Good morning and welcome to the Brunel International Results Call for the third quarter of 2025. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask questions by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. On this side of the line, we have Peter de Laat, CEO, and Toine van Doremalen, CFO. I will now hand you over to Peter. Please, Peter, go ahead.
Thank you very much. Good morning, everybody. Welcome to our call for the results of the third quarter of 2025. Let me go to the key points of the results. The quarter kind of developed as expected. That means that revenue ended at Q3, in Q3, pretty much at the same level as we achieved in Q2. That also means that after five quarters of consecutive revenue decline, revenue has now stabilized. Of course, it's still a mixed bag. We continue to see challenging markets in Europe, whereas outside Europe, we are still doing pretty OK. The same pretty much applies for firm activities, slightly better than in Q2, but still much lