Good morning and welcome to the Brunel International Results Call for Second Quarter and First Half 2025. My name is Breaker, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two to remove your request from the queue. On this side of the line, we have Peter de Laat, CEO, and Toine van Doremalen, CFO. I will now hand over to Peter. Peter, please go ahead.
Thank you very much. Good morning, everybody. Welcome to our call on the results for the second quarter and the first- half year of 2025. I want to start by welcoming Toine because it's the first time he joins the call after joining us 1st of April and his appointment in the second quarter to CFO on the AGM. Thanks for joining me.
Thank you. Good morning, everyone.
As you can see on this slide, we also just celebrated our 50-year anniversary on 1st of July . That's a 50-year anniversary full of ups and downs in a cyclical market. It's also good to keep that in mind that we've been here before. Moving on to the operational highlights, the second quarter developed in line with our expectations, with a similar trend organically as we've seen in the first quarter. That means at a lower level than we were last year, but it's pretty much a stable run rate at the moment. That means low revenue and lower GP. We saw the benefit of the cost program we executed last year with a saving that's been around EUR 13 million in the second quarter, first half year. More than the EUR 20 million that we were aiming for last year.
Still, based on our current run rate, we also decided that we need to do more in cost. We'll do an additional cost-saving measure. The biggest one of that is closing our car test centre in Dortmund in Germany. We closed that in June. It's the only activity where we have some assets or actually quite some assets on the balance sheet. As a result, the balance between the one-off cost and cost saving is different than we've seen last year. We saw a little bit of positive in our permit activities in the second quarter, still at a lower level than last year, but higher than the first quarter. There's a slight recovery there. We've seen a lot more progress on our technology and AI implementations. We got our front system almost live everywhere in the world, or I would say everywhere in the world except for one location.
The addition of AI to it is going faster than I had expected six months ago. Very happy with that. With that, I want to hand over to Toine to share the details of our results.
Thank you, Peter. Again, nice to meet you all. Let me get into some more details of the financial results. Revenue ended in quarter two with around EUR 303 million, which is down 12% on the reported basis. Mind you, there's quite some currency and working day impact to get to organic growth, which ended at 7%. The currency impact is given all the turmoil in the world and specifically the U.S. dollar, which has reduced compared to the euro. The gross profits declined with 20% compared to last year, and organically, that was 14%, given the working day and the currency impacts. The decrease in gross margin was also impacted by the fact that permit revenue still is lower, and that comes at a very high margin, as you know, as well as some ongoing margin pressure in some of our markets, most specifically in Germany.
Peter mentions that from a cost perspective, we initiated last year a cost reduction where we're basically overshooting the EUR 20 million in the first half. EUR 20 million was a full year run rate, and we achieved EUR 30 million in the first half. That's overshoot. In addition, given the challenges, we've initiated an additional cost-saving program with specifically the test centre in Germany, as Peter already mentioned. The cost savings will show in the results during Q3. Those are full year run rate savings, and they come within one-off cost of close to EUR 8 million. It's about half related to assets and lease impairments, as those test centres have a relatively high asset base, and the other half is people related. Underlying EBIT is at EUR 6.3 million. That's a 46% decline. Organically, it was 27%. Here the currency and working day impact was pretty high.
From a regional perspective, we'll go in the regions in a minute, but high level, we see most pressure currently in DACH and the Netherlands. We also have some positive developments in Australasia, Middle East, and India, Americas and Asia, specifically from a profit perspective. We have seen in Q2 an increase organically, as well as reported, and the same for the first half of the year. With that, let me continue to the next slide. This shows the split in revenue and gross profits across the regions. We have seen over the last few years, and also in Q1 and Q2, that the rest of the world has increased its share in revenue as well as in gross profits. Zooming a bit more into the regions, DACH was hard hit by the reduction in headcount.
That, of course, also then impacted the revenue per working day, which was close to 25% reduction. Also, the margins were impacted not only by the reduction in activity level, but also with some price pressure in specific segments, as well as lower permanent headcount and some productivity. Underlying EBIT was at - 0.6%. I think I've highlighted most of the topics on this slide. What you can see here is that the trends between Q1 and Q2 were pretty similar from a top line and gross profit perspective. We see some increase in the operating expense reduction, which again will further increase over the course . Moving on to the Netherlands, there we did see a decline in revenue per working day of around 9%, which is also in line with the headcount decline that we've seen year -on- year.
Gross margin adjusted for working days was down 23% in quarter two of this year compared to 25% last year. That reduction is primarily impacted by still a slightly higher bench, which is reducing, but it takes time to get that to the right level. Underlying EBIT was 4.5%. Then the specifics of the Netherlands, I've highlighted most of the topics here. What you can see also is that in Q2, the revenue was down 11%. Operating expenses were down 30%. Profits still out in 7% in the line. Australasia had a good performance, even though revenue was down where we have reduced some of our low margin businesses. As a result, we have seen a conversion ratio increasing to 33%. Also, the cost of organization has reduced year -on- year, leading to a very high EBIT increase of 40% organically.
Most of the topics I've discussed here, so I will skip this one with the good performance. Middle East and India, also here, we have seen solid improvement year-on-year in EBIT, even though activities have reduced a little, margin has improved, and EBIT has improved year-on-year amongst others driven by some cost measures in the region. Going to the Americas, we have seen here a positive element in Brazil in terms of revenue, which was partly offset by lower revenue in the U.S. and Canada, also impacted there by firm revenue, which, as Peter already mentioned, we've seen across the board. Gross margin declined slightly, but then combined with good cost control, we have seen the EBIT staying flat year-on-year in Q2 and even improving a bit for the first half of the year.
Asia did see a rebound in quarter two compared to quarter one. That was partly driven by working days, given the fact that the Chinese New Year took place in Q1. We also have seen some more activity level on existing projects in the region with that driving revenue, driving margin, and driving profitability. Also, the cost control in the region was very well during Q2 in the first half of the year. The rest of the world did see a decline in profitability that was partly related to Taylor Hopkinson, where again, firm revenue, even though a bit better than in Q1, declined year-on-year. We have also seen a slight slowdown in the business in Europe and Africa, specifically conventional energy and hydrogen. That was the main impact in Q2 for the rest of the world. I think I've highlighted most topics here.
Also, you can see that operating expenses were well controlled. Thank you, Brunel International. You can see the -12%. OpEx was well controlled and more coming. Again, underlying EBIT shows a -4 6% here, but on a line-for-line basis, it was - 27%. Moving on to the verticals, obviously, the verticals show more or less across the board what I've highlighted for the regions, specifically in mobility, which is specifically the car industry. We did see a higher decline, not surprisingly, primarily driven in Germany. In net profits, which includes the one-offs that we highlighted before, ended up with EUR 0.3 million, and on the back of a EUR 6.3 million, then underlying profits and then the one-offs. The tax rate was relatively high in Q2 and usually high.
That came through a couple of topics, which was primarily some payments of withholding taxes, as well as some non-deductible losses related to the one-off cost, specifically the write-offs that I spoke about in Germany and where we could not book in corresponding deferred tax assets. We move on to the next page. I think we already mentioned most of this in terms of the incremental cost savings and the corresponding one-offs. The balance sheet, free cash flow was EUR - 24 million in the first half of the year. That compares to more or less a flat cash flow in the first half of last year. The main impacts there are the low earnings, as we mentioned, also a delay in collections, as well as some higher corporate income tax payments, which were primarily impacted in Q1. The net debt balance per end of the quarter was EUR - 2 million.
That compares to about a EUR 65 million cash balance last year. The main difference there is, one, the dividend payment of EUR 26 million, which took place recently, as well as the seasonality in the cash flows, which we also have seen in prior years. That is, I think, most on the balance sheet for now. If we go to the outlook, that is where we see that the trend, we expect the trend in Q3 to continue in line with the trend in Q2. Obviously, with the movement in currency, that will impact the results as well. With that, I hand it back to you, Peter.
