Hello everyone and welcome to the Brunel International N.V. Trading Update for the Fourth Quarter and Full Year 2024. My name is Emily and I'll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. Alternatively, you may also ask questions via the webcast platform. I will now hand over to Peter de Laat, Brunel CEO. Please go ahead.
Thank you very much. Good morning, everybody, with the presentation of our fourth quarter results. I will dive immediately into it. Let's start with some operational highlights. The cost reduction plan was already fully announced and discussed the previous quarter, but we have two other items that I wanted to share. Let me start with that I'm very happy that we are able to propose Toine van Doremalen to be our new CFO as we have announced earlier this week. Toine is the right candidate and exactly fits our profile that we were looking for. I really look forward to start working with him from the 1st of April onwards.
And then, as a reminder, we also completed two smaller acquisitions this year: Advance Careers in Australia, a recruitment firm specialized in ESG profiles, and Equals, a nice Amsterdam-based company focused on training women, especially for IT profiles. And well, there's a lot of demand for that. So we're looking forward to the opportunities that that will bring to us. Then, on to the results. Q4 kind of developed as expected. As we had included in our outlook at the end of Q3, we had anticipated that the impact of the DACH region and the related projects in Asia on our Q4 results would be bigger than in Q3. And that's also what materialized. But the other regions still continue to be pretty resilient, especially EBIT-wise. And the cost level ended up slightly lower than we anticipated.
So as a result, we achieved an EBIT that's really close to what we achieved in the fourth quarter last year. And under these circumstances, and especially in Germany and Asia, I'm pretty happy with these results. Of course, we saw the gross margin decreasing, but it's mainly the impact of the change in the mix between the lower volume and our higher margin businesses in especially the DACH. That's a smaller part of the total. And because of the reduction in OPEX, yeah, the lower margin, we were able to offset most of it. For the full year, I'm still pretty pleased that many regions were able to improve their EBIT contribution, and most notably Australasia and Americas.
Moving on to the DACH region, the headcount line graph is the key thing here where you see the weakening in the second half of the year where our business held on pretty firmly in the first half of the year. We are getting more and more traction on our focus on the markets that are growing like defense and energy, but it will take a bit of time before you will see that in our numbers because we're still facing quite a number of stoppers in the other industries. But that brings us to an overall result with a 12% declining gross profit, but still an underlying EBIT of 8%. And in these markets, in these circumstances, there is still very strong performance, very resilient, and they responded timely to the market circumstances.
Yeah, I'm very interested to see what will happen in 2025 for Germany, especially. The macroeconomic outlook, yeah, is pretty positive, especially towards the second half of the year. So I would like to see that materialize. Moving on to the Netherlands, the key thing there that is now keeping us busy is the increased monitoring on the freelance regulations. And the good thing is that we see a clear change in behavior, mostly at our clients, but also at the freelancers itself, where many clients are moving away from using freelancers when there's any doubt. And as a result, there is a level playing field between all the companies active in that area. And that makes it easier to deal with it.
And the result will be that the portion of freelancers in our total mix, now roughly 25%, will probably go down slightly towards the own employees that typically attract a higher margin. So that should help to improve our results in the Netherlands on a medium term. The Netherlands managed to increase their profitability slightly in the year by cost control and managing the margin impact of the growth in freelancers that we still experience in the first two quarters of the year. On to Australasia, a very strong performance in Q4. The markets there are still doing very well. The energy market and the mining market. As a reminder, Australasia, we are working mainly in Australia and Papua New Guinea.
Yeah, a very tightly managed organization with tight cost control, resulting in a nice EBIT contribution of EUR 7 million EBIT, whereas for many years we were looking at a zero here. So happy with all the progress they've made and they're developing towards their target EBIT of at least 4% pretty rapidly this way. So very happy with that performance. And Middle East and India. Yeah, a resilient, stable performance as always, I would like to say. And they had another shutdown project. So that's a short-term project where we mobilize a lot of people and that attracts quite some revenue and a slightly higher margin. So supporting their results to still continue to show, yeah, a strong result overall and a very strong EBIT percentage of still over 7%. On to Americas. The headcount appears flat. The slide is not moving on the screen. Oh, now it is.
