Good morning everyone, and welcome to this virtual analyst meeting. My name is Christine Disch, and I'm the Investor Relations Director at Arcadis. We are here to discuss Arcadis Q3 results released this morning. With us on the call are Peter Oosterveer, our CEO, and Virginie Dupérat-Vergne, our CFO. We will start with a presentation by Peter and Virginie, which will be followed by Q&A. For the analysts attending this call, if you would like to raise a question, please notify us using the chat box, saying, "I have a question," or just type question. Please do so only after we've opened up for Q&A. I will call out your name, after which you can verbally raise your question to Peter and Virginie. Kindly keep it to a maximum of two questions at a time.
Lastly, I would like to call your attention to the fact that in today's session, management may reiterate forward-looking statements which were made in the press release. Please note any of these risks related to the statements which are more fully described in the press release and on the company's websites. With these formalities out of the way, Peter, please over to you.
Thank you, Christine. Good morning everyone, and welcome to our Q3 results. Over the last three months, we have continued to see strong growth and improved performance across our businesses, driven by our three global business areas, resilience, places, and mobility. Our net revenues totaled EUR 740 million and increased organically by 10.9%, while our backlog remains in a strong position with 5% growth underlining buoyant client demand. Our operating EBITDA margin improved to 10.3%, up from 9.5% in Q3 last year. A significant year-on-year improvement driven by all three GBAs. Let's take some time to focus on our three business areas and see what is driving our growth.
Our resilience business continues to benefit from increased client demand for environmental restoration, climate adaptation, energy transition, and advisory and water optimization solutions, particularly in the UK and Europe. This demand led to organic net revenue growth of 13.7% and a healthy year-on-year backlog organic growth of 5.4%. The market outlook remains strong for areas like energy transition, particularly in Europe, given the dependency on Russian oil and gas. We're seeing many energy clients seek secure and sustainable solutions with a growing focus on grids, renewable energy generation, electrification of transport, hydrogen, and the creation of local energy systems. TenneT is one such client example where we have recently won a framework to develop a 9 GW offshore wind project in Belgium and the Netherlands.
With all eyes on COP27 in Egypt next month, and the hope for even greater clarity from world governments and leaders to meet Paris 2050 net zero targets, it is reassuring to see that our clients remain committed to addressing the impacts of climate change. For example, in New York, we have recently been selected by the Battery Park City Authority as lead designer and engineer to help create an integrated flood risk management system on the west side of Lower Manhattan. With rising sea levels posing an ever-present risk, the mile-long flood barrier system will not only help to protect the city from coastal flooding, but will also include wider improvements to the city's drainage infrastructure and underground sewage system.
In places, net revenue organic growth stands at 3.6% with large wins in North America and Germany, and increased demand from manufacturing and government clients. This was slightly offset by weakening market circumstances in China, mainly due to the continued COVID lockdowns. We continue to see significant success supporting the development of industrial manufacturing facilities and so-called gigafactories. A salient example is our work with a high-end automotive manufacturer developing their first EV plant by providing design and project assurance. This brings our GBA model to life with experts coming together in collaboration from North America, the Netherlands, and the UK to provide a seamless experience for the client. This ability and agility of connecting our people with each other and with clients wherever they are located is a key strength for Arcadis as we move forward.
The appetite for smart and sustainable buildings and net zero facilities also continues to grow as clients increasingly want to reduce their carbon and their cost from both existing and new build developments and projects. For example, in Paris, Arcadis is working with partners on an extension to the National Archives as part of a commission by the French Ministry of Culture. Our team will design an intelligent management and control system to optimize the energy footprint and ventilation of the new building, while minimizing the impact on existing green spaces and protected trees on the project. Once complete, it will create a pleasant and cleaner environment for employees and visitors of the archives, and ensure that the precious documents stored in the building are protected for generations to come.