Yeah. Of course, there is a lot of positive news in our markets. We're starting with the Bazooka that's been announced in Germany, but also progress on conventional energy projects like Rovuma in Mozambique, P'nyang in PNG, the Whiptail FPSO for Guyana, and GranMorgu FPSO for Suriname, the Venus project in Namibia. There is more activity than we've seen in the last 12 months. Some of those projects will only start in the course of the second half of the year, so there's not too much impact yet in the first quarter. The same for the Bazooka in Germany. It has been announced, but they're still working on the funding, and it definitely has not resulted in projects being started. We need a bit more time to see that positive impact of those new activities in our results.
Of course, these macroeconomic conditions, but also the impact of technology and especially AI, that of course asks for an updated strategy. We're currently working on that to see what our plan going forward will look like, updating it again on all the developments. We will share that with you latest in the first quarter of next year. Looking at AI, AI is a big opportunity for us, but also a threat. Let's start with the threat. We are currently providing certain roles to our clients that are likely to disappear in the short or medium term from our clients. The positive part is that they will need new skills, and we can also help them there. We need to find the balance there to make sure that balance is positive.
The biggest impact in the short term will be in making our own organization more efficient by using AI and streamlining our processes, and especially increasing our speed of everything we do. We're making nice progress there, so really optimistic on what that will bring for us. That's a brief summary of our second quarter results. I now want to ask you to ask me any of the questions you might have.
Thank you. We will now begin the Q&A session. If you would like to ask a question, you can do so by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two to remove your request. When preparing to ask your question, please ensure your device is unmuted locally. The first question we have from the phone line comes from Konrad Zomer with ABN Amro. Please go ahead. Your line is now open, Konrad.
Hi. Good morning, Peter and Toine. Thanks for taking my questions. A few. Firstly, can you be a bit more specific on how you're going to spend the EUR 10 million, or sorry, how you're going to save the EUR 10 million of costs, the geographical direction they should come from, what you implement to do? Secondly, can you share with us what the specific delay in your collection of bills contains? Any specific clients or geographies that you can share with us? Lastly, Peter, you mentioned a few new contracts or potential opportunities, but at the same time, your guidance for Q3 is broadly in line with Q2. Do we understand it correctly if we say that the benefits of these additional contracts are going to take a while to filter through your actual results? Thank you.
You want to start with first?
Thank you, Konrad. In terms of the EUR 10 million savings, we have emphasized here the test centre in Germany as one of the savings. Other than that, we have identified savings, and those have been implemented across all regions and activities. That is a majority of the EUR 10 million. The delay in collection, I think that requires a bit of explanation. If you look at our TDO, which is our metric to see how long we take to, one, bill our invoices, but also collect the monies, we finished with 80 days per the end of Q2 this year compared to 87 days last year, same time period. Overall, we are collecting faster. However, what we see in terms of seasonality is that we ended the year 2024 very low at 73 days.
We always see in the beginning of the year with new service orders being originated that it takes a bit of time to get that process again fully working with our clients. That is why you see in the comparison that collections are good compared to last year, same time period, but a little bit less compared to the end of the year. We had hoped for a little bit more unwinds in our receivables, but that will then happen in the second half of the year.
Yeah. To add to that, it's not client-specific or region-specific. Your last question, I'm sorry. No, the last question, yeah, you're right. The new opportunities, the pipeline is increasing, but it will take a while before we will start to see the real benefits. Also, keeping in mind that most of the projects starting, especially in the energy space, only start with a low headcount for us and then ramp up in the course of the project.
Right. Maybe one follow-up on the back of that last answer. We've seen quite a lot of news flow recently on some of the oil majors scaling back activities in renewables, hydrogen, the specific areas that Brunel would like to grow at. Have you noticed any scale back in your negotiations yet or your contacts with these companies? I mean, particularly BP in Australia comes to mind. Has that any impact on your business?
Let me address the first part first. What we see is that all the increased activity is all in conventional energy, not in renewables. That matches what you're seeing. BP specifically is slightly different for us because until now we have never worked with them. It's not an impact against yet, although we did just sign a contract with them for the first time. That could be promising. We haven't seen a change with Shell and BP again because we didn't do too much renewable work with them so far.
Okay. Okay.
The renewable energy market has been weak for two years already, and it's definitely not getting weaker.
All right.
Thank you. Your next question comes from Simon van Oppen with Kepler Cheuvreux. Your line is open. You may proceed, Simon.