Yeah, sorry. Yeah, the headcount appears flat, but there's a change in the mix where the portion of the U.S. is increasing compared to what we do, especially in Brazil. And obviously in the U.S., the day rates are higher and the margins are slightly higher. So that's also supporting our results. Q4 was a very interesting quarter where many clients were waiting to make their final decisions on where to go to based on the results of the elections. And what we see at the moment is, although the sentiment seems strange, that there's still continued activity even in the renewable market and that a lot of activity is also continuing towards Conventional Energy. So still a very strong market in the verticals we are aiming in. And their strong performance also shows in the results with a nice revenue growth and a very impressive EBIT growth.
They managed their cost really well despite the revenue growth, keep the cost level pretty stable, and also here a nice EBIT contribution of EUR 7 million. Asia, yeah, again, as expected, we knew that there wouldn't be any projects starting in Q4. And you even see a steep decline in headcount in December. That's mainly in local employees. So the people working on projects in Thailand and Indonesia and the local employees typically have a much lower day rate than the expats that we employ there. So the revenue impact won't be as strong as you see in the headcount graph here. In Asia, the year always starts slightly later than in Europe, especially when Chinese New Year is celebrated early in the year, where it was this year in the end of January.
So Asia is really starting up now and we see the activities in preparing new startups of projects increasing. So it makes me pretty optimistic for the rest of this year. It'll take a couple of months before you really see it reflected, but the underlying activity, including the pipeline of contracts that we have already secured, is very promising. But of course, the lower project level did have an impact on our revenue in 2024 and especially on the EBIT. But looking at it from a different perspective, in the past when we were at a low project volume, our EBIT will drop back to close to 0%. And now at a lower project volume, we are still able to keep it at a 4% EBIT.
Yes, it's lower than we were hoping for or expecting at the beginning of 2024, but still, yeah, considering all the project delays, a strong performance. And the rest of the world, again, that's our energy activities in wider Europe and then Taylor Hopkinson. Headcount is pretty stable. We did win and started a nice hydrogen project in Sweden that's starting to ramp up in Q1. They're building a steel plant that's run on hydrogen energy. So it's really exciting and also meant that we opened up in Sweden. And in the numbers, we see that especially the GB development quarter on quarter is better compared to Q3, but especially due to the weaker quarter at the end of last year where we saw the firm market in renewable very slow. And we know that market is continuing to return.
Overall, a slightly higher EBIT contribution than in 2023 as well for the rest of the world. As a group, yeah, I know that at the end of 2023, we guided for high single-digit revenue growth until 2027. But we also added to that that it won't be a straight line, that there will be ups and downs. We didn't achieve the high single-digit revenue growth in 2024. But again, looking at the markets, especially in DACH and Asia, I'm still pretty happy with the results that we achieved under these conditions. Managing to still deliver an EBIT that's pretty close to what we achieved in 2023. I think a job well done by our organization and it's very promising for many other markets and start improving as well.
Then the gross profit per vertical that we operate in, we continue to grow in Conventional Energy as expected. Renewable Energy is at a slightly lower level than it was. Future Mobility and Industrials and Technology significantly lower than 2023, mainly as a result of the weaker markets in DACH. What we do in Automotive or Future Mobility, the trend improves a little bit in Q4, where the decline was slightly lower than in Q3. And we do see that the activities we do in Automotive are pretty stable at the moment. The clients that we work on are the stronger parties that continue to invest in R&D and other CapEx projects. Then our cash flow. I must admit, I was even surprised by that. To go back to 2023, we saw an increase in our days outstanding.
We started a lot of initiatives to improve that, including better use of systems, automation, and robotization. That all materialized or really came to fruition in Q4. We saw a huge decrease in the days outstanding, making up for the weakening in 2023 and even more. I think we still have even more potential to improve our collections further. As a result, we ended with a very strong free cash flow for the year of almost EUR 75 million and a cash balance of EUR 65 million. Overall, with the result being at a similar level as 2023, we proposed to pay a similar dividend as in 2023, so EUR 0.55 per share. The other item I just already mentioned, Toine's appointment will be voted on in the AGM on 15th May. Pretty optimistic about the outcome of that vote.
A reminder of the 2027 targets. If you look at where we are today, especially on the EBIT percentage, we achieved the EBIT percentage of 4.3% in 2024, and we're still guiding for an EBIT of over 6% in 2027. I still think we're on track to achieve that based on what we see today. Then finally, the outlook. The outlook for Q1 is still that we expect the current trends to continue. Like I said, Asia starts a little bit slow because of Chinese New Year. The German market is not improving yet, and it's very interesting to see what will happen in the elections this weekend. Yeah, so the trend we've seen in Q4 is likely to continue, and we see that continuing. Okay, that's a brief overview of our fourth quarter full year results.
