Brunel Q4 and FY 2018 results

Friday, February 15, 2019

Continued high revenue growth and strongly improved profit margins

Key points Q4 2018

  • Revenue growth of 16% (yoy) to EUR 245 million over the quarter
  • Strong EBIT improvement, growing 69% (yoy) to EUR 10.7 million with EBIT margin up by 1.4ppt to 4.4%
  • All-time high number of 13,000 specialists and professionals.

Key points full year 2018

  • Revenue growth of 16% to EUR 915 million
  • Excellent results in Middle East, India and Russia in multiple verticals
  • Strong EBIT improvement, growing 90% (yoy) to EUR 34.1 million with EBIT margin up by 1.4ppt to 3.7%
  • Earnings per share (EPS) up 173% to EUR 0.41
  • Proposed dividend EUR 0.25 per share, versus EUR 0.15 in 2017

Jilko Andringa, CEO of Brunel: “Brunel’s 43rd and my first year was in many aspects a very good year. Thanks to the hard work of all our professionals at our clients and the colleagues in our offices, growth returned and accelerated in many regions through the year. We ended the year with almost 13,000 professionals working on projects at our local and global clients. An all-time record for Brunel, proof that our strategy to diversify to adjacent vertical activities is starting to pay off. To follow the successful course and performance of Team Brunel during last year’s Volvo Ocean Race: we will continue to execute on our strategy to further improve our growth and profitability and to create a more sustainable world for professionals and future professionals. We have seen continued strong growth in January 2019, so we expect another exciting year!”

Brunel International (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

FY 2018

FY 2017

Δ%

Revenue

244.9

210.2

16%

a

914.6

790.1

16%

b

Gross Profit

55.4

49.4

12%

208.9

182.7

14%

Gross margin

22.6%

23.5%

22.8%

23.1%

Operating costs

44.7

43.0

4%

c

174.8

164.8

6%

d

EBIT

10.7

6.4

69%

34.1

17.9

90%

EBIT %

4.4%

3.0%

3.7%

2.3%

Average directs

12,618

10,505

20%

11,955

9,589

25%

Average indirects

1,570

1,533

2%

1,544

1,497

3%

Ratio direct / Indirect

8.0

6.9

7.7

6.4

Earnings per share

 

 

 

 

 

0.41

0.15

173%

 

Dividend

 

 

 

 

 

0.25

0.15

67%

 

a 17 % like-for-like
b 16 % like-for-like
c 4 % like-for-like
d 7 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Q4 2018 and FY 2018 results by division

P&L amounts in EUR million
Summary:

Revenue

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

DACH region

68.1

59.7

14%

268.6

238.5

13%

The Netherlands

57.0

53.9

6%

220.1

195.3

13%

Australasia

27.6

31.9

-14%

113.9

102.4

11%

Middle East & India

25.1

17.8

41%

87.3

63.7

37%

Rest of world

67.0

46.9

43%

224.6

190.3

18%

Total

244.9

210.2

16%

914.6

790.1

16%

EBIT

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

DACH region

6.2

3.4

80%

25.1

21.9

15%

The Netherlands

3.3

5.3

-37%

11.6

11.3

3%

Australasia

-0.3

0.8

-134%

-0.8

0.0

-6683%

Middle East & India

2.5

1.0

155%

8.0

2.3

243%

Rest of world

0.6

-2.0

127%

-1.5

-7.8

81%

Unallocated

-1.6

-2.1

27%

-8.4

-9.8

15%

Total

10.7

6.4

69%

34.1

17.9

90%

The Group’s revenue in Q4 increased by 16%, which was fully organically.

 

DACH region (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

Revenue

68.1

59.7

14%

268.6

238.5

13%

Gross Profit

21.8

18.5

18%

86.3

79.6

8%

Gross margin

32.0%

31.0%

32.1%

33.4%

Operating costs

15.6

15.1

3%

61.2

57.7

6%

EBIT

6.2

3.4

80%

25.1

21.9

15%

EBIT %

9.1%

5.8%

9.3%

9.2%

Average directs

2,757

2,528

9%

2,646

2,441

8%

Average indirects

484

457

6%

476

449

6%

Ratio direct / Indirect

5.7

5.5

5.6

5.4

Our activities in the DACH region continued to show strong growth. Especially our organisation in Germany, the biggest contributor in this region, has proven to be able to quickly and professionally adjust to changes in the market, with the careful implementation of the equal pay regulations, whilst continuing to provide excellent services to our clients. 

Revenue per working day increased by 11% in Q4. The gross margin adjusted for working days in Q4 is 30.1% (2017: 31.0%). The decrease was due to the introduction of equal pay, and has now stabilized at this level. The productivity in our competence center was on a normal level.

The headcount development in 2018 is as follows:

Direct headcount as of December 31th was 2,791 (2017: 2,390).

Working days:

 

Q1

Q2

Q3

Q4

FY

2019

63

60

66

61

250

2018

63

60

65

62

250

2017

65

59

65

60

249

 

Brunel Netherlands (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

Revenue

57.0

53.9

6%

220.1

195.3

13%

Gross Profit

15.8

16.7

-6%

62.3

57.3

9%

Gross margin

27.7%

31.0%

28.3%

29.3%

Operating costs

12.5

11.4

10%

50.7

46.0

10%

EBIT

3.3

5.3

-37%

11.6

11.3

3%

EBIT %

5.8%

9.8%

5.3%

5.8%

Average directs

2,531

2,368

7%

2,463

2,220

11%

Average indirects

447

430

4%

438

435

1%

Ratio direct / Indirect

5.7

5.5

5.6

5.1

In The Netherlands we continued to grow, but we were unable to match the excellent performance of Q4 2017. Productivity decreased primarily on the back of an upfront hiring campaign of talented professionals and training initiatives in all our business lines, which will enable us to service the future HR needs of our clients. Vacation and illness percentages were up compared to Q4 2017. For the full year, almost all business lines achieved significant growth, and both Engineering and IT reached new records. This growth was partly offset by a decline in our business line Insurance & Banking, due to the changes in this market. We are confident that the actions we have taken in this business line will result in a return to growth in 2019.  

