Everybody, welcome to the trading update for Q3 . A lot of things changed in the recent weeks. First of all, this is the first call in many times without Jelko. Jelko just left and actually started his new job today. Another change is that with me in the room is Ingrid Prins, our new head of investor relations, who joined us on the 1st of October. It's also the first quarter in 12 quarters that we were not able to achieve revenue growth. Let's go to that directly. The core of what Brunel does is provide flexibility and specialism to projects to our clients, and mainly investment projects and R&D projects.
With all the uncertainty in the world, to name a few, the Middle East, the continuing war in Russia-Ukraine, trade discussions between China and the rest of the world, the U.S. elections, we see that a lot of clients are a bit hesitant to take bigger investment decisions at the moment. At the same time, we do see a lot of tender activity, and we actually also win quite some new projects, but they're all planned to start early next year. As a result, our activity level is a bit lower than earlier this year, and that's demonstrated in the revenue development, where we are more or less in line with the revenue we achieved last year, but a slightly different composition.
And obviously, everything that's going on in the automotive industry in Germany has a huge impact on that, where we were pretty resilient until Q2 in Germany. It really weakened in Q3 to stabilize after that. But it's hard to predict what will happen in the next couple of weeks. End of year are always interesting periods in these circumstances. Overall, our EBIT ended up slightly below last year, EUR 17.3 million versus EUR 18.8 million, supported by the execution of the cost reduction program we executed in Q3, and it's completely executed now, and that will reduce the cost by EUR 20 million on an annual basis. But we've also shown in the past that there's always more room for cost agility when necessary. But we'll get to that later when we look at the respective regions. So, overall, a slight slowdown in activities, but still a very promising pipeline.
Moving on to the most eventful region in Germany, everybody read the news that came out in Q3 on Volkswagen, the recall that BMW had to do, the issues with Bayer, issues with BASF, yeah, and that's reflected also in our headcount in Germany, where you see in the yellow line that the trend that was slowly downwards earlier this year has, yeah, dropped further, but once again, stable for now, but hard to predict what will happen in the next couple of weeks. What we've seen in the past is that in these circumstances, some clients decide to shut down factories in December or those types of things. We haven't seen that yet or haven't heard it yet, but yeah, hard to predict. Under these circumstances, we're still really proud that we managed to achieve an 11% EBIT in this region, as you can see here.
Of course, the market is weak, but it's still very profitable. So, if the market, yeah, recovers, then we'll definitely benefit from that. And it's not the entire German economy that is struggling. We do see pockets also in our activities that are growing. And the best examples are obviously everything in the defense industry, but also anything energy-related, both conventional and renewable, but also the related grid. Moving on to the Netherlands. Historically, we always managed to achieve all the growth in the Netherlands in the second half of the year. And that was also what we expected earlier this year. But two things changed in this quarter. We saw some anticipation of the tighter application of the new law for freelancers happening. And we were a bit surprised that some of our clients decided to hire the freelancers themselves instead of asking us to hire them.
Another element is that a bigger client in the finance industry also moves up on hiring our people. So, that has offset the growth that we achieved in other parts. But also in the Netherlands, our EBIT remained pretty stable with a small growth year to date in revenue. Yeah, strong organization, finding the right opportunities in the market. Even there, we saw hiring decisions being postponed, as you can see in the development of the yellow line that was flat in Q3 . The projects in Papua New Guinea are continuing and will continue to ramp up next year, but probably will be pretty flat this year. But in Australasia, yeah, very strong growth year to date.
We're now working on, supported by the cost reductions, to also get the operational leverage reflected in our numbers to bring the EBIT percentages to our target level for this region for 27.4%. Middle East and India, you notice a steep decline in headcount. That's mainly in India. So, that's a big number in headcount, but has a lesser effect in revenue. Pretty resilient activities, especially in Qatar, where we are doing really well and continue to do really well and have a strong market position with a high profitability in this market. And we're about to start our activities in Saudi Arabia, which is obviously a huge market in our industries. Moving on to Americas. Also, there the slowdown in hiring in the U.S. But the same development, a lot of underlying activity, but hiring decisions being postponed to early next year.
I expect this line to also remain flat. In the U.S. or in Americas, we do see the operational leverage, and there's more to come. This is not close to our target level for the EBIT yet. We are targeting an EBIT of 6% for 2027, and we will see a steep increase next year towards that development. Continued revenue growth and a nice improvement of the gross margin for the full year to date. Asia, we already announced in our Q2 results that we experienced delays in new projects being started. That delay got a little bit or the impact got a little bit bigger with some projects that were expected to go or some contractors that were expected to go from one project to another project.