Within our mobility business, significant rail wins in the Netherlands and a growing appetite for smart mobility solutions from highways and public transport clients helped to deliver organic revenue growth of over 15%, and a very strong backlog growth of 9%. The mobility and infrastructure market continues to benefit from infrastructure stimulus packages in North America, in Europe, and the UK, leading to a healthy pipeline of activities for 2023. Client demand for electric vehicle solutions and the increased use of data to inform infrastructure investment and improve the passenger experience also shows no signs of slowing down. The recent acquisition of the IBI Group and their experience in developing digital tools, including CurbIQ and Travel-IQ, will further help to pursue new opportunities and strengthen our mobility business, both in North America and across the world.
The commitment to sustainability and reducing embedded carbon in infrastructure continues to remain key priorities for mobility clients. In the UK, as an example, we're part of a joint venture team working with High Speed Two, the largest infrastructure project in Europe, to halve the amount of embedded carbon in construction. Our pioneering approach is currently being used on foundation works for one of the project's main viaducts, and was inspired by structures on the latest French high-speed TGV lines. By using significantly less carbon-intensive concrete and steel, we will be able to save an estimated 7,430 tons of carbon, the equivalent of 20,500 return flights from London to Edinburgh. All these examples highlight our strong desire to create integrated solutions that truly deliver sustainable outcomes and generally improve the quality of life for the clients and the communities we serve.
I'll now hand over to Virginie to talk to the financial figures in more detail.
Thank you, Peter, and good morning, everyone. Before we go through the quarterly results, I would just like to highlight that our financial statements reflect the closing of the acquisition of IBI, which happened on 27th September 2022. Therefore, the balance sheet fully includes IBI contribution, as well as related balance sheet KPIs. The P&L contribution of IBI of three days in the quarter has been assessed as non-significant, and as such, the P&L elements of the quarter, as well as related KPIs, do include Arcadis contribution as a standalone. Over Q3, we delivered net revenues of EUR 740 million, representing a strong organic growth of 10.9%. Growth was driven by all three GBAs, with resilience and mobility being exceptionally strong in North America and the UK. In addition, the currency impact was 9%.
Our operating EBITA was EUR 76 million as the operating EBITA margin improved to 10.3% versus 9.5% in Q3 last year, driven by all three GBAs, with a significant year-on-year improvement of 80 basis points from improved operational efficiencies, despite lower working days hitting all three GBAs in the UK and Australia due to the Queen Elizabeth II's funeral. Our EBITA was EUR 27 million for the quarter, as non-operating costs amounted to EUR 49 million and includes some transaction costs related to the three recently announced acquisitions and a net loss on divestments of non-core geographies in Singapore, Malaysia, Hong Kong design and engineering business, and non-core activities as Switzerland's labs and French environmental restoration and waste business. These net losses are non-cash costs.
Free cash flow generation during the quarter was EUR 38 million and below last year's EUR 75 million, driven by sharp revenue growth elevating working capital levels and some transaction costs related to the recent acquisitions. Free cash flow generation year-to-date was EUR 27 million, which was impacted by a normalization of working capital levels compared to 2021. Our net debt increased to EUR 880 million as we drew the bridge loan of EUR 600 million to close IBI transaction, and IBI net debt elements are bringing an additional EUR 54 million on our balance sheet. Revenue growth accelerated in Q3 to a very solid organic growth of 10.9%. The operating margin for Q3 at 10.3% improved year-on-year and followed our seasonal pattern of a typically stronger second half of the year.
We continued our efforts to successfully pass on wage inflation. Net working capital percentage improved versus last year. We remain disciplined on net working capital management in these times of significant revenue high growth, maintaining a 13.8% net working capital as a percentage of gross revenues and 72 days of DSO. We saw favorable net working capital development during the quarter. With an organic increase of 5% year-on-year, we had a very strong order intake of EUR 780 million. Finally, divestments of non-core geographies and businesses resulted in a backlog reduction of EUR 94 million, and we saw almost no cancellation in the quarter. IBI's backlog of EUR 130 million was added, and all in all, this resulted in a net record backlog of EUR 2.8 billion.
