Good morning, everyone, and welcome to this virtual analyst meeting. My name is Jurgen Pullens, Director Investor Relations, Arcadis. We are here to discuss Arcadis' third quarter results released this morning. With us on the call are Peter Oosterveer, CEO, and Virginie Duperat-Vergne, CFO. We will start with a presentation by Peter and Virginie, which will be followed by a Q&A. For the analysts attending this call, in case you would like to raise a question, please notify us using the chat box with, "I have a question," or simply just, "Question." Please do so only after we have opened for the Q&A. I will call out your name, after which we can verbally raise your question to Peter or Virginie. Kindly keep to a maximum of two questions at a time.
Lastly, we would like to call your attention to the fact that in today's session, management may reiterate forward-looking statements which were made in the press release. Please note the risks related to these statements which are more fully described in the press release and on the company's website. With these formalities out of the way, Peter, over to you.
Thank you, Jurgen. Good morning, and thanks everyone for joining us to discuss our trading update for the third quarter of 2021. I'll begin today's presentation with one of our key achievements in Q3, which is the design and delivery of the new extension of the Port of Calais in France, one of the largest construction projects in Europe. This project started back in 2015 and blends the best that Arcadis has to offer, strong design and construction management skills with additional focus on environmental mitigation measures and preserving the surrounding biodiversity. Located at the heart of one of the busiest maritime straits in the world in terms of passengers and goods, the new port extension, which officially opened earlier this month, increases area capacity at the port from 45 to 65 hectares and allows for the use of the next generation of ferries.
A really superb project that will improve trade links and transform the future of Calais and the wider region. As some of you will recall from our recent Sustainability Day, the transition from fossil fuels to zero carbon energy is really critical if we are to limit rising temperatures to 1.5 degrees Celsius in line with the 2015 Paris Agreement. Arcadis is heavily involved in supporting our clients with that transition. Last quarter, we secured a significant commission to support TenneT expand its power grid to help transport more renewable energy between northern and southern Germany. With our capabilities in digital solutions, communication, infrastructure design, and project management, as well as our extensive experience in the energy sector, this project win plays perfectly to our strengths and builds on our current strategy and our mission to improve quality of life.
Now, let's get through our trading update. Let me talk about the markets first. As I also mentioned in our Q2 update, we continue to see strong demand from clients and governments to help mitigate the impacts of climate change, support the energy transition, and create sustainable assets and livable communities, all of which enabled Arcadis to deliver strong overall performance whilst maintaining a healthy backlog. We're seeing increased investments from both public and private sector clients in growth areas such as smart mobility, green places, the energy transition, and climate adaptation. This does create a positive business outlook for the future and gives me confidence that we will be able to secure more projects and also to maintain a healthy pipeline of opportunities into 2022.
The COP26 summit in Glasgow over the next two weeks will obviously also shine further light on the crucial need to accelerate the journey to a net zero and nature positive world for clients and governments alike. I will be attending in person and hope to see strong commitments and tangible actions on tackling climate change by world's governments. As far as the result is concerned, I'm very pleased with both the organic net revenue growth of 4.1% and the solid operating margin of above 10% in the quarter. Our strong financial position with now hardly any debt creates room to further invest in our people, in our digital expertise, and into our business.
While we delivered the net revenue growth, we're also able to grow our backlog with 3.1% year-over-year as a result of good order intake in virtually all of our regions. Lastly, we successfully refinanced our credit facilities into a sustainability-linked credit facility of EUR 500 million with improved terms and conditions because of our strong financial profile. On strategic progress, as communicated before, to allow us to accelerate our 2021-2023 strategy and even better leverage the global scale of our expertise and asset knowledge, as well as to drive greater efficiency, we are gradually reorganizing ourselves in three global business areas. Resilience, Places, and Mobility. These new business areas will allow for the delivery of best-in-class solutions for our clients, as well as efficient service and product delivery.
At our recent September Sustainability Day, we announced our commitment to accelerate the transition to a net zero world, rapidly reducing our operational carbon footprint with the ambition to achieve net zero emissions by 2035. This forms an important tenet of our strategy to put sustainability at the heart of our business and of the solutions we provide. Which is why, at the time, we also announced the launch of our global sustainability advisory services. The advisory will bring together experts from around the world to each and every project, no matter where they are, to develop comprehensive and holistic strategies for our clients. A demand we see rapidly growing. This resolve to bring sustainability services has also recently been recognized by both Sustainalytics and EcoVadis.
Only a few days ago, Sustainalytics announced our renewed and further improved score, allowing us to still lead the engineering and construction rankings with a number one position of almost 300 companies listed. Really fantastic achievements for our business and for our clients. Building on this success, I'd like to share a few more Q3 examples with you that further demonstrate our commitment to creating a more sustainable world and the delivery upon our strategy. In early September, Arcadis was selected by the Los Angeles County Metropolitan Transportation Authority, also known as Metro, to assist in operational and capital improvements targeted at increased sustainability, transit accessibility, and expanded service opportunities in advance of the 2028 Olympic Games. As part of this three-year contract, we will provide support to LA Metro's existing operations and capital improvement programs.
Specifically, Arcadis will deliver environmental services for a wide range of projects that support solid waste, recycling, and hazardous waste compliance at Metro's sites. We will also be embedding social impact and environmental stewardship goals into the service delivery plan and will also be using our new community engagement tool developed in partnership with Irys to help build stronger engagement with residents in the area. In the Netherlands, we obviously have a rich history of supporting clients in the real estate sector to evaluate the energy savings and opportunities that arise from solar photovoltaic panels. With the cost of PV production and installation dropping in recent years, many clients and their respective customers are embracing the benefits of clean energy. To cater for this growth, we're helping clients navigate the different incentives and regulations, develop business cases, and providing technical feasibility studies to deliver the investment projects.
To date, Arcadis has assessed solar PV potential for over 5,000 assets for variety of clients. Cumulatively, these assets have the capacity to build a power plant that is nearly 4% of the Dutch total power generation, with potential carbon savings of 12 million tons over the life of the projects. The reliance on technology and data shows no signs of slowing down, and in turn, clients are increasingly looking to us to help innovate and digitalize their services. At Arcadis, we continue to invest heavily in digital skills and empowering our people to create solutions to meet our clients' greatest challenges. Also here, I want to share a few examples with you that showcase our role as digital leaders.
Building on 60 years of supporting the delivery of wastewater treatment projects in Upstate New York, Arcadis was chosen last month to consolidate two wastewater plants in Chemung County and modernize outdated infrastructure in order to save operational costs. With the client under pressure to meet aggressive regulatory deadlines, we are adopting an entirely virtual approach to designing the project, reducing the time it takes from three years to one, and saving up to $15 million in capital costs for the client. Using building information modeling, building information modeling experts, and leveraging our engineers from around the world, we are developing 3D digital twins to innovate and guide the decision-making process for final delivery. Once complete, the facility will have the capacity to treat 28 million gallons of water per day.
As some of you can appreciate, the noise from onshore wind turbines can at times be quite loud, causing nuisance to local communities. To help address initial community concerns and build consensus on the need for wind power, Arcadis has developed an interactive noise forecast app called Geluidsverwachting.nl. This app provides communities in the Netherlands with hyper-local forecasts for wind turbine noise and shadow flicker. It also shows how loud the wind turbines are expected to be compared to ambient noise and how much electricity is actually generated by the turbines. This information is then used to optimize the development and operation of further additional wind farms, ultimately helping to create greater trust and mutual understanding on the need for cleaner sources of energy. Finally, I want to close this part by talking through two examples which highlight our strategic aim to grow our business through focus and scale.
Already earlier mentioned the launch of our global sustainability advisory service aimed at unifying our regional sustainability strategy services into a truly global advisory practice. We're currently helping clients globally, like for instance, AkzoNobel, as well as regionally, like for instance, Transport for the North in the U.K., set their sustainability strategies and make the right decisions that will have the greatest impact. The challenges are getting bigger. The target dates are drawing closer, and time is running out. This, of course, presents opportunities for Arcadis. Through the creation of the advisory, we will double down on our clients' pain points, bring new ideas to the table, and showcase our global expertise to help them to develop the comprehensive sustainability strategies they do need to safeguard their future while driving profitable growth for our business.
With protecting the environment, and sustainable solutions again at the forefront of our minds, it is difficult to forget the devastating effect floods that hit Northern Europe this summer had and the damage they caused to local communities. Our work on advising the likes of Rijkswaterstaat in the Netherlands on river and flood management is well known. Through our new Arcadis Cross-Border Floods Task Force, we want to bring together our deep global knowledge and know-how around this subject to help other cities and countries protect people from extreme weather events in the future. This approach is clearly gaining traction with new wins in the city and province of Limburg and new opportunities in Germany and Belgium.
Both examples, I believe, showcase how we bring local expertise and best practice to the global stage and ultimately improve the quality of life for the clients and the communities we serve. Looking ahead to 2022, the business outlook for Arcadis is clearly positive. Our organic net revenue growth and improved profit margin, combined with a strong order backlog and solid opportunities ahead, provides me with the confidence in our ability to deliver on our strategic targets. With that, I will now hand it over to Virginie to provide further detail on our financial performance.
Thank you, Peter, and good morning, everyone. Really happy to be with you this morning. If you allow me, before turning to the results, I will just start to highlight another win for Arcadis in Singapore. Drawing on our strong experience in environmental management and mobility solutions, we've been commissioned to deliver environmental specialist services for the design and construction of the Changi East Rail Depot. This is a critical piece of enabling infrastructure to support the Cross Island Line, the longest mass rapid transit line in Singapore, and the centerpiece of the government's plan to create a sustainable and world-class transport system for the people. Turning now to our quarterly results.
We delivered again this quarter a very good net revenue organic growth of 4.1%, and even 4.8% if you restate for Middle East performance, and that increased our net revenue to EUR 636 million. The operating EBITA margin was very strong at 10.1%. While this represents a decrease compared to Q3 2020 margin, mainly due to COVID-related support which positively impacted our P&L last year, the performance is a 90 basis points improvement compared to the 9.2% reported in the prior two quarters this year.
Net working capital as a percentage of gross revenues was 14% compared to 16.6% in Q3 last year, and days sales outstanding decreased to 74 days compared to 82 days, which is a result of the robust performance and the cash management program set in motion more than a year ago. Commenting now on the group performance in Q3 on revenue developments in our geographical segments. In the Americas, we've seen organic growth of 3%, slightly offset by a negative foreign exchange impact of 1%. In this region, and especially in North America, we saw continued growth in all business lines. Order intake was robust, with significant project wins in Los Angeles, for example, with LA Metro project, and in New York with wastewater treatment plants, as Peter highlighted earlier. In Latin America, organic net revenue growth was outstanding, driven predominantly by infrastructure projects in Brazil.
In Europe and in the Middle East, organic growth was strong at 7%, mainly driven again by significant growth in the U.K. and several countries in continental Europe, compensating for unexpected and planned modest decline in the Middle East. The UK's strong performance continued in Q3, with excellent organic net revenue growth, driven by key clients in all business lines. Significant project wins in the quarter included a commercial partner role for the Oxford-Cambridge railway and framework wins for the National Highways. In continental Europe, we experienced steady organic net revenue growth. Our presence in several major countries positions us well for opportunities presented by public and private clients.
This is illustrated by significant project wins in the quarter, including the decommissioning of 24 gas extraction plants for NAM in the Netherlands, but also a 10-year contract for energy distributor TenneT to support energy transition in Germany, and a six year contract to restore bridges and quays in Amsterdam. Moving to Asia Pacific, revenues in Asia returned to good organic growth in the quarter, mainly driven by Greater China, while prolonged lockdowns and low vaccination rates continue to impact economic activity in numerous Asian countries such as Thailand, Vietnam, or Malaysia. Australia also reported growth in the quarter, benefiting from Arcadis's strong market position in mobility in major cities, despite repeated regional lockdowns. Turning now to CRTKL. Organic net revenues were still under pressure due to COVID-19, affecting mainly retail and commercial sectors, especially in Asia.
However, CRTKL secured a few transformational projects involving collaboration of several practice areas, such as combination of healthcare and residential, or residential and retail in various geographies. To conclude, I would like to remind that we delivered an organic growth of 4.1% this quarter. Now, for the first nine months, our net revenue organically increased by 3.4% to EUR 1.9 billion. Our operating EBITA increased by 11% to EUR 189 million, while margin improved from 8.6% for the first nine-month period of 2020 to 9.5% for the first nine-month period of 2021. Our free cash flow of EUR 105 million was solid, in line with our expectations, and demonstrates our sound cash management.
Net debt was significantly reduced year on year at EUR 47 million due to strong cash collection, but also late liability disbursements. We also refinanced all our existing outstanding syndicated credit facilities into a sustainability-linked syndicated revolving credit facility of EUR 500 million. The maturity of this credit facility is October 2026, with two additional options to extend for one year. We also finalized in August our 1.85 million share buyback program, and canceled the amount of shares newly issued for dividend payment to avoid dilution. These 1.85 million shares have been repurchased at a volume weighted average share price of EUR 34.22, for a total consideration of EUR 63.3 million.
Let me conclude on the financial part, highlighting again our strong performance with another quarter of strong organic growth and year to date margin improvement, as well as a strengthened balance sheet and steady cash generation. With that, let me hand you back to Peter.
Thanks very much, Virginie. Let me now wrap up our presentation by reminding you about our strategic targets set for 2023, and presented in November of last year during the launch of our strategy, Maximizing Impact, as well as a quick summary of our year-to-date results before we obviously go over to Q&A. As I mentioned earlier, to accelerate our strategy and provide an efficient service for our clients, we are gradually organizing ourselves in three global business areas, Resilience, Places, and Mobility. In terms of our financial targets, we simply aim for further improved, predictable, and profitable growth, satisfying the interests of all our stakeholders. In terms of non-financial targets, we want to further advance our course to be an employer of choice through lower voluntary turnover and higher engagement by creating a diverse, inclusive culture in which everyone can be their self.
In that context, there's one area I probably wanna touch on today, which is the increase in voluntary turnover rate and the actions we are taking to address it. We at Arcadis are obviously not immune for the trends virtually everyone experiences, regardless of the business in which they operate, which is attrition. Our voluntary turnover rate is now higher than we've seen in the last 12 months under COVID. Although total number of FTE increased 5% year-over-year, with GEC is actually increasing by 14%, the turnover rate has been identified as a key focus area for the management team. We have further sharpened our focus on investing in our people and in their well-being. We launched a new work style promise to accommodate and encourage hybrid working.
We appointed a global head of diversity, inclusion, and belonging, and also introduced more efficient human resource processes to allow our teams to hire faster and onboard new hires more effectively. The growth in technical capabilities within the GEC is obviously positive news, which with the further globalization of the organization, presents us with an excellent opportunity to be less dependent on people availability and shrinking talent pools in other markets. Suffice it to say that voluntary turnover will continue to be very high on our list of priorities. To summarize our Q3 trading update, we are very encouraged by the continued revenue growth and solid operating margin. We continue to see strong demand from clients to help them mitigate the impact of climate change, support them in the energy transition, and create sustainable assets.