Yes. Good morning, and thank you for taking my questions. I have two. First of all, the DACH region continues to be a drag on performance, which seems to be a broader trend among staffing companies in the sector. What is your view on the outlook for the region in the second half and into 2026? In particular, how are your clients' hiring intentions evolving in the light of the EU-U.S. tariff agreement and the German federal budget vote expected in September? Secondly, you reported strong growth in renewables in Asia during the first half of the year. Could you elaborate on what is driving that performance and how do you see the growth trend evolving in the coming quarters? Thank you.
Yeah. Thanks, Simon. Let's start with the renewable in Asia. That's one specific project. It's the Inchcape project where we do construction on a fabrication yard, and that has started in December last year. That's contributing in the first half of the year, a very nice project. On the DACH region, I want to answer it in a couple of ways. First of all, you noticed that we only provide an outlook for one quarter ahead. That's because of the lack of visibility on how the market will behave. Based on what we've seen now, does that answer your question, Simon?
You're standby.
My line was breaking up. I'm not sure if the issue was on my end or on your end because I couldn't hear you for a moment.
Okay. Did you get the part on renewables for Asia?
Yeah, I got that.
Yeah. The DACH region, it's hard to predict when exactly the investments will result in additional work for us. I don't expect any significant this year, but I'm optimistic that we will see the first pieces next year. Once again, the sentiment in Germany is changing so many times and so drastically that it will be hard to give a detailed prediction on that.
Okay, thank you very much.
Thank you. We now have Marc Zwartsenburg with ING. Your line is open, Marc.
Yeah. Good morning, everybody. I just want to follow-up on the cost savings question from Konrad on the EUR 10 million. As a part is in the automotive test centre in Germany, but the other, let's say, EUR 8 million. Is that purely reducing staff in Germany, in the Netherlands, and across the globe a bit to address the organization to the top line, or are there any specific other cost savings in there, like closure of branches in Germany or something like that?
Oh, yeah. That's exactly where I was going to. We are also reviewing our office infrastructure. We're reducing the office space we're using and also reducing the number of locations we're in. That's not just Germany, but also other parts of the world where we see that we can do with a smaller office. Also, definitely, office cost is less, and then staff cost is the biggest part of our cost. Obviously, the biggest part is in staff cost. A part of that is that we're earning less gross margin or gross profits, so we're also paying less commission to our salespeople. That's a connection that we have with the business. You've seen that our internal headcount is still going down, and that will also result in lower staff costs.
By reducing the network across the globe, do you mean smaller offices, or are you also retreating from some areas in the global businesses?
For now, it's mainly smaller offices, but as part of the strategy update, we are obviously also reviewing our global footprint.
Is it in specific industries, like maybe in the renewable areas where you believe that maybe the market might be structurally lower, like in the U.S., for example, where Trump is, of course, very much opposed to wind energy and what have you?
Yeah.
Do you have anything about that or automotive in the U.S. or somewhere else?
The reduction in office space is twofold. It's firstly due to the lower activity level in Germany, so we're just a smaller organization. In other parts of the world, we see that we are becoming more efficient, and the headcount is lower, so we need smaller offices. It's not vertical related. It's much more how we are organized internally.
Okay. Okay. You also made a few statements on AI. On the one hand, short term, it will be a benefit from making your own organization more efficient. I assume that's not in the cost savings yet. That's on top of at some point. Is that correct?
A little bit of both. Last year, we announced that part of the triggers driving our cost-saving that we achieved last year was on the back of the technology implementations, but there's more to come with the use of AI. That's clear.
Yeah. You also mentioned there's a threat that some services that are currently delivered to clients will disappear. Is that a statement you make based on an assessment you've currently made on the service you're providing to your client, that you already have some feedback from clients like, "Hey, these kinds of businesses will disappear. So keep that in mind because you will get some people back." Is it that concrete? Can you maybe give a bit more color?
That's not. We don't.
[audio distortion] You didn't have too many conversations with clients yet, but it's based on the client behavior that we've seen and our own review of the most common roles we're providing. The biggest part of that will be in the Netherlands with exposure to supporting banks and governments for work that probably can be also done by AI. In the energy space, we don't expect too much impact.