Turning to the performance of the GBAs in the quarter. As Peter mentioned, we saw resilience delivering a record 13.7% organic growth during the quarter, thanks to the strong contributions of US Environmental and Water Solutions and even stronger UK and Continental Europe contribution. In this area, the growth has been supported by the successful optimized onboarding of new hires. Our Places GBA did deliver a modest organic growth of 3.6%, resulting from the combination of a very strong growth in the UK and in a slightly lesser extent in Continental Europe and in the US, offset by a decline in Greater China area, where we currently see market circumstances weakening and where we have a very selective approach in the project we take in all type of solution we offer, from project management, cost and commercial activities to architecture.
Finally, our Mobility GBA delivered a stellar growth performance with an organic growth rate of 15.4% in the quarter, resulting from the execution of large mobility projects in Australia and in the UK notably, supported by double-digit growth on almost all markets where we operate. Globally, on all GBAs, the pace of growth has allowed to limit the effects on P&L of the addition of an exceptional additional bank holiday in the UK and in Australia in the quarter. On the back of the strategic decisions we took earlier in the year, we start our Q1 with a record EUR 2.8 billion backlog value, our highest ever. This includes IBI backlog, which again is EUR 530 million at the end of Q3, and that represent a strong backlog growth of 17% year-on-year, which is almost fully an organic growth.
In terms of geographic split, we show a rebalanced backlog tailored to high-growth geographies and businesses with an increased share for Americas, representing now 50% of our backlog. On average, Places and Mobility backlog contain project of longer duration compared to Resilience. That's the reason why we have a 34% backlog for Resilience at the end of the quarter, and a rather longer backlog on Places and on Mobility. With that, I will hand you back to Peter.
Thank you, Virginie. I hope you do agree with us that these are strong set of results. Now I'd like to focus a little bit more on our strategic progress to date. Let me begin by doing so and showing how we are bringing digital leadership to the heart of all we do at Arcadis. Following the successful completion of the IBI acquisition in September, we're now moving forward with establishing our fourth GBA called Intelligence. The new GBA will combine the best of IBI's intelligence segment and Arcadis Gen to create an attractive suite of data-driven products and solutions to meet the ever-changing priorities of our clients. Intelligence will support Arcadis' existing GBAs and deliver a wide range of services from tech-driven consulting, such as software and systems design and integration, software as a service or software as a product.
One such example is Travel-IQ, an advanced traveler information system designed by IBI that provides real-time, multimodal trip planning to the public, which is highly complementary to our Mobility GBA solutions. For sustainable solutions, I want to put the spotlight on the recent and intended acquisition of DPS. The acquisition of 2,800 people business will drive our ability to increasingly serve our clients with sustainable solutions across all phases of their asset lifecycle. Clients in the life sciences and semiconductor sectors, which are the sectors in which DPS operates, are increasingly looking for full service offering from an advisor they can trust and an advisor that offer speedy delivery. Arcadis already has a critical role in early stages of these type of projects, particularly around site identification, environmental planning and permitting, and at the end of the project, including facilities management.
Now DPS fills in the significant gaps, providing expertise at the core of the project. In the case of semiconductor manufacturing, the design and build of the manufacturing facilities to ultimately produce the semiconductor chips. Together, Arcadis and DPS are strongly placed to be that full service provider for clients in the life sciences and industrial manufacturing and technology markets, combining our complementary service offerings, expertise, and our global reach. On focus and scale throughout Q3, we've made significant progress in optimizing our strategic portfolio and focusing our efforts on operations where we see the most attractive opportunities. As Virginie mentioned earlier, this has resulted in the divestment of our non-core business in Switzerland, Malaysia, Singapore, and our design and engineering business in Hong Kong. These divestments represent about 900 people and about EUR 47 million of annual net revenue.
They were in addition to the divestments of the Czech Republic, Slovakia, Thailand, and our non-core environmental restoration business in France in the first half of 2022, which altogether represented about 190 people and about EUR 11 million of annual net revenues. We will continue to review the strategic portfolio in Q4, again, based on criteria including scalability, long-term growth potential, financial performance, and scope of services available to our clients. To conclude, I'd like to summarize our strategic progress this year. Following the implementation of our global operating model and the creation of the three GBAs, I am confident we're now very well-positioned for organic growth with inorganic growth opportunities.