The increased investments from both public and private sector clients in key growth areas create a positive business outlook for the future, and will enable Arcadis to secure new projects and maintain a healthy pipeline of opportunities. This, combined with our organic net revenue growth, continued robust performance, and strong backlog, gives me confidence that we are on track to deliver the strategic targets we have set for 2023. With that, I would now like to hand it over to Jurgen, who will, after some short instructions, open it up for Q&A. Obviously, we're very happy to take any questions you might have. Thank you, and over to you, Jurgen.
Thank you, Peter. Hereby, we would like to open our Q&A. In case you have a question, please let us know using the chat box, and I see already questions coming in. If you have a question or simply question, I will call out your name, and then you can verbally address your question to Peter and Virginie, and kindly keep to a maximum of two questions at a time. I do see that first question is for Martijn den Drijver. Martijn, go ahead, please.
regards to the Americas, you mentioned outstanding growth in LATAM, organic growth of 3%. That seems as though the U.S. has decelerated. Can you talk us through what you're seeing in that market specifically to provide us a bit more color as to why we're seeing 3% growth in the third quarter, for example, versus 7% in the second quarter? That would be my first question. With regards to client behavior, my second question, we're seeing energy prices, raw materials impacting projects. Now, obviously you're more in the design phase, so ahead of actual construction. But we also see COVID-19 being-
Put under severe pressure. I think the credibility of supply chain is very clear. You already sort of provided a bit of the answer in terms of how that impacts us, because of the fact that our role is largely in the earlier stages of project development. With the exception of where we work with clients on, for instance, having a construction management, a cost management role, there we do see a bit of impact. In terms of direct impact on Arcadis, I think it's negligible at this point in time. We do see clients actually looking at supply chains very critically.
I think it's no secret. I suppose that many clients are looking at whether the global supply chain they have created over time is the supply chain they want to maintain for the future. Again, in terms of direct impact on Arcadis, both components you mentioned, raw material prices as well as energy prices, is not necessarily impacting us directly.
The COVID uncertainty that is rising not having an effect either yet, I guess then?
Not yet.
Okay.
I can maybe take the question on Americas region. On Americas, in fact, this quarter, we had really a decent performance of growth. Yes, you're right, there's really a difference of pattern between what happens in Latin America, which is really a booming market, and something which is a bit more slower on the Americas North America side rather. That I would explain also the fact that if you compare Q3 this year to Q2 this year and also Q2 last year, definitely in Europe but also in Americas, we have had an effect on holidays. As you could expect also, people have taken their leave.
Consequently, we had an effect in terms of production of net revenue in that respect. We had less leave than we anticipated or than you have on a standard year, I would say in H1. There's probably been a little bit of catch-up that has happened in Q3 also, which is also the demonstration that in some of these areas of this world, we have been seeing a little bit of normalization of the way of living, I would say. That would be the main, let's say, explanation. The other one is that the order intake pipeline is quite strong.
You have a lot of people also working in terms of delivering these bids and such. At that point of time, the conversion is something that you could transform, you know, in production of revenue and such, would happen only at the moment the order intake is signed and the project is in motion. That remains in the non-billable hours, so long as it's not converted. The acceleration in some respect in terms of pipeline has a kind of, let's say, slightly detrimental effect in the absorption of hours immediately when you have a big step up in growth. That's also some of the effects that you can see in North America.
I would also highlight the fact that the nature of the project is probably not exactly the same in all the geographies where we operate. We have a lot of environmental projects over there. The revenue that we are going to derive is really attached to the number of people that we have on the ground. While in some other types of projects, you can produce based on some milestone or different things that happens, where the direct link between the number of people working at one specific moment and the metrics of revenue can be a little bit differentiated. I hope this helps.
Thank you, Virginie.
Okay. I see, the next question is coming from Luuk van Beek. Luuk, please, go ahead.
Luuk here. You mentioned that you won a couple of new transformational projects. Can you indicate when you expect these to start contributing to revenues and more in general, when you expect, say, new revenue streams of CallisonRTKL to take over the role of commercial real estate and basically allow them to stabilize the revenues again? The second question is about the COVID measures that supported last year in Q3, possibly also in Q4. Can you remind us a bit about how much impact it was and to what extent we should take into account an effect in Q4 as well?
Thank you, Luuk. Starting with COVID, because a short answer on that side, I would remind that last year we received approximately EUR 8 million support in H2. You can probably take that on a kind of linear basis year-on-year. That was mainly, you know, social cost reduction, social charges in some of the countries, namely in Asia, but also in other areas of the world. That's, let's say, the big missing effect that we would see year-on-year.
If we turn now to CallisonRTKL, these transformational projects, you know, have a strong importance, not really in terms of magnitude and volume of order intake, and don't get it wrong, but rather in the fact that the strategy which is pushed at the moment by CallisonRTKL and the new opportunities that they see start to see a little bit of momentum and start being converted. That's a positive sign. For these projects, we will probably start seeing some revenue as short as Q4. But again, you know, that's not something I'd expect to be perceptible or readable immediately in the line of the revenue. It's been a complex year.
We knew it was a complex year. We have the management of CRTKL that has been appointed around the year-end, something like this, last year, who now is a complex team. As you would expect, you know, they are really pushing and changing things. What we've been seeing in Q2, Q3, but I would say it's Q4, and not getting in the details of P&L performance because that's not the purpose of this trading update. Definitely this is a semester of restructuring in some respects. We've started, for example, to get out on some of our leased offices. We regroup with some Arcadis office.