And now I'd like to invite you to ask any questions you might have.
Thank you. As a reminder, if you would like to ask a question today, you can do so now by pressing star, followed by the number one on your telephone keypad. You can also register any questions on the webcast platform. Our first question comes from Konrad Zomer with ABN AMRO. Please go ahead, Konrad.
Hi, good morning, Peter. Thanks for the presentation.
Good morning.
I've got a few questions. First, hi. Firstly, on the Q1 outlook, you stated in the press release, you also just mentioned it, you expect current trends to continue. Now, if we look at the regional performance, except for the Americas, Q4 revenue developments were actually worse than in the first nine months in every region.
When you say that you expect current trends to continue, does that mean that you expect these worsening trends to continue, or is that too negative a view on what you intend to say? And let me just ask the other two questions as well. The other question on the EUR 20 million of cost savings, I think you did really well in 2024. What could be the additional full year effect in 2025? And then thirdly, in the rest of the world, you talk about Renewable Energy projects that are scheduled to start early 2025. Could you maybe tell us a bit more about the potential size of these projects, and are they likely to start in Q1, or is that likely to be Q2? Thank you.
Yeah, thanks.
So starting with the outlook, yeah, we did see a little bit of slowdown also outside Europe in Q4, but I don't expect any further weakening. So I expect them to, in the year-on-year comparison, stay at that level. And Germany and Asia is a bit harder to predict, obviously, but for the other regions, I don't expect any further weakening in Q1. The EUR 20 million cost savings. First of all, there will be the impact of the normal inflation and salary increases 1st of January, but we still have some levers to manage our costs. And that's by being a bit reluctant, and the key thing is in replacing people that leave us. We are taking our time to replace them to manage our costs.
The EUR 47 million in cost you saw in Q4 will definitely be higher in Q1, but nowhere near the level we've seen in Q1 2024, 54. I think we will expect to end up somewhere around EUR 49 million or EUR 50 million in Q1, and we'll be able to keep it pretty stable at that level. On the renewable projects, I cannot name concrete projects at hand that are starting now, but we are delivering and placing a lot of people on the, let's say, the preparation for the startup projects. That's 10 people here and 10 people there. It will start to add up in the first half year. It's all across Europe, especially. Germany is pretty strong there with all the investments that are also going on in the grid.
And we also see more and more moving towards Asia, but we'll end up in our Asia numbers. Does that answer your question?
That's really helpful. Yeah, yeah, no, absolutely. Just one other question on Asia. If I look at your indirect-direct ratio, it improved in pretty much every region except Asia. And I noticed you actually recruited more indirect people in Asia. And given the developments in your revenues, could you tell us why that ratio didn't improve and why you recruited more people there?
Yeah, so remember that I mentioned that we had a lot of local people stopping. So that impacts the headcount, and with that, also the ratio. And the increase in headcount in Asia, we see we are keeping our organization in place to be ready for the projects ramp up that we expect later this year.
That's why our indirect headcount is not developing in the same way as the direct headcount yet. But that will reverse in the course of 2025.
Okay, that's great. Thank you, Peter.
We do not currently have any further questions registered on the phone line. So as a final reminder, if you would like to ask a question today, you can register those now by pressing star, followed by the number one on your telephone keypad. The next question comes from Maarten Verbeek with t he IDEA! Please go ahead.
Morning, it's Martin Verbeek of the IDEA! A couple of questions from my end. Firstly, after the Q3 numbers, when you presented those start of November, you still expected to return to a high single-digit revenue growth as of this year going forward. Is that still feasible? Do you still think that's a realistic view at this moment?
Good morning, Maarten. Thanks for your question. Honest answer is that I cannot tell at the moment. It could still happen, but it all depends on how fast projects are started and are ramping up. But where we are today, if I look at all the forecasts for the second half of the year, it's definitely still feasible, but I would not guide for that at the moment.
How many months in advance do you hear whether or not a project will go live or not?
There's a huge variation in that. So we have one smaller starting where we need to have people ready at 1st of March, where we are informed this week. So that's two weeks in advance. That's quite a challenge. But we also have clients that look six months ahead. So it really varies. But in Asia, more and more, the timeframe is pretty short.
