done in Q3, our selling FTE are minus 4% year-on-year, but non selling FTE are 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 all have between the dynamic of developing the business and also the streamlining of what we do in the rest of the structure.
Rory McKenzie
That's very helpful, thank you both.
Operator
The last question comes from the line of Michael Foeth with Vontobel. Please go ahead.
Michael Foeth
Yes, thank you. Good morning, gentlemen. Two questions. Just the first one is on this Australian contract. I think it's pretty interesting 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's talking about in the digital transformation and in the tech sector in general?
Denis Machuel
Sure. Hi Michael. So on the Australian contract, which we're very happy about so far. Actually the business unit as contracted with DFR is Adecco. We are -- you could qualify it 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 seven years. It's a seven-year contract. Hopefully we'll be able to extend it afterwards. But first thing is, is seven years. The fact that -- so we run the whole thing. We go to the candidate markets, 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've used, and you can imagine we've digitized a lot of the processes. We've created a fantastic career opportunity portal where people can renavigate with artificial intelligence on their possible future, etcetera. And so the tech inside is powered by Akkodis. And so the two teams have joined forces to create this absolutely integrated service that's getting very good traction. So we are very pleased with the way it's going so far. We have very close relationship with our clients, and it's promising. And that's really this complimentary of the two 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 are 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 are recruiting massively during COVID and post COVID. They are more recalibrating than anything else. And 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 talent scarcity 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 Gaëlle 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 a -- we say 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 is a particular context, but definitely talent scarcity, 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 bit less cyclical, more sticky with our clients, that business. And, we grew 24% in the U.S. with a 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 tech downturn. But on the long run, we are very, very positive on that business.
Michael Foeth
Okay, very interesting. Thanks. Looking forward to next week.
Operator
Well, ladies and gentlemen, that was the last question. I would not like to turn the conference back over to Denis Machuel, CEO, for any closing remarks.
Denis Machuel
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.
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Adecco Group AG (AHEXY) Q3 2023 Earnings Call Transcript