Brunel Q3 2019 results

Friday, November 1, 2019

Key points Q3 2019

  • Revenue up by 11% to EUR 260 million
  • EBIT continued operations up by 13% to EUR 14 million
  • EBIT (including BIS) down by 39% to EUR 7 million

Key points YTD 2019

  • Revenue continued operations up by 12%
  • EBIT continued operations up by 27% to EUR 31 million
  • EBIT (including BIS) down by 19% to EUR 19 million

Dividend

  • Dividend will be based on normalised earnings
Jilko Andringa, CEO of Brunel International N.V.: “Our continued operations achieved double digit growth in revenue and profitability. DACH and Middle East had another strong quarter. Growth in the Rest of the World remains high. The discontinuation of BIS has a significant impact on the results this year. Together with the global leadership team, Peter de Laat and I will continue to execute the communicated strategy to achieve our multiyear goals.”

 

Q3 2019 results by division (P&L amounts in EUR million)

Revenue

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

DACH region

74.5

70.5

6%

217.7

200.5

9%

The Netherlands

49.4

52.8

-7%

155.7

163.1

-5%

Australasia

31.1

30.4

2%

88.4

86.4

2%

Middle East & India

29.5

22.6

31%

85.1

62.1

37%

Rest of world

72.8

55.1

32%

197.1

149.8

32%

Total continued operations

257.3

231.5

11%

744.0

661.9

12%

Discontinued - BIS*

2.4

3.2

40.0

7.9

Total revenue

259.7

234.6

11%

784.0

669.7

17%

EBIT

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

DACH region

10.7

8.5

25%

23.5

18.9

24%

The Netherlands

2.7

3.0

-11%

7.0

8.3

-15%

Australasia

-0.3

0.0

-

-1.2

-0.5

-129%

Middle East & India

2.6

2.1

24%

7.7

5.5

41%

Rest of world

-0.4

0.5

-172%

-1.1

-1.2

9%

Unallocated

-1.4

-1.8

24%

-5.2

-6.8

24%

Total continued operations

13.9

12.2

13%

30.8

24.1

27%

Discontinued - BIS*

-6.5

-0.2

-11.8

-0.8

Total EBIT

7.3

12.0

-39%

18.9

23.3

-19%

* Brunel Industry Services – discontinued in October 2019

Brunel International (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

259.7

234.6

11%

a

784.0

669.7

17%

b

Gross Profit

55.8

54.9

2%

161.9

153.5

5%

Gross margin

21.5%

23.4%

20.7%

22.9%

Operating costs

48.5

42.9

13%

c

143.0

130.2

10%

d

EBIT

7.3

12.0

-39%

18.9

23.3

-19%

EBIT %

2.8%

5.1%

2.4%

3.5%

Average directs

11,225

12,087

-7%

12,273

11,734

5%

Average indirects

1,651

1,542

7%

1,637

1,536

7%

Ratio direct / Indirect

6.8

7.8

7.5

7.6

a 9 % like-for-like
b 15 % like-for-like
c 11 % like-for-like
d 9 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

The decrease in gross margin (YoY) is the result of the impact of BIS and a change in the mix.


DACH region (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

74.5

70.5

6%

217.7

200.5

9%

Gross Profit

27.1

23.8

13%

72.5

64.6

12%

Gross margin

36.3%

33.8%

33.3%

32.2%

Operating costs

16.4

15.3

7%

49.0

45.7

7%

EBIT

10.7

8.5

25%

23.5

18.9

24%

EBIT %

14.3%

12.1%

10.8%

9.4%

Average directs

2,717

2,698

1%

2,713

2,609

4%

Average indirects

518

472

10%

512

473

8%

Ratio direct / Indirect

5.2

5.7

5.3

5.5

This region includes Germany, Switzerland, Austria and Czech Republic. In the DACH region, we have seen a revenue growth of 6%, slightly impacted by the slowdown in the automotive industry. We expect these circumstances to further impact revenue growth in Q4, with a slight decrease of profitability due to a higher bench in Q4. Revenue per working day increased by 4.6% in Q3. The Q3 gross margin adjusted for working days is 35.5% (Q3 2018: 33.8%).

Working days

Q1

Q2

Q3

Q4

FY

2019

63

59

66

62

250

2018

63

60

65

62

250

 

Headcount as of September 30th was 2,735 (2018: 2,731)

Brunel Netherlands (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

49.4

52.8

-7%

155.7

163.1

-5%

Gross Profit

13.8

15.4

-11%

42.1

46.6

-10%

Gross margin

27.9%

29.2%

27.0%

28.5%

Operating costs

11.1

12.4

-10%

35.1

38.3

-8%

EBIT

2.7

3.0

-11%

7.0

8.3

-15%

EBIT %

5.4%

5.7%

4.5%

5.1%

Average directs

2,172

2,449

-11%

2,277

2,441

-7%

Average indirects

405

449

-10%

417

435

-4%

Ratio direct / Indirect

5.4

5.4

5.5

5.6

The performance in the Netherlands is still hindered by the scarcity in specialized IT and Engineering talent. To improve profitability, we have adjusted the structure in Q4, to start 2020 with a leaner organization, with full focus on the growth areas.