You say in the Netherlands, it's where you support the government and banks?
Yeah.
Was that the other one?
Yeah.
You say based on customer behavior, you mean they're already not extending contracts. Is that how I should see it?
Yeah. You can see that in our vertical reports, our activity in the financial sector in the Netherlands is also reducing. That's partly because of the cost-saving programs in that industry. They're able to achieve those cost savings also because they're implementing AI integration.
Okay. On the Netherlands, now we're talking about the Netherlands anyway, do you see some, do you also see some positive impact from the freelance law? Initially, it had a small negative because you had a small group of people that needed to leave. Do you also see people more coming in on the back of that? They end up somewhere. I would expect that it at some point has a bit of a positive impact on your business, but I can't see that, to be honest.
That's also what we had expected, but we're not seeing it yet. That's for a couple of reasons. The current legislation around freelancers still has some room for interpretation. We see that there are still competitors that have a slightly more aggressive interpretation of it. Freelancers are still able to find companies like us to continue being a freelancer. In general, clients do not want to work or want to work less and less with freelancers. This will help us going forward. We do see the first signs of freelancers being open to have an employment contract instead of a freelance arrangement. That's only really recent changes. The first couple of months of this year, we saw that freelancers were desperately trying to find a solution to continue as a freelancer.
Okay. I'm writing this all down really quickly. Thank you. Then maybe lastly, on the tax rate, are you going for a higher tax rate? How should we look at the tax rates maybe beyond this year? 2026, 2027, should we then assume a normal 30%, 35% again, or what should we expect there?
Yeah, based on our current activities, it should go back to anywhere between 30% and 35%.
Lastly, you mentioned some projects. Can you maybe share us a bit of a more color on what projects are new and which ones will start in the second half of this year and which ones are delayed maybe to next year? Can you give a bit more color maybe on the project business?
The two that will definitely start this year are the FPSOs for Guyana and Suriname. That's Whiptail and GranMorgu . PNG is now.
[audio distortion] What's the other one?
Guyana.
Oh, yeah.
The Mozambique and Namibia projects will only start in the first half of next year. Based on what we know now, those are the four biggest ones.
How big are these contracts? Are they EUR 10 million -EUR 20 million on an annual basis, or how big are they in revenue terms or in people?
Yeah. The FPSO projects are in that ballpark, so EUR 10 million, EUR 20 million. Mozambique and PNG are potentially much bigger than that, also over a longer course.
Okay. That's it from my side. Thank you very much.
Thank you.
Thank you.
Thank you. Your next question comes from Maarten Verbeek with the IDEA!
Good morning. It's Maarten Verbeek of the IDEA! Firstly, linked to the previous question, more or less, when we look at conventional energy, there's also the backdrop this year. Was that due to delayed projects or was it simply due to lower activities?
Sorry, what do you mean by backdrop?
Much lower revenue?
Oh, yeah. What we've seen in conventional energy this year is that a couple of projects have been completed already in Q4 last year or in the first half of this year, and that's driving lower revenue, with the new projects only starting in the second half of the year.
Okay. Secondly, looking at your cash flow statement, it was also negatively impacted by a higher income tax payment. That income tax payment, was it related to profits of last year?
That's twofold. It's partly due to the previous years and also the advance payments for this year that are a bit too high. We also need to work on that, on adjusting that and collecting the money again. The largest part relates to previous years.
Okay. For the second half, you should expect none to maybe even a bit of a refund?
Yeah.
Okay. Maybe the technical question, when I look at your net profit and you divide it or you divide it to your non-controlling and attributable to the Brunel shareholders, that's a very different and odd split this year. Could you give some color to that?
That's linked to the mix in our business because the non-controlling interest is mainly in the Middle East. The Middle East has a bigger share of the result than the mix was last year.
What company does it refer to, this non-controlling interest?
That's the activities in the Middle East where we are the controlling partner, and this is the share of our minority shareholders in that region.
Okay. Let me see. Yeah, just one remark because in the first quarter of 2026, you will organize in your I nvestor Day, Capital Markets Day. Just as a recommendation, please look because that will be a period whereby a lot of companies will report their full-year results, a lot of conference calls, meetings, and whatever. Just to advise to do it maybe at a day that it's not going to be as many companies reporting because otherwise, you won't have maybe analysts and shareholders' interest for your Capital Markets Day. That would be a waste of time.