Okay, okay, and then secondly.
Sorry, Maarten, may I add to that, and of course, that's clients that we have been discussing the project with for six months to make sure that if we get the go-ahead, we know what to do. It's not that they called us this week, "Hey, I need so many people next week." There's continuous dialogue, obviously. But the actual start date can be confirmed really late in the process.
Okay, okay. Secondly, concerning Taylor Hopkinson, last year, you already more or less acquired a large stake again, but still not at 100%. I thought at the first quarter of this year, or maybe you already have done that, you would buy the remaining last shares of Taylor Hopkinson. What's the status at this moment,
So we did another tranche in Q4 with existing management, and the final piece will be done mid-March.
But the numbers have all been prepared and finalized. So it's only a matter of formalization. Yeah, and I'm very happy to say that despite the headwinds they faced in renewable, we still ended up with a nice transaction and also allowed many of the people that were involved in that earnout scheme to offer them a promising role going forward within the group.
So the cash out of EUR 1.8 million in the cash flow statement for the second half is partly for Equals and partly for Taylor Hopkinson?
It should only be Taylor Hopkinson. But that's in a, yeah, so we had a technical discussion with our auditor. So the cash out for the put and call is in a different line. But happy to clarify that or fight. But we had the cash out for Equals of EUR 1.5 million.
And for Taylor Hopkinson, in the fourth quarter, it was also EUR 1.5 million, I think.
Okay. And then furthermore, concerning Taylor Hopkinson particularly, what is the impact of Mr. Trump at the helm in the U.S., making clear statements that he forbids all new windmills, as he calls it, and focuses particularly on oil and those kinds of energy sources?
First of all, it scared everybody that worked in renewable a lot. And now that everybody sees the impact, it appears to be not as bad as it might suggest. We see that there are still a lot of renewable projects still continuing just because there's a business case or there are states in the U.S. that want to continue with that. So it's not that the market is completely dead.
And we have been preparing for all scenarios, so also looking into other sources of renewable energy outside offshore wind. So yeah, for now, I think it mainly impacts the sentiment in the industry, but there's still projects that are continuing and are being started.
And also the situation in Europe where Denmark is canceling offshore wind projects. There are doubts that in the Netherlands, the Navy projects won't find any bidder. How do you look at that situation?
Yeah, so the offshore wind market is really challenging at the moment. And that's why we've been focusing already for more than two years on hydrogen. That seems more and more promising with the education on hydrogen. We provide them in the Netherlands, and the hydrogen market still continues and growing fast. Like I said, the project is Sweden.
Yeah, and related to that, all the investments in the grid are continuing. So there's still plenty of growth in that industry. But you're right, offshore wind is not the best market at the moment. But there are plenty of other pockets in renewable that are investing.
For me to give you a bit of feeling for the markets Taylor Hopkinson is addressing, can you more or less give a breakdown of offshore wind, hydrogen, energy networks, etc.?
So at the moment, and by my earlier comments, still a lot of what I do, and it's probably 60% is geared towards offshore wind. And still a decent portion of onshore wind. That's probably 20% and 20% of the rest, and that includes hydrogen and the grid infrastructure.
But as I explained previous time, in the reported numbers, we only see the business for Taylor Hopkinson that's run out of the U.K., out of their own entity. And more and more, the renewable business is won and contracted by Taylor Hopkinson, but executed by Brunel region, and therefore ends up in the P&L of a Brunel region, as you can see in the total development of our renewable revenue. When we started with Taylor Hopkinson, or in 2021, we did roughly EUR 35 million in renewable. And last year, we did close to EUR 175 million. So there's still clear growth in that market. But it's not visible in only the TH numbers because it ends up in various P&Ls within Brunel.
Okay, great, thanks.
The next question comes from Konrad Zomer with ABN AMRO. Please go ahead.
Hi Peter, it's Konrad again.
I have a question on your financial expenses. I think you did really well, as you said, on your free cash flow. Net cash came in really at a high level. I was wrong-footed in my estimates on your financial expenses for the year, minus EUR 7.9 million. It was minus EUR 2.2 million in the first half, and that was the result why my EPS forecast was a lot higher than your reported EPS level, and also subsequently your dividend fed year on year. It makes sense from your reported numbers, but can you explain to us what happened in your financial expenses, particularly in the second half? Because overall, you're a net cash company, and your net financial expenses were actually higher than last year.