I will expect some other effects of that type to happen in Q4. We've been seeing also a little bit of restructuring in terms of number of people. That I expect will then be on track to restart on a different foot next year.
Okay. That's clear. Thank you.
Thanks, Luuk. Hans, you are next in the row. Hans, go ahead.
Yes. Can you hear me?
Yes. We can hear you.
Yeah. Okay, great. Now, two questions from my side. First of all, you already mentioned, pointed out increase in voluntary turnover rate. Can you give maybe some feeling where that especially you're seeing that? Is there any region where that is, let's say, somewhat more visible than other region? And especially also follow up on that, where do you expect, let's say, the biggest issues in the coming quarters with respect to staff and also therefore, of course, increase in staff going forward? Sorry. My second question is on the cash flow, a good cash flow in Q3. What do you still believe, let's say, is the potential to further reduce DSO?
Of course, Middle East will a little bit help, but to give maybe some feeling in other regions, what you see and what the impact could be, let's say, on the DSO. What do you believe, let's say, a level could be, let's say, in the next, in two years time.
Thanks, Hans, let me address the turnover since I already addressed it a bit in the prepared remarks. The voluntary turnover, the first sub-question was, you know, where is it most noticeable? It's most noticeable in Asia, followed by Australia, and then the other regions are also actually seeing an increase. Continental Europe is relatively stable, actually. In fact, the U.S. is also still at a level which I consider to be manageable. That being said, you know, you only have to read what is available in the public domain, what is being said about, and sometimes people use grandiose terms such as the Great Resignation.
It's quite obvious that where the light at the end of the tunnel is visible for people, light at the end of the pandemic tunnel that is. People have used the time to ask themselves, "What is it I value? What is it I want to do? What is it I want to do differently?" That is causing quite a bit of pressure on the market, in combination, of course, with when you look at people in our space, quite a good set of opportunities in many places. It's almost like a perfect storm. You have people asking themselves, "What is it I want to do with my life? Do I need a change?" That's also combined with really good opportunities.
What brings people to a company, what keeps people at a company hasn't really changed in my view. First and foremost, it's, with a nice word, purpose. Companies with a strong purpose are more attractive to people who join the workforce now. I dare to say that we have a very strong purpose, and that is what we do hear from our people. They do like that we focus heavily on sustainability. Coming out of the Sustainability Day last month, it is clear that people really like that we make choices, so purpose is important. Attractive projects is still very important. People like to see a diverse slate of projects, so that they have an opportunity to advance and develop themselves. Remuneration, of course, needs to be in place.
Last but not least, being a diverse, inclusive culture helps an awful lot as well. That is why we focus on all of these components quite heavily. Last but not least, goes without saying that people want to be part of a successful team. I leave it up to all of you to decide whether you would describe us as successful or not, but clearly that helps too. That being said, you know, looking ahead, I think it's going to be challenging for some time. What I think is helpful for us is the fact that we have that growing presence in our global excellence centers, as I mentioned in my prepared remarks as well. Romania, in India and in the Philippines.
My experience from the past suggests that that is a really good way to offset, you know, pressure you could get in other markets when attrition goes up. It is clearly an area of a lot of attention. We want to bring it back to below 10%. That is what we have communicated a year ago. That is still very much our goal.
Okay. Maybe let me take the second question on the cash flow and the expectation in terms of DSO. Yes, cash flow was quite good this quarter, but that's really the stabilization in terms of what we can achieve in terms of cash conversion based on the enhancement of our processes undertaken more than one year ago. That's really now embedded in the processes and bringing fruits. I would just let's say highlight a little bit also the fact that we have been seeing our suppliers also taking some holidays. We have been taking holidays also.
We have a little bit of increase in suppliers on the face of the balance sheet due to the fact that we received a bunch of invoices quite late in September and October that might have been, you know, intended for some August ones, and will have a small effect on the opening of the quarter of catching up on that side. That's probably the only seasonal effect I would highlight on that front, but not something massive either. In terms of DSO, we are 74 days as of today. As you can imagine, Middle East getting down in terms of revenue, in terms of, let's say, average number of days.
If you isolate Middle East by itself, we start reaching a number of days that can be a little bit heavy, also because the working capital will take more time to decrease on the face of the balance sheet than the revenue and the elements in P&L, as you can expect, based on the traditional pattern of this region. Hence, we do capture our fair share of cash collection.
Mm-hmm.
It's progressing on that front. That has a small impact somewhere, I would say, in the calculation of our current DSO. We'll also, because of recent embedment of Arcadis Way in Europe, so there is still capabilities of catching up on that front to have our Oracle system in the smooth running mode that we can see in Australia, in the West or in some other regions elsewhere. We probably have some capabilities over there. Then that also depends on the pattern of the project we've been taking.
When we are in some joint venture in infra in Australia, we can also be in a situation where we see some down payments. It can happen. There we'll be in the future, I guess, this objective of being down to lower to 70 days, which is really achievable. The other way around, I do not expect to get to drastic changes because we want to have the flexibility also of being quite selective in terms of portfolio. The portfolio, you know, has an impact also in terms of the pattern of DSO.
Thank you. I see, Maarten, you have also a question. Maarten, please go ahead.