And now there's a gap of six months that explains why we are guiding for a slightly bigger impact on our Q4 results for everything that's happening in Asia. But, interestingly enough, the most wins we experience in this region for yard construction work in China and Indonesia. So, still very optimistic about 2025, but we're not going to see anything contributing in Q4. With the lower activity, that also impacts our gross profit while we keep our organization in place with the pipeline that we need to deliver next year. And the rest of the world, pretty stable headcount development. This includes Taylor Hopkinson, where we are happy that the performance remains pretty stable after a tougher year last year and a lot of new projects in the pipeline that will also support our firm placement activities for Taylor Hopkinson.
And because the slightly lower than expected performance, also our earnout obligation has been reduced for the settlement of the final shares that we need to buy. So, there's no cost related to the earnout included in Q3, where we in previous quarters had EUR 700,000, and we don't expect any related costs in Q4. And that supports the improvement of the EBIT in this region. Revenue is slightly lower because of some bigger projects, offshore wind projects in Taiwan being finalized. But yeah, nice improvement in gross margin and yeah, contributing an EBIT now. That brings us to our overall results. Revenue, 1% below last year, but a bigger impact on EBIT because of the mix. So, the lower performance in Germany is partly offset by other regions, but not entirely. Still 5% EBIT this quarter. Yeah, and 4% revenue growth year to date.
Then we did have a very strong cash flow in Q3, especially because we were able to improve our collection. That means that our cash balance is now back to over EUR 20 million, where we were in a net debt position earlier this year. And we expect to be at a similar level as last year, so around EUR 31 million. Happy to see that improvement. Then the gross profit by vertical. First of all, conventional energy and mining are still growing, but especially Future Mobility and Renewables changed compared to earlier this year. In the first half year, our gross profit from Future Mobility, so mainly automotive for Germany, was pretty much at the same level as last year, where we are now year to date significantly below. In Renewables, the impact is slightly lower.
We do see issues that happened in that industry last year also impacting new projects starting. They will start later than earlier expected, but we'll definitely see that coming next year. Then some organizational matters. The Supervisory Board is still working on finding a new CFO. We were looking externally for a candidate. Search is ongoing. And as soon as we know more, we obviously will inform you. And the other part is that we are proposing to appoint Mr. Aad Kuiper as a new member of the Supervisory Board. Mr. Aad Kuiper has a long history with Hunter Douglas, and that company has some similarities in dynamics as Brunel does. We really think he's a unique candidate to strengthen our Supervisory Board. Then the progress on 2027 targets.
I've been challenged a lot on these targets if these are still relevant, but supported by the cost reduction we did earlier and our cost agility and our strong pipeline, we're still fully confident that we will be able to achieve these targets in 2027. It won't be a straight line there. We will show a bigger improvement next year and then continuation after that. But before we get to that, we first have to manage through Q4 . I don't expect any big changes in trend in most of the regions. The only thing is that the DACH or Germany is a bit harder to predict, and the impact or the negative impact will get slightly bigger in Q4 than it was in Q3. So, that's a very brief summary of our results. So then I want to invite all of you to ask any questions you might have.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you have joined via the webcast, please submit questions on the bottom of the page. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is muted locally. And the first question goes to Mark Swartzenberg of ING. Mark, please go ahead.
Yeah, good morning, everybody. The first question on the DACH region. So, Peter, can you maybe share a bit more color on the impact from the decline in automotive, what the impact is on your idle time, so your gross margin impact? Can you share the percentage of bench now versus maybe even Q2 or a year ago to get a bit more color how that's developing? And also, yeah, if I look to the graph on DACH, the automotive sector was still up in Q2, and now it's down 33%. So, there's a strong weakening through the quarter then. While I think when we had the results on Q2, things were still going pretty stable, not falling off a cliff. But when I look at those numbers, it must have been falling off a cliff in September. So, maybe you can give a bit more color there. And I think you mentioned in the call earlier that you saw a weakening in Q2 indeed, and then a stable trend. So, maybe a bit more color on Q4 also for the automotive sector. Do you want them to take them one by one? Is that easier?
No, please go to you.
Yeah, the other one is the Asian project. So, that's delayed by two quarters. Can you maybe share a bit what the impact is from that delay on Q4 and the impact on Q1, something that we lost? So, that's more a simple question. And then, yeah, you mentioned that you expect still a strong improvement in 2025 towards your 2027 targets. But yeah, if you see you have a miss on Q3 and things are looking pretty quiet a bit weaker also for Q4, that means that the starting point for next year is quite significantly lower than I think what we expected maybe a quarter ago. So, and of course, you will have maybe EUR 40 million of extra cost savings next year.