The acquisitions of IBI, Giftge Consulting, and the planned acquisition of DPS are not only fully in line with our strategy, but they will also allow us to accelerate the delivery of our 2021, 2023 targets. Furthermore, we have seen growing demand for digital products and sustainable solutions from clients, highlighted by strong results and a record backlog. The recent acquisition of Giftge Consulting will only further strengthen our position in the energy transition market. Arcadis joining forces with DPS will allow cross-selling of sustainable solutions, including sustainability advisory, environmental social planning, and permitting. By focusing and scaling our business across 2022, we have driven operational efficiencies through the new GBA model and greater use of GECs, focused on high-growth markets, and moved away from countries that are considered non-core from a geographical or from a services point of view.
In 2023, we see greater opportunities to further scale our operations and focus on the buoyant North American market, bringing the best Arcadis has to offer to address clients' needs. To wrap up, although the evolving geopolitical situation and inflationary headwinds remain firmly on our radar, our strong revenue growth, record backlog, combined with the exciting new growth opportunities IBI, DPS, and Giftge offer, positions us really well to meet our 2023 strategic targets. I can only be very proud of all the teams across Arcadis that have kept the right focus on our clients in these busy but yet exciting and challenging times for our company. It is on that note that you will have also heard my news today that I plan to retire at our AGM in May of next year and hand the baton over to Alan Brookes, our Chief Operating Officer.
Alan brings significant international senior leadership experience, a very strong strategic, commercial, and operational background, and a deep understanding of Arcadis. It's been an honor and privilege to lead Arcadis over the last five and a half years. I will obviously miss these sessions with all of you greatly. With that, I'd like to hand it over to Christine, who will, after some short introductions, open it up for Q&A.
Thank you, Peter. Hereby, I would like to open it up for Q&A. I already see some requests for questions coming in. Let's see. Okay, Martijn, I see that you have a number of questions. Please go ahead.
Yes. Thank you, Christine. Good morning, everybody. Can you hear me?
Yes, we can. Go ahead.
Okay, cool. My first question is on the organic backlog developments. If you take the last three quarters, even though still healthy, they have declined. Yet you speak in the press release about strong demand. Can you explain the developments? Secondly, this is still one question. Should we read that statement on strong demand that you're expecting an acceleration again going forward? That's question one. The second question is about cash conversion. Obviously leverage is up 2.2 times net EBITDA pro forma at the end of this quarter. You've mentioned talking about the acquisitions that deleveraging will mainly come from the high cash flow conversion, yet cash conversion in the last two quarters hasn't been that great.
My question is, what are you going to do to improve that? When will that actually happen? Is that already going to happen in Q4 or will that take a little bit more time? I'm just going to sneak in a third question. Have you guys had any update in terms of thinking about your balance sheet, the debt and the refinancing question? Thank you very much.
Yes, thanks, Martijn. Let me, as we almost always do, kick it off and address probably the first half of your three questions, and then I'll turn it over to Virginie to answer the second half. The strong demand is obviously reflected in the backlog which we already have. To grow a backlog while you, at the same time, also grow the work you execute, I think is a reflection of that demand. We have grown substantially, but yet with the growth, we have still been able to take on more work than we have performed. Maybe a bit more anecdotally, and not reflected in the numbers, but still important is what we're hearing from our clients.
Despite the challenges, which I think we all face with the geopolitical tension, the inflationary environment, at the same time, many clients, particularly in the, say, private domain, do see the need to accelerate the energy transition as a way to actually allow them to survive. That sounds somewhat dramatic, but it is a fact. It is a fact that, if they don't accelerate the energy transition with the challenges we see immediately ahead of us, that it'll be really difficult for them to survive. We see examples, which I don't need to probably mention, but you just have to follow what has been seen, if you like, in the local press, recently. The strong demand is something we expect to continue despite the challenges.
That doesn't mean that we're ignorant and turn away from recognizing that these challenges exist. The fact of the matter is that what we hear from our clients is a need to help them with energy transition and climate adaptation. If you then add on top of that what we obviously see from the public clients, particularly in the regions which have our full focus, and that, of course, includes Europe and North America. Particularly when you look at government investments in many plans which have to do indeed with a greener future, with more sustainable assets, then that does indeed, at the end of the day, suggest that the demand is still very strong.