Revenue per working day decreased by 7.4%. The Q3 gross margin adjusted for working days is 27.0% (2018: 29.2%), where the YTD gross margin adjusted for working days is 26.7 % (2018: 28.5%). 

Working days

Q1

Q2

Q3

Q4

FY

2019

63

62

66

64

255

2018

64

61

65

64

254

Headcount as of September 30th was 2,155 (2018: 2,477)

 

Australasia (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

31.1

30.4

2%

a

88.4

86.4

2%

b

Gross Profit

2.6

2.5

5%

7.3

7.0

3%

Gross margin

8.3%

8.1%

8.2%

8.1%

Operating costs

2.9

2.5

16%

c

8.5

7.5

13%

d

EBIT

-0.3

-

-1.2

-0.5

-129%

EBIT %

-0.8%

-0.1%

-1.4%

-0.6%

Average directs

906

917

-1%

907

925

-2%

Average indirects

86

80

8%

85

77

10%

Ratio direct / Indirect

10.5

11.5

10.7

12.0

a 3 % like-for-like
b 3 % like-for-like
c 14 % like-for-like
d 13 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions
 
Australasia includes Australia and Papua New Guinea. We achieved limited growth despite the low number of new projects in the Oil & Gas industry in this year. The increase in operating costs mainly relates to increased sales activities to prepare for upcoming projects.


Middle East & India (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

29.5

22.6

31%

a

85.1

62.1

37%

b

Gross Profit

5.1

4.0

26%

15.0

11.0

37%

Gross margin

17.2%

17.8%

17.7%

17.7%

Operating costs

2.5

1.9

32%

c

7.3

5.5

33%

d

EBIT

2.6

2.1

24%

7.7

5.5

41%

EBIT %

8.6%

9.1%

9.1%

8.8%

Average directs

2,605

3,478

-25%

3,411

2,992

14%

Average indirects

142

116

23%

136

114

19%

Ratio direct / Indirect

18.3

30.0

25.0

26.2

a 23 % like-for-like
b 30 % like-for-like c 21 % like-for-like d 26 % like-for-like Like-for-like is measured excluding the impact of currencies and acquisitions
 

Middle East & India continues its strong, double digit growth, mainly driven by the results in Qatar and Kuwait. We have seen a small decline in revenue in India. 

As a result of the implementation of IFRS 16, for Q3 an amount of EUR 0.4 million is now recorded under operating costs, which was previously (2018) recorded in cost of sales.

Rest of world (unaudited)

P&L amounts in EUR million

Q3 2019

Q3 2018

Δ%

YTD 2019

YTD 2018

Δ%

Revenue

72.8

55.1

32%

a

197.1

149.7

32%

b

Gross Profit

11.0

8.4

31%

28.6

22.7

26%

Gross margin

15.1%

15.3%

14.5%

15.2%

Operating costs

11.4

7.9

44%

c

29.7

23.9

24%

d

EBIT

-0.4

0.5

-1.1

-1.2

9%

EBIT %

-0.5%

0.9%

-0.6%

-0.8%

Average directs

2,688

2,490

8%

2,659

2,735

-3%

Average indirects

418

365

15%

413

374

10%

Ratio direct / Indirect

6.4

6.8

6.4

7.3

a 29 % like-for-like
b 29 % like-for-like
c 39 % like-for-like
d 21 % like-for-like
Like-for-like is measured excluding the impact of currencies, acquisitions and discontinued operations
 
Rest of World includes Americas, Asia, Russia and the remaining European countries, but excludes the results from BIS. Asia and Americas are the main growth drivers, following increased activities in the Oil & Gas sector. Revenue growth exceeds growth in direct headcount due to a change in the mix.

Operating cost increased due to further investments in our sales force, new branches in China and Guyana.

Discontinued operations – Brunel Industry Services

As announced in our press release on 23 October, we have decided to halt our operations in BIS. The market for shale oil & gas experienced a slowdown bringing the revenues of our BIS-activities at a very low level of EUR 2.4 million in Q3. As we had built up our organisation in the past period, there was a disbalance between capacity and activities, resulting in significant operational losses of EUR 6.5 million in Q3.

As announced in the October press release, we expect to incur operational losses for BIS in Q4 of EUR 2.5 million and one-off costs of EUR 8 million to cease activities and speed up the finalization of current projects.

Cash position

In line with seasonal patterns, the cash position increased to EUR 81.7 million (30 June 2019: EUR 60.6 million).

Effective tax rate

Due to the fact that the losses incurred by BIS in 2019 will not result in a refund of corporate income tax, nor result in a deferred tax asset, our effective tax rate for 2019 will be over 70%, compared to 34% over 2018. Additionally, the deferred tax asset on the balance sheet relating to the US of EUR 3.7 million is expected to be (partially) impaired.

Dividend

Brunel has the dividend policy to pay out between 30% and 100% of the result over the year. In light of the developments in BIS, we will exclude the results from discontinued activities and use normalised earnings as the basis for dividend over 2019.

Outlook for 2019

For our continued activities, revenue for the full year is expected to be between EUR 980 million and EUR 1,030 million, with EBIT between EUR 37 million and EUR 42 million.

Reported EBIT is expected to be between EUR 15 million and EUR 20 million for the full year 2019. Including BIS, revenue will be between EUR 1,025 million and 1,075 million.