Yeah, good morning. It's Maarten Verbeek. A couple of questions from my end. First of all, you just mentioned that last year there was some EUR 8 million COVID contribution, and that was something we could split two ways in Q3 and Q4. More or less that adjust the last year's margin to 10.3% this year or 10.1%, so still below that one. You just argued has a lot to do with productivity. People have taken holidays. What's the outlook for Q4? Because then also revised, we're gonna have a margin of 10.3% for final quarter of 2020. What do you expect for productivity in Q4? Will there be a negative once again?
Secondly, could you inform us about the book-to-bill ratio you had either this quarter or the first nine months? Lastly, you mentioned about the strong or the net debt position, and you most likely will go to net cash surplus by year-end, if you don't make acquisitions. You mentioned that you could do all kinds of things with such a strong balance sheet, but not really mentioned what you might do for shareholders. Obviously, you said that you might do something with share buybacks or something else, but could you give somewhat more clarity on that item? Thank you.
Well, let me take the last question, your last question first, and then let Virginie respond to your first two questions, including the book-to-bill, Maarten. What we do for shareholders has not really changed. I think we have communicated during the Capital Markets Day, what our vision is in terms of what we want to do with the cash, which is to continue to invest in the company, in addition to, of course, pay out the dividend. We also keep the option open to provide additional shareholder returns. Last but not least, when speaking about additional capabilities, I think we've also signaled before that we do look at an opportunity, the right opportunity to enhance our capabilities, which would have to ideally check two boxes.
It has to be something which gives us additional capabilities in sustainability. The second box which we ideally like to check at the same time is digital solutions. As a minimum, either of the two, ideally both of the two. That is probably not necessarily a change for something we have, we've said before. Invest in the company, deliver on the commitments to pay a dividend, and where appropriate, keep the option open for additional shareholder returns.
Getting back to your two questions. I'm sorry, it seems that I have dust somewhere on my throat, so it's a bit of a nightmare. I apologize. Coming back to last quarter. Yes, for sure. In Q3, we had a COVID support around EUR 8 million, as I said, for the full H2 2020. We also had this effect of probably complementary vacation this year that we didn't have last year because people frankly, in Q3 2020, they had difficulties to go anywhere they wanted, while there's been some compensation this year. In terms of absorption of the massive cost and billability, you have an effect in terms of the level of overhead that you could reach in the P&L.
That's probably this other absorption effect, which is a little bit missing, also this year. Then, I would say that the book-to-bill year to date is just a little bit above one.
Okay. That more or less implies that in Q3 it was below one.
Yes, probably. Again, you know, I would not be completely affirmative on that point because I need to admit also that some of the things that you see in vacation effect is that there can be a little bit of delay in terms of registration of order and taking the systems by the sales force. Then I'm a bit measured on that one because really what we see just slightly below. It might be a bit of catch-up beginning of next quarter, I don't know.
Okay, thank you.
Next in line is Henk Veerman. Henk, go ahead.
Hi, this is Henk Veerman from Kempen. Thank you for taking my two follow-up questions, actually. The first one is on the voluntary turnover, which was already discussed a little bit. My follow-up question is this, in the years where turnover was really a problem, I think voluntary the rate was about 15%. Do you expect that, you know, the turnover this year or the run rate into next year could approach this level again? Or is the problem not that severe, at least yet? And do you already seeing it affecting project execution? That's my first question. My second question is on a follow-up on the capital allocation. Indeed, you are rapidly approaching net cash.
Last year, indeed, you mentioned that acquisitions is one of the things you plan to do with the cash. Can you update or can you maybe give a little bit of color on what has happened on this front in the recent or year-to-date, in the recent quarters? Have you looked at many targets? What has been the main reason why the acquisitions have not materialized? Especially because some of your peers have done some acquisitions here today, quite some sizable acquisitions here today. Thank you.
Okay, Henk, thanks for the follow-up question on voluntary turnover. Let me take that one. Yes, you're right in that, in the past, we have seen voluntary turnovers for Arcadis as a whole exceeding 15%. We are not quite there yet, which is obviously in a way positive. I would say, that if I look at what the voluntary turnover was a couple of years ago and why people left at that time, and why people now consider leaving is a different ballgame. That doesn't make the number acceptable. As I stated before, we will do whatever we need to do to bring that number back to single digit, which is our goal.
People now leave for different reasons, and most of that is the same reasons as people leave other companies, and largely, I think a combination of coming out of the pandemic, wanting something else, with lots of opportunities. Could it go to 15%? I can't rule it out. We will try to do whatever we need to do to avoid that from happening. The outlook and the market in the next couple of quarters in terms of people will probably remain somewhat volatile. I can't rule out that it could get to the 15% again. Conversely, I'm not making a commitment that I can guarantee you that it will be below 15%.
It is something which is extremely high on our priority list because at the end of the day, whether we acknowledge it or not, we are a people company, and we will only be good if we can retain and when necessary, hire people quickly. Virginie, you want to take the second one and update Henk and others on the progress we've made?
Yeah, sure. Thank you. M&A remains something quite, let's say, important on our plate. As we said, it is something that we are considering and as you can expect, we are contemplating each and every opportunity that we think makes sense for us. We've been seeing, as you have seen, also recent acquisitions made by a competition, and that's good. We do not have exactly, probably the same goals or are looking for the same things. That, let's say, would be the only comment I would make on this one. On our side, it remains something which is quite key and where we think we might have some opportunities.