Your second question is on free cash flow. What are you going to do to improve that? As you will have noted from prior years, free cash flow, it's quite seasonal. That has also been the case last year. Our expectation is that it will be exactly the same this year as well. It is not like we need to do a lot of new things. The focus on free cash flow started back in early 2020. I think from that moment onwards in 2020 and 2021, over the year, we have generated strong free cash flow. With a strong finish to the year, we expect to do the same in 2022.
If I may follow up on that. In Q2, you mentioned that unbilled receivables went up because of high growth. You're saying that is basically what happened in Q3 again, and that will reverse in Q4. That's basically the message.
Q4 will be the usual strong Q4 as we've seen in prior years.
Okay, got it. Virginie?
Again, I think that if you have a look at the big metrics of the balance sheet, you can see that the DSO, remain maintained and the net working capital percentage is also really maintained, which show that yes, it's increasing, but it's not increasing in the same pace. The effort of the team to maintain that are quite good. I would say that what is impacting the cash flow of the quarter is obviously additional, year-on-year elements of payments that we've been doing due to the transactions that have been happening over Q3. The discipline is there and the cash conversion levels are maintained.
W e have cash conversion which is really back-end loaded in the year. We have typically very high DSOs as towards the end of the year. We still expect to see that this year. There is no specific issue on our side. seeing where we are today, this is fully in line with what has been happening to the group over the last 6-12 months, I would say.
Just one minor follow-up. Will you be able to share the amount of the transaction cost so we can calculate, impute ourselves a bit what the working capital impact was?
Also you'll get a full P&L in a full year as usual, getting everything in. Part of it for sure will probably go on in Q4. That remain a small bucket of cost quite well managed. I would say that the biggest element is non-cash costs related to the loss attached to the divestments of Southeast Asia and other small European elements.
Okay. Thank you, Martijn.
I think that the last question of Martijn was around financing and such, so I don't want to forget that one.
Yes, please.
Martijn, thanks for the question. I think that we have the bridge financing, which is in place. We've been doing it as you can expect. It's there. It's something which is valid, for the next year with two opportunities of extending it. It's quite an attractive rate and such. Hence, we are not going to sit on it because that's not the governance of the company. We'll seize any window we think is opportunistic in the months and in front of us, to convert that in a solid financing element.
Okay. Thank you very much.
Okay.
I would like to give Quirijn Mulder from ING the opportunity to raise his questions. Quirijn, go ahead.
Yes. Good morning, everyone. My questions were especially on CallisonRTKL. From the presentation of DPS, I remember that there was something about, let me say, the integration of CallisonRTKL within IBI. I must be honest there, I had expected some charges there. Can you maybe update us on the integration there for CallisonRTKL within IBI? That's my first question.
Yes, sure, Quirijn. Obviously, we closed formally on the IBI acquisition on the 27th of September. That then formally also allowed us to start working on the actual integration. Now, that doesn't mean that we didn't use the time between the 18th of July when we announced the intended acquisition and the 27th of September wisely. We used most of that time to actually prepare ourselves for the integration. In the meantime, we have increased the conversations between the IBI Buildings group and CallisonRTKL. The integration is actually in full swing. That will also be signified by some announcements on the leadership.
I don't want to get ahead of myself in terms of informing the organization and the leaders themselves first, b ut suffice it to say that there's a lot of excitement on both sides to actually create what will be arguably one of the biggest global architectural divisions in the world with close to 2,000 people. It is in full swing. I would probably ask you to stay tuned for any further notification in the not-too-distant future, including who will actually be the leader of the combined organization.
Okay. My second question is about margins. I know that, let me say, first half of 2022, there was margin pressure on mobility and on the margins of resilience related to digitalization and related to hiring people. Did that diminish in, let me say, Q3? What are we looking forward? In relation to that, what is the attrition rate for Q3, and what are your expectations there?