Revenue per working day increased by 4% in Q4. The gross margin adjusted for working days in Q4 is 26.8% (2017: 31.0%). Gross margin decreased due to the lower productivity. Operating costs increased year on year due to continuous investments in technology and digital tools. For the full year, EUR 2.5 million of costs relating to digital market initiatives are non-recurring.

The headcount development in 2018 is as follows:

Direct headcount as of December 31th was 2,535 (2017: 2,411).Working days:
 

 

Q1

Q2

Q3

Q4

FY

2019

63

62

66

64

255

2018

64

61

65

64

254

2017

65

61

65

63

254

Australasia (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

Revenue

27.6

31.9

-14%

a

113.9

102.4

11%

Gross Profit

2.9

3.7

-23%

9.9

9.0

11%

Gross margin

10.4%

11.7%

8.7%

8.7%

Operating costs

3.2

2.9

10%

c

10.7

9.0

19%

EBIT

-0.3

0.8

-134%

-0.8

0

EBIT %

-1.0%

2.6%

-0.7%

0.0%

Average directs

902

856

5%

919

601

53%

Average indirects

79

78

1%

78

71

9%

Ratio direct / Indirect

11.4

10.9

11.8

8.5

a -10% like-for-like
b -2% like-for-like
c 12 % like-for-like
d 13 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Revenue in Australasia declined in Q4, mainly because one major client hired part of our professionals directly. Over the past 12 months, we have been actively working on new growth opportunities, which are now starting to contribute, and we expect a return to revenue growth in the course of 2019. Gross margin decreased due to a change in the mix: we have been successful in securing our positions following supplier consolidation efforts of some of our clients, but this has resulted in slightly lower margins.

Operating costs increased as a result of the preparation of our organisation for the recovery in the Oil & Gas industry that is expected in the course of 2019, as well as continued investments in new initiatives.
 

Middle East & India (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

Revenue

25.1

17.8

41%

a

87.3

63.7

37%

Gross Profit

4.6

2.7

67%

15.6

9.2

70%

Gross margin

18.3%

15.4%

17.9%

14.4%

Operating costs

2.1

1.7

24%

c

7.6

6.9

10%

EBIT

2.5

1.0

155%

8.0

2.3

243%

EBIT %

10.0%

5.6%

9.2%

3.7%

Average directs

3,696

1,625

127%

3,168

1,228

158%

Average indirects

121

110

10%

116

106

9%

Ratio direct / Indirect

30.5

14.8

27.3

11.5
a 38 % like-for-like
b 43% like-for-like
c 14% like-for-like
d 14 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Middle East & India ended a very successful 2018 with the best quarter in Q4. The excellent performance in 2018, with a growth in professionals from 1,772 to just under 4,000, and a 37% growth in revenue, is the result of the diversification strategy that started early 2017. The strong team and organisation have been able to achieve a very high operational leverage, resulting in an EBIT of 10% for Q4.

The main contributors are India, Kuwait and Qatar, and most of the activities are project related. The recently won projects, in combination with all the activities in the region, will ensure continued growth in 2019.

Rest of world (unaudited)

P&L amounts in EUR million

Q4 2018

Q4 2017

Δ%

YTD 2018

YTD 2017

Δ%

Revenue

67.0

46.9

43%

a

224.6

190.3

18%

Gross Profit

10.3

7.7

34%

34.7

27.7

25%

Gross margin

15.4%

16.4%

15.4%

14.5%

Operating costs

9.7

9.7

0%

c

36.2

35.5

2%

EBIT

0.6

-2.0

127%

-1.5

-7.8

81%

EBIT %

0.8%

-4.4%

-0.6%

-4.1%

Average directs

2,733

3,128

-13%

2,759

3,098

-11%

Average indirects

390

405

-4%

384

384

0%

Ratio direct / Indirect

7.0

7.7

7.2

8.1
a 44% like-for-like
b 18 % like-for-like
c 5% like-for-like
d 6% like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions
 
Rest of the World includes Americas, Russia, South East Asia and the rest of Europe. Growth continued to accelerate. Main drivers were Americas and Russia. The new project in the Permian Basin in Texas, the biggest shale oil producing region in the USA, showed strong growth since the start in October, despite adverse weather conditions. These conditions also slightly impacted our gross margin.

Russia continues to grow following the high level of project activities in that area. In South East Asia, we see an increase in headcount on yards and engineering sites as a result of the many new Oil & Gas projects.

Effective tax rate

The effective tax rate decreased from 46.2% in 2017 to 33.7% in 2018, mainly because most countries have returned to profitability, and therefore created a positive mix effect.

Cash position

The December 2018 cash balance amounted to EUR 106 million, a decrease of EUR 20 million compared to December 2017 due to higher working capital expenditures resulting from the growth of our activities. 

Dividend

We propose a dividend of EUR 0.25 per share, an increase of 67% compared to the EUR 0.15 per share over 2017. This corresponds with a pay-out ratio of 61%.

Outlook

In 2018 we have continued to invest in the number of direct and indirect employees, in new activities and markets and in new technologies that will improve our operational effectiveness. On the back of these investments we are very well positioned to continue to benefit from favorable market developments. Moreover, the resulting higher starting headcount for 2019, in combination with further expected growth in our main markets will contribute to continued revenue growth, operational leverage and improved profitability.

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