Yeah, if you already miss, say, EUR 3 to 4 million on a quarter of Q4 and you multiply it by four, just simply doing that, it means that all the cost savings are gone. How convinced are you that you can still see a strong improvement in 2025 given what's going on now? Maybe a last one, if I can squeeze it in. If I look at the verticals, I did know renewables were still up in Q2 and now it's down, but also life sciences is going down rapidly. Maybe you can share a bit on the verticals, what is happening because I don't get the feeling that things are then pretty stable. Those were my questions.
Okay. Good questions. I'll address them in order. The bench in Germany, you are very right. If we see a lot of projects ending, that always causes our bench to increase, where our bench in Germany normally is just over 2%. It now went up to almost 3.5% in Q3 just because of the earlier terminations of projects. And that's connected to the automotive trend. If you look at the headcount graph, and I might have explained it by wrong quarters, you see the headcount really decreasing basically after the end of June throughout the quarter. And where I said it's stabilizing, it's stable at the moment. But yeah, that's just four weeks after Q3. But yeah, at the moment, it's stable. But yeah, very hard to predict at the moment. The Asian project, so it involves close to 150 people that are working on Indonesia, where we miss, where we will miss the revenue in Q4 and Q1.
That will have an impact of roughly EUR 500,000 EBIT per quarter. That automatically brings me to the question on the starting position, where I said I'm still confident that we will be able to achieve our 2025 targets. I was especially referring to the targets on EBIT percentages and conversion levels. Starting position will be lower than expected, obviously. We might need to look a bit more at cost to be a bit more cautious there, but we don't need any big programs. Once again, we have shown that we have quite some cost agility. We did show that in the past, and that's still there. That makes me comfortable that we will achieve the 2027 EBIT percentage target and already see a quite big improvement there.
The revenue for next year is a bit too early to guide because it's, yeah, all depends on when all the projects will really take off. But again, supported by cost agility and more focus on our margins, I'm confident that we will see a big improvement in EBIT percentage for next year. And then the final question on the verticals. So, last year in Q3, we still had a huge workload on offshore wind projects around Taiwan and in the year-on-year comparison. Yeah, those projects are stopped, so that explains part of that. And again, we saw all the issues in the renewable industry in the second half of last year, and that also resulted in a slower startup of new projects and that we see happening now.
a bit of a mismatch in timing of new projects starting, and the firm placements by Taylor Hopkinson are making up a little bit for that. Life sciences is mainly also affected by Germany, where we see, yeah, not just the automotive sector being weaker, but also other sectors, but also some positive developments in, once again, the defense industry and other energy industries. Does that answer your questions, Mark?
Yes, for sure. Thanks. Maybe you can give a bit more color on the defense industry, how big it is currently of your mix?
Yeah, it's still pretty small. So, I think we have 45 people working in the defense industry for now, but we just started that. So, I'm happy with the progress we've made so far. And some of our clients were pretty reluctant to use agencies until earlier this year, and we see a change in behavior because they struggle to get the right people in.
Yeah, you were mentioning at Q2 that you were in this process to become a preferred supplier for, I think, Rheinmetall. Is that the case? Is that already?
Yeah. No, we have people working there. Yeah.
All right. I'll leave the floor to some others with questions.
Thanks, Mark.
Thank you very much.
Thank you. The next question goes to Konrad Zomer of ABN AMRO - ODDO BHF. Konrad, please go ahead.
Hi, good morning, everybody. A few questions for me as well. The first one on the Dutch business. I think your profitability in Q3 was actually quite good. I think the overall performance was also quite good. My question is, does it include any fees you might have collected from transferring freelancers directly to the clients? And it's something that has happened before. Do you think that trend will continue? And then on Germany, even though obviously you don't give specific guidance on your performance in Q4, but you've mentioned a few times in your remarks that you are hard to predict and you're quite cautious, it looks like some factory shutdowns are likely because it has happened before.
Is there a way for you to anticipate on that? Because obviously some of these people are on your books, the bench risk is increasing. What can you do now if these people are still employed at some of the automotives, if you think they might be out of a job in December? My third question, you mentioned that you're very positive about significant growth in the US or in North America next year. What makes you so positive on that statement? Thank you.
Yeah, thanks. Thanks also for recognizing the performance in the Netherlands. Unfortunately, for transfers of freelancers, we don't get a fee as it is also not strictly considered a transfer technically by our clients. Whether the trend will continue is hard to predict. In the past, we have always assumed that most of the freelancers will be pretty reluctant to be employed by some of our clients. For the majority of our freelancers, I expect that will still be the case. Also because the freelancers we use or, yeah, contract are genuine freelancers and should not be affected by the tighter monitoring of the law.