Yeah, but you will see that also our interest expenses for banks, so for the overdrafts in the second half of the year, were at the same level as the first half of the year. Because the trend in Q4 was opposite as what we've seen, yeah, as we've seen in the first half year. Remember, for the first time since many years, we were in a net debt position at the end of June. So we were still using quite a bit of our overdraft facility in the first couple of months. And the cash collection really accelerated in November and December. So the interest on our overdraft was pretty similar in the second half of the year as in the first half of the year. In the second half of the year, we did incur some additional interest expenses.
The tax dispute we settled at the end of 2023 in Germany, which went back to even 2013, where we ended up paying the remainder in the second half of the year, and that also came with some interest.
And that tax settlement explains the year-on-year increase in your financial expenses.
The year-on-year increase, the year-on-year also started because in 2024, we did use a large part of our overdraft facility for quite so much, many more than in 2023. So a big portion of the increase is also because of that, if you compare to 2023.
Right, right. Okay. I still struggle a little bit to explain why your second half financial expenses were so much higher than in the first half, given that you were in a net debt position at the half-year stage, but you're not in a net debt position today.
No, but we are also not in a net debt position at the beginning of the year. But that's why I said the trend in the second half of the year was opposite from the trend in the first half of the year.
Okay, thank you.
At this time, we have no further questions from the phone lines, and so I'll turn it over to the management team to manage the questions from the webcast.
So we received a question from Rob Sweers, where we can give an update on our pipeline of new projects. I remember many years ago, we did give actual projects because they were huge and so significant and had individual impact on our top line. The size of projects we are currently working on is not at that level.
But to give some overview of projects we're working on is the hydrogen steel plant in Sweden, where we do the commission, where we support them in commissioning. We have continued work in Asia on FPSO construction for the bigger FPSO producers. We do a lot or increasing more and more on the shale in Texas in the U.S. So it's a combination of many projects. And besides that, we still have the ongoing activities on the installations in Papua New Guinea, where there will be a new addition being started towards the end of this year. Mozambique is still on the horizon. So no huge projects that will have or will be a game changer this year, but it's a combination of many smaller projects. Okay, the next one. Question from Marc Fröhlich. Is Brunel able to provide technical workforce for all types of energy capital investments?
Can the same talent profiles be allocated on various projects? In other words, does it matter which energy vertical is stable? We see that skills are really transferable between many parts of the energy market. The ones that are named wind, hydrogen, LNG, conventional, there we see a lot of skills that can be used in all those markets. You also mentioned nuclear. Nuclear is a completely different industry, and we're hardly doing anything there. So that is more difficult, and the same applies to solar energy because that's these days pretty much an installation, and that doesn't require the same level of management and health and safety and quality inspection as many of the other energy projects do. Onto the next question. Interesting question from Willem Burgers. Good morning, Willem.
Whether we have additional M&A targets for 2025 and are price levels becoming more attractive, and in what area would we be interested most? We're definitely still very interested to do M&A this year, and I will not commit to a target because then you might end up making the wrong decisions, but we're still working on the pipeline, speaking to many companies, although we postponed it a little bit for as long as the CFO position was vacant because we also want to be capable of managing an acquisition, but we're still looking at it, and at the moment, we are especially looking at the markets where they generally have a higher margin, such as Netherlands and Germany, or where we have a strong organization, so we're still also looking at Australasia, but we're definitely very interested to do more acquisitions, and pricing levels.
Strangely enough, there appears not too much change there where you expect. If you look at all the listed companies in our industry, multiples have gone down significantly. But if you look at the acquisitions that we are looking at, so slightly smaller, the multiples are still pretty high, and we see a lot of private equity activity there. Okay, I think that's the final question. We have one more. Question from Max Klijsen. On the dividend payment, asking why the last year we didn't have enough cash to fund the dividend, and with the improved free cash flow this year, if we will be able to fully fund the dividend from the cash flow. Yeah, and I can confirm that. I expect we will at least keep the collection at this level and probably will even increase it further, and then not expecting significant revenue growth.
So, increasing working capital in the first half of the year, our free cash flow should be sufficient to pay for at least the dividend and probably a bit more. Okay, that's the final question. So thank you all for your attention. And hope to see you soon.
Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.