Thanks, Quirijn. Maybe I'll take this one on Q3 margins. Thanks for the wrap-up of what happened before. It's exactly that . I think that maybe the point I would like to highlight on Q3 is that for sure there is a seasonal pattern, and we see that again this quarter. The growth is really fueling in our P&L and I think you know that as we said, our wage inflation progressively see their benefits in our P&L. I would also want to highlight that something you know as was highlighting because this has an impact obviously on the revenue growth.
As you can imagine, this has an immediate impact on the P&L performance, is the additional bank holiday on a few of our key countries, which is obviously weighing on the performance and h as an impact, whatever on our already very good performance of the quarter. That I think gives you also a little bit of the flavor of where we think we are currently. I think that Resilience has been seeing obviously the number of people quite growing. The onboarding process optimization is bringing fruits, and we definitely see that in the performance of the quarter. That is a little bit not exactly the same model, as Mobility and Places.
The average length of the backlog is a bit shorter, and we go as fast as we have, the number of people to get additional service orders and then execute the backlog. That really is bearing fruit. In terms of attrition, the stabilizing element we've been talking about is still the same and I guess that the average number is something which has not really moved a lot over the last quarter. Definitely, we really benefit from getting that down and being so successful in how we bring new people in.
Okay. Thank you.
Thank you, Quirijn Mulder.
Next up is Luuk Van Beek with Bank Degroof. Luuk, go ahead, please.
Good morning. First of all, a question on Places where the organic growth was a bit lower than the other divisions. You mentioned China there has selectivity in taking [inaudible]. Can you give a bit detail on which type of activities were slowest growing? Is it mainly [inaudible] or any other areas here that caused that? My second question is on the divested activities. Can you say whom at the margin profile was very different from the rest of your business? Also, you continued to look for non-core activities, should we expect anything significant in the near term? My final question is on the profile of Alan Brookes, can you give a bit more background on the experience in the integration of live acquisitions?
Let me maybe take your questions then in reverse order, Luuk, and I'll start with Alan's experience, and we'll then probably talk about the non-core, and then I'll turn it over to Virginie. Alan actually came through an acquisition coincidentally, or maybe not coincidentally, because many people in Arcadis came through an acquisition. Alan came through the acquisition of EC Harris, where he already held a senior position at that particular point in time. Of course, since the acquisition of EC Harris, we've done a few more acquisitions as the company.
Alan was, I think, instrumental in creating what I can safely describe as a powerhouse in the U.K., our second largest operation within Arcadis and only slightly smaller than the U.S. is. Clearly, a success story from a growth perspective, but also a success story from an integration perspective because the U.K. organization as we know it today is a combination of used to be EC Harris, Hyder, and a few more acquisitions. He has handled that first hand. In addition, Alan has been in different places in the world, so brings international experience as well.
Needless to say, having been a COO myself in the past, CEO tends to have a very strong focus on the operational side of the house as well. All in all, if you look at Alan's track record in Arcadis, the growth he has created in initially the UK and then subsequently in Europe, the Middle East and the UK, the decisions he was willing to take, for instance, around the Middle East, make him a perfectly qualified nominated successor for the CEO role. On the non-core activities, specific question about the margins.
Obviously, we went through quite an elaborate exercise to ensure that we would take the right decision and that included criteria such as profitability, but not just only profitability. It also included other financial and actually also non-financial criteria to ultimately determine whether or not a particular region needed to be part of Arcadis. P rofitability is indeed one, and it goes without saying almost that the profitability of the now non-core activities or the ones which we have made a decision on was below what we set as the benchmark within Arcadis. Then your first question, Luuk, was on Places. Virginie, you mind taking that one?
Yes. I think that in the organic growth of APAC, definitely, Greater China is weakening and it's declining year on year. Part of that for sure is about us being really cautious in the project we select. We consider this geography of being an important one for us, b ut that does not mean that we need to take everything at the moment where we know, particularly in APAC some of the potential clients are not all in great shape. We are quite selective, and that is strengthening the activity over there. That's the solution.
Architectural, with CallisonRTKL after entering China being one, but this is a cautious approach that we have for any of our types of projects over there. That I think is a strong element that needs to be taken into consideration and is definitely having an impact. On the other side, you have quite a number of key geographies there where really the organic growth is a double-digit element. We are really growing fast in the new markets we are targeting. Remember that we more or less, started in Places in North America this year with the creation of our GBA Places, and that is really progressing really well.