As you know, that takes time to come to a different point. When and wherever there is something to be shared and such, we'll come back.
Okay. Thank you.
Are there any more questions? I think, Martijn? Quirijn, are you in the call?
Yeah, I have two follow-ups.
Yes. Okay. Please go ahead then, Martijn.
Yeah. Okay. I'm sorry, Peter, but Henk's question, you didn't quite answer that one. Is attrition impacting project execution? I would like to ask that one again because I think it's an interesting one.
Mm-hmm.
In relation to that attrition again, I realize it's an industry issue, but how should we think about wage inflation for 2022? Because I know you've been, as a company, reluctant to use that measure, but it seems kind of inevitable that you will have to do it. Can you perhaps shed some light on your thinking on that subject? For Virginie, we've talked about OpEx developments, you know, travel, marketing going up slightly in the second half. How has that impacted the third quarter, and what should we think in terms of the fourth quarter? Just a bit more color on those two elements, please. Thank you.
Yeah, my apologies that I didn't completely answer Hans' early question. The brief, quick answer is no, it's not impacting project execution, but that is not a reason for moving it down on the priority list. It is an important priority for us, but at this point in time, with the attrition we're seeing, it's not negatively impacting project execution. Sorry for missing that question. Wage inflation is, of course, quite possible. Now the answer there has always been and will continue to be that that is typically something we would pass on to our clients. That is typically something you would actually cover in contracts, through either specific clauses or by having clauses in there that you are entitled to an annual salary increase anyway.
It could happen, it's likely to happen, but it's not something which we would have to take the burden ourselves. That is something we would pass on to our clients.
Okay, clear.
Maybe moving to the OpEx.
Yep.
OpEx in Q3 and Q4. Yes, for sure, there is a little bit of increase in travel compared to last year. The world has been reopening again. I think that in the measures we've been taking last year and in the new way of considering our work, there is a lot which is really embedded. I would not highlight a huge increase in terms of travel year-on-year. There will be some for sure because the world has been better this year. Again, this seems to be quite embedded.
What we had last year also, and that we are losing this year, if you remember, had a lot of companies we've been withdrawing bonuses and all this sort of things in Q1 2020. We are delivering rather a good performance. As you can expect, I'm not withdrawing bonus provisions on the P&L this year, which is also something which is a positive in my view, because it shows that we are where we thought we would be able to be.
That's probably also one of, let's say, the differences that you could expect to see between Q3 last year and Q4 last year and this current semester, something being right back in normal expectation in terms of what your employees mass representing in your P&L, as well as, let's say, a real effort which is sustainable in the future in travel, but also in workplaces where we've been committing, as you remember, to a decrease over three years. While, as you can expect, a lot of these efforts will have rather late effects because it takes time to achieve a vast majority of the savings. Some of the quick wins or some of the things have already been benefiting to 2021 P&L.
Okay. Thank you very much.
Okay. Quirijn, can you hear us? If you have a question, please go ahead, Quirijn.
Yeah. Can you hear me?
Yes, we can hear you, Quirijn.
Okay. Now, let me first ask about the situation with Callison RTKL. It looks to me that first half year there was some stabilization with regard to the order book. The organic decline of 17% is quite disappointing in my view. Can you tell us, give an idea. Is RTKL loss-making at this moment? That's my first question. The second question on RTKL is, what are you going to do to address the situation? Because it doesn't look like that the company is going to recover soon as it is spreading out. Let me say the impact is not only in malls in U.S., but it looks like it is a real structural problem.
To what extent, yeah, was RTTL a drag on the organic growth in the third quarter. I think it's maybe 100 basis points or something like that. That were my questions on RTTL.
Okay. On RTKL in H1, maybe you remember, we've been seeing a little bit of start-up late in last year and beginning of this year in Asia, in China. That has been quite soft, not only because there was no market, but also because, you know, we started perceiving that situation in the market we operate in China might not be as safe in terms of economic conditions of our clients as we thought. What we've been doing is becoming quite selective in this area in terms of the projects we've been taking, for sure. That's not hindering a restart in terms of revenue and in terms of order intake, as you can expect.
Hence, I have to say that for this immediate starting when we've been seeing some of, let's say, the announcements on the Chinese market at the beginning of September, we think that it was the right decision to be quite early in the year, you know, making sure that we were not exposed to this sort of clients and where we really work in China with government-related organization or let's say major international developers that do not face the same current economic problematic situation, I would say that some of the developers on the Chinese market do face. That's probably the first point.
The second point, as we said, we wanted to turn our business on some of the sectors where we see the restart is quite complex. It's not bringing the right projects and there is really slow pace after COVID and prolonged effects of the COVID crisis. Two new sort of sectors, namely science, life sciences, but also healthcare and such. That takes time, as you can expect. For sure, we need to take the right projects. We have the capability with the rest of what the business is doing to, let's say, absorb part of it. We prepare CallisonRTKL to be ahead of the curve.