It will definitely be somewhere in March, not before that. When there's more clarity on the result releases, we'll pick a date.
Okay. Great. Thanks.
Thank you. We have a follow-up question from Konrad Zomer with ABN AMRO. Please go ahead.
Hi. Yeah, I've got a few more, please. Firstly, referring to Maarten's comment on the CMD, the fact that you do not give an update on your mid-term targets today, can we assume that whatever you're going to tell us at the CMD is going to be referring to different KPIs or the same sort of layout? It sounds like you are unlikely to achieve those targets. Obviously, with new management and a new world, are you going to give us new KPIs, or are you going to refer to the ones that you have set out a few years ago?
That's a good question, but it's a little bit too early to answer that. What I can say is, as I shared last time, we need better macroeconomic conditions to achieve our targets for 2027. Those improved economic conditions are not here today, and it's hard to predict when they will return. That will also be kept in mind when we share and set our new targets. Unfortunately, not a clear answer, but not more than I can give now, Konrad.
Yeah, on your dividends, because it's like a percentage of net profit, it looks like in 2025 your net profit will be hampered by the additional one-off charges. The benefits of this new EUR 10 million cost-saving might not come in before the end of the year. There's a higher tax rate, so your net- net number is actually subdued versus your, let's say, underlying net number. Is that going to have an impact on the dividend, or are you likely to adjust for that?
Yeah, Konrad, that's probably a bit too early to say, but we will take these effects into account once we get to the dividend decision.
[crosstalk] Maybe my last.
Sorry.
In progress.
Go ahead.
Maybe my last question, it's about the timing. If you, in your press release, you do give a few specific comments that suggest that the worst might be behind you. You've made some positive comments about things are slightly picking up. Perm in Q2 is not as bad as in Q1, etc. You do try to give us the impression that here and there, cautiously, things might improve somewhat. Are you not concerned that if, in addition to the EUR 20 million of cost savings last year, you put through an additional EUR 10 million for this year, that you're going to reduce capacity just at a time when things might pick up?
First of all, on the suggestions, the slight positive items that you picked up from our press release were a reflection of what we've seen in Q2. With the current lack of visibility, it's hard to predict that that's really a change in trend or that it's a temporary, slightly better improvement. The other part is correct. We also want to be ready for when the markets really start improving. We are achieving cost savings in areas where we don't expect growth in the foreseeable future. That will give us room to invest in areas where we do see growth because, for example, we are increasing our sales force in the Americas and Australasia. It's a balancing act, and we want to be ready for when the market picks up. That's definitely part of our decision process.
Thank you very much.
Thank you. I want to hand it back to Peter for some web questions.
Thank you very much. We have a question from Willem Burgers asking for the extent of the strategy update and if it could include that Brunel is considering leaving certain markets because of a lack of sufficient future profit potential. It's too early to factually answer that question, but obviously, we are looking into all our markets and the outlook for those markets. Our strategy will be aligned to the outlook of those markets. That potentially could also mean that we will exit certain markets. The second question from Willem Burgers is if we could add some color on our medium-term prospects for the U.S.A. and Canada and Asia. The medium-term outlook for the U.S.A. and Canada and Asia are actually connected. We see now the LNG markets improving in the U.S.A., especially with some projects getting really close to FID, with a couple expected this quarter.
That will support the results in the Americas, but also in Asia because those projects will involve construction of modules in Asia. That's one part. Canada-specific, they just announced the second phase of LNG Canada, and we're also working on that. That will support activities in Canada, but even more so, the construction for that project in Asia. Those were the questions we received via the chat.
Thank you. I can confirm that does conclude the Q&A session today, and I would like to hand it back to the management team for some final closing comments.
Thank you very much. Thank you, everybody, for attending. The second quarter developed more or less as expected. We see some project activity or promising project activity for the future ahead of us. Until that, we are working very hard to make sure that we have the right strategy and a very strong strategy to return to strong growth and good profitability. I hope to share more with you pretty soon. Thank you very much.
Thank you.