With the addition of the backlog of IBI, the combination of our strengths and DPS coming in, we'll have a very strong footprint to be able to accelerate on that front over there. What Places is facing at the moment is really a repositioning. Repositioning in terms of the portfolio, the type of project we are operating in. Remember that we've been trying to explain with the DPS acquisition and IBI, that the focus is about the right geographies. North America for Places is really important in our view. The second thing is about the type of market and solutions, and the resilient markets such as life sciences and semiconductors being bought by DPS.
Plus everything that we have been able to demonstrate on industrial manufacturing, especially in the automotive sector. All these elements combined together is progressively shifting the portfolio, and that's also something that we think is bringing the positive wins behind the Places GBA, which is quite an important element in the current economic context, which is a little bit different when compared to what it is. Then, in terms of divestments and what we've been doing, a little bit like the Middle East. For sure, the average margin was not the same in this core areas.
In these areas that we consider as being non-core, either because we had not a sufficient presence on a determined geography, and we didn't see really much between the effort to be made locally to increase our size compared to what we can do in other markets where we think we have a better right to play and also, more interesting projects to be positioned on in terms of the solutions and the service we want to deliver. That is a shift of the portfolio to really be able to focus our priorities and our teams on these added value solutions in the geographies where they happen.
Does it mean that we would be enabled, I don't know, to operate a project in Southeast Asia, either from another country, through a joint venture on a momentary solution for a key client that we have and getting out again? For sure not. That's the beauty of the organization, but it means that we do not see the benefit on keeping a small structure to go on developing a little bit of day-to-day small business around. What has been happening in Europe is that we had some adjacent solutions that we feel might be interesting, might have been quite profitable also and in the past, but are not the key ones that we are focusing on.
That's really the thing with the Switzerland labs, for example. Getting that out, because it's not a key focus, we think help us having the right priorities and be as a management, fully focused on the integration of our recent acquisition and on our priorities of sustainable solutions for energy transition, digitalization, and the shift of the portfolio of Places.
Thank you, Virginie. Okay. Next up is Andy Murphy from Edison.
Good morning. Thank you for taking my questions. I'll stick to the format of two. My first question relates to the UK and all the political changes that have been occurring recently, and the budget restrictions. Just wondering what your views were on whether there's any risk to existing projects that you have or whether you think that the UK government will have to rein back on investments in the future, which may have an impact on your future cash flows and projects. Then secondly, just thinking about the M&A disposals and the questions you had around cash flows and balance sheets.
I was just wondering, could you just give us a little bit of a thought around where and if you might be considering more M&A in the near term or near to medium term? Also, the flip side to that, of course, is that you made a number of disposals. I was wondering whether there's anything else of material nature within the portfolio that might be on its way out at some point. Thank you.
Okay. Thanks, Andy, for the questions, and we'll follow the same sequence again. I'll take those questions where I can provide you with a meaningful response, and the other ones will be handled by Virginie. I'll preface my first answer to your first question by saying that I'm not a UK citizen, so I've looked at the political environment in the UK from an outside perspective, if you don't mind. I'm not going to dwell on it. I could smile about it, as in, looking at what all happened in a relatively short timeframe. The reality, of course, is that what we all need is stability.
I hope that, with the most recent chapter, as we saw unfolding late last week and the early part of this week, that stability will be given. Now, your question is specifically about, do we see any risk or projects in our portfolio which are at risk? Not at this particular point in time. It is obviously early days. I think the current Prime Minister has only been in charge since, I believe, Monday, if I'm not mistaken. We probably need to give him a little bit more time and ourselves a little bit more time as well. We don't see any projects at immediate risk. No worries there from our perspective. Your question on M&A and what is next.
We're very happy with the close of IBI and we hope to also close on DPS relatively soon. That will give us a pretty full plate. We want to ensure that we integrate them expediently, efficiently, and seamlessly before we take on something which would be as meaningful and as sizable as these two. Maybe that is a disappointing answer, or maybe it's a reassuring answer. I think first things first, we want to be sure that we do justice to the large investment we did on these two acquisitions before we do something sizable again. First things first is what I would say, Andy. Then, Virginie, the last question was on disposal.