We are also developing new capabilities in terms of collaboration with our places organization for intelligent buildings and so on. That's development of new offers, and that, you know, occupies the teams. They need to be ready also to answer some of the pre-development of the market. As you can expect in sort of things that always go with some, let's say, small projects or test projects that we are taking, and that allow to develop this new type of offer. Clearly 2021 is and needed to be this full year of getting to a point where we do restart. As I said earlier, there is also a need to restructure our cost base to adapt to the current situation.
As you've been stating yourselves, it's a sharp decline that they've been seeing in terms of order intake. Then, you know, their cost structure and the fact they see this cost structure to restart, they need to get a little bit of agility, which they are doing as we speak. Yes, with a sharp decline of revenue, it's very difficult to get to breakeven point. That's also something. On top of that, if you have some restructuring costs, well, then, you know, the picture is not as nice as you can expect. Sorry to say that, but in my view, it's a positive. Because at one point of time, you need to get to that sort of a situation to have the capability of restarting.
Being now in the situation to know exactly in which towns we need to be present, where we can withdraw, where we see positive in the future, and let's say reorganizing to be ready for 2022 is exactly the place that we are. We really think that there is a complementarity in what CallisonRTKL is doing, and that closer cooperation with our Places organization in the future could only be benefit for our two business lines.
Okay. Thank you. My other questions are on IT OpEx. I know the running costs in the third quarter were relatively high compared to the expectations. Can you maybe elaborate to us on IT, on CapEx in IT and CapEx in general, and also update us on the cost in OpEx for IT? Alongside, yeah, general costs, which increased, in my view, quite sharply compared to third quarter in 2020. Outside this EUR 8 million, assume EUR 4 million for government support.
As I said earlier, in the beginning of the year, we are on our plan, you know, in terms of CapEx development. We said, you know, EUR 40 million-EUR 60 million a year, so there is no reason not to be in that range for the full year. This is exactly the track that we are seeing at the moment. Vast majority of that, yes, is a lot of digital CapEx and IT CapEx, both in terms of infra, but also a lot in terms of, let's say, hardware of development.
Just as a let's say kind of warning, telling everyone that there is a new IFRS pronouncement, you know, in terms of accounting of cloud computing developments, and that will impact all the companies, probably for year-end, including ourselves, for sure. That's what the accounting team is working on. We do expect that in the future, more of the things that we were qualifying as CapEx will be qualified as OpEx.
Okay. Okay, thank you.
Okay. Thanks.
These were my questions. Yeah.
Hans, thank you, Quirijn. Hans Pluijgers, do you have a follow-up question yet?
Yes. Can you hear me again?
Yeah, I can hear you. Go ahead, Hans.
Can you hear me?
Yes, we can hear you, Hans.
Okay, great. Yeah, follow up on the wage inflation question already asked. Looking at first of all this year, could you give maybe some feeling what your average wage inflation was, which we should calculate, let's say, maybe split between in the organic growth between wage and underlying volumes? Secondly, on that, how did you include that in your target growth for 2020-2023? Did you also there include, let's say, some wage inflation? Can you give me some feeling on that, what the split was there for your organic growth target?
Virginie, you wanna take this one?
Yes. I think that, you know, we've been giving a guidance and such for the P&L. We've been embedding some of the things for sure. That, in my view, is more a mechanical effect. As Peter said, we expect to pass more of the single stocks. You wouldn't beat the organic growth targets, you know, with the, let's say, artificial elements of push coming from this sort of thing.
Maybe to add to it, Hans, it's not such that we, in building a plan for the three years which we built a plan for, would assume that there would be, you know, significant wage inflation built into the growth numbers. I mean, typically what you would do is you would assume a realistic, reasonable percentage of wage inflation, which is what you typically see, let's say directionally between 2% or so, let's say 2%-3% max, across the board. That will actually be on the high side.
We're not assuming that or have not assumed when we built the plan, because at that time a year ago, I don't think that we had enough knowledge to even make an assumption that there would be more wage inflation as a result of general inflation.
This already gives a lot of clarity, because indeed, let's say, maybe the building blocks are a little bit changing, but this gives already somewhat more clarity. Thanks.
Are there any more questions? I don't see them anymore in the chat room. No? I'd like to hand back to Peter for some closing remarks.
Yes. Thank you, Jurgen. Thanks everyone for the active conversation here as well. Just closing it out, we believe that we delivered another successful solid quarter. In delivering the solid quarter, I think we benefited from the actions we took prior to Corona. When you look at our trend over the last couple of years, going as far back as, say, two and a half years ago, obviously, we've strengthened the foundation and because of that much strengthened foundation, we came through Corona so far, actually, in a very positive way.
In addition, we are also learning and will forward-looking benefit from improvement activities and lessons we've learned through Corona, particularly as it relates to the need for extensive travel, how we would use real estate in the future. That is an additional improvement we expect to see in the future. Needless to say that the world is increasingly acknowledging and accepting the impact of climate change and nature loss and that is about time. It is really about time that recognition and acknowledgement is there. That's combined with the much stronger foundation we currently have as a company gives us the confidence to be as positive about the future as we have been.
To restate what I've said before, also creates that confidence in our ability to deliver on the targets we've set for 2023. In closing, thank you very much for your interest, for the active dialogue. Let me ask you to stay safe and healthy, and we'll see you again next quarter. Thanks very much.