So, we are pretty optimistic that we continue to contract them as a freelancer, perhaps with other clients. But yeah, honestly, I don't fully know, but I assume that it will be okay for, yeah, the foreseeable future. On Germany, on the factory closures, we did see them in the past and managed that by asking people to take leave for at least part of the time, and that really reduced the impact, and that's pretty common practice. Also, what our clients ask is because it will be a factory closure and then people can resume working in first of January, so it will only be the December impact, and that can be largely offset by people taking leave.
And finally, USA, why we are so optimistic. USA, there's so much underlying activity, especially in the Shale area, where they try to get projects approved just before next week on Tuesday. But last couple of weeks, there has been a standstill in anticipation on who will be elected president. But either way, the Shale projects will continue because the US needs that to remain independent on the energy basis. But it's just, yeah, a standstill before the results of the elections are announced. And it's also based on feedback. I was in Houston three weeks ago, and our clients are only looking for more people. But it makes me confident that we will continue to show strong growth in the US. And also because looking at the US energy market and our position in that, we are still so small and we see improvement on improvement in our organization. So, we also see the returns on that.
Right. Thanks for that. Maybe just one other question on your cost savings. I mean, your cost level was down 8%. Your revenues were down 2%. So, I think that's a great achievement. Can you remind us of the quarterly development of that EUR 20 million, please? I mean, maybe I should know, but I don't. And I'm wondering if the full 20 will be in 2024 already or some of that will flow through into next year.
So, in Q3, it includes already EUR 3.5 million of cost savings, where we slightly more than we had forecasted because the project was executed faster than expected. We will see a bit more impact in Q4 with the further decrease in operating expense and the full impact from first of January. So, that basically means that out of EUR 20 million, you already see EUR 8.5 million in this year.
Okay. Thank you very much.
Thank you. The next question goes to Martin Wehrbeek of The Idea. Martin, please go ahead.
Good morning. It's Martin Wehrbeek of The Idea. Just continuing on the Konrad's question about cost savings. When you announced those cost savings, the market was not as depressed as it is today. So, what are the odds that you do some kind of step up and try to save a bit more cost in the near future?
That's also why I thank you, Martin. That's also why I refer to our cost agility. And a lot of that flexibility is pretty much around postponing new hires or replacements. And that also already provides us a lot of flexibility. Based on what we know now, that should be sufficient to achieve the improved results for next year.
And when you would implement those, that would more or less also not require a lot of exceptional costs like what we have seen with this current program?
No, because it won't be a big program. It's, like I said, especially a delay in hiring new people or replacing people that left us. So, I don't expect any cost there.
Okay. Referring to or mentioning the '27 target, you mentioned specifically that you feel you are on track with respect to the EBITDA margin. But you also communicated different targets, particularly also on growth. Do you think these are still, or this target is still achievable to realize by 2027?
Yeah. The high single-digit revenue growth, obviously, we're not going to achieve this year. But it's a bit too early to tell, but I expect that we will achieve that next year. And then definitely, we will see the renewable market grow. So, yeah, I'm pretty optimistic that we will return to high single-digit revenue growth from next year onwards.
Okay. But do you believe that it was an average till the period of 2027? So, if that average is still achievable, it's then questionable. But as of next year, you're more confident that it will be achievable?
Yeah. Yeah, especially considering the circumstances, I want to be a bit prudent in promising that we will achieve the high single-digit overall until 2027. But I'm also definitely not saying that it's not achievable.
And maybe one add-on, because you mentioned that for the growth, you see a lot of opportunities, a lot of big projects, large projects. But what gives you the guarantee that these will be executed and these will be executed when they have communicated initially? Because now we're also seeing that initially, you thought you would have a back-to-back project, which now shows a gap of some six months. What kind of guarantee do you have that this won't happen in future again?
I don't obviously have a 100% guarantee, but a lot of those projects are linked to commitments of our clients to their ultimate clients on moments that equipment needs to be delivered. And I don't expect that those projects will be canceled at all. And the deadlines for the delivery of those items are getting closer and closer. So, for many of the projects, they cannot afford much more delay anymore. And I don't expect the projects to be canceled at all. So, that means that they need to start producing early next year.
Okay. Thanks once more.
Welcome.
Thank you. We have no further questions. I'll hand back to Peter for any closing comments.
Okay. Well, thank you all very much for joining this call. It's been an eventful Q3 , and it will be, yeah, interesting Q4 to get ready for a much better next year. Hope to see you all soon. Have a nice day.
Thank you. This now concludes today's call. Thank you for joining. You may now disconnect your lines.