Yes, for sure. Thank you, Andy, because I think that Luuk also raised the same question, and I sat on it, so I apologize for that. We've been probably having our biggest quarter on that element. This portfolio review is hopefully getting to an end. We hope by the end of Q1, nothing else that we think needs to be addressed, is out. Potentially, when you do some acquisitions the way we've been doing, you know very much that we have been winding down the Middle East for quite a while. There is a little bit of the Middle East coming in with IBI also.
That's the things that we might need to address also in addition to what we've been doing . Making sure that what we get from our acquisitions in terms of portfolio is also aligned with what we want to have. Then, in terms of the pure Arcadis one, there might be one or two other elements to come in the next few months, b ut at the latest, end of Q1, that should be fully behind us, and I do not expect to see a significant impact as the ones that we've been seeing in this quarter. This was probably the biggest one in terms of number of operations and magnitude of the impact of the operations.
Okay. Thank you.
Okay. I think those were all the questions for today. Thank you very much. Now we've concluded the Q&A session. I would like to give Peter the opportunity to give some closing comments.
Yes. Thanks, Christine. There's one more question I see in the chat room, which I think is important, which is about attrition. What can you tell us about the attrition rate in Q3? W e started to signal in Q1 and then again in Q2 was a positive trend in stabilizing attrition rate, and that positive trend has continued. It's now actually not stabilizing anymore, but it is starting to show the downwards trend, which of course the trend we were looking for. In that respect, we feel like we turned a corner, and attrition is heading in the right direction.
Maybe equally important, and I've commented on that in the past as well, is the fact that we also, in addition to attrition, measure engagement. Engagement is more of a leading indicator, where attrition is more of a lagging indicator. The good news is that the most recent engagement survey, which we concluded in September, so last month, showed a significant positive jump. A very significant jump, which we actually probably didn't expect to happen in one quarter. Very, very positive and pretty much across the board. Again, taking that as a leading indicator, that is extremely positive. I thought I address that question as well. Just a couple of closing comments, if you don't mind.
First of all, as always, thank you for your interest in Arcadis and your active questioning today. I believe that what we have done in Q3 is deliver a pretty strong performance. I think we've also, through that strong performance, demonstrated that we took the right decision to move to the global operating model and the creation of the three GBAs. I have to applaud the management teams in the three GBAs and anyone supporting them for that strong performance. We are now seeing that when we bring the best of Arcadis to opportunities which demand the best of Arcadis, no matter where the capability sits, that we can be a very effective, very attractive to our clients, and probably very difficult to beat.
I'm really happy that the global operating model is starting to work. When you look at the strategy which we rolled out in late 2020, then we focused on three levers, digital leadership, sustainable solutions, and focus and scale. I think all three were addressed during the conversation today. The digital leadership, which is further enhanced by the capabilities IBI brings to Arcadis. Sustainable solutions, simply addressing what we see as a recurring, strong, consistent demand from the market to deliver sustainable solutions and focus and scale to ensure that we focus on the right geographies, that we do focus on the right clients, and that we, in terms of the geographies, focus on those geographies where we have a right to play and an opportunity to win.
Even though I did tell you that I will miss the interaction with yourself because of the decision I took, there's still two more quarters which you will have to deal with me. Let me reassure you that I will use these two quarters until the 11th of May to focus almost exclusively on two things. That is, A, to facilitate an effective transition to Alan a ssuming that our shareholders will endorse the nomination. That is something I feel very positive about. I've worked with Alan Brookes pretty much since I joined Arcadis, so I'm very comfortable to take that on in the next six months.
Then secondly, I really want to finish the integration of IBI and hopefully soon DPS as well. That will be also in close collaboration with Alan, but that probably will be my main focus for the next six months. I'm not going anywhere. I will see you at least two more quarters, and my focus in the meantime will be on both the transition to Alan as well as the effective integration of both IBI and hopefully soon DPS as well. Thanks again for your interest in Arcadis, and please stay safe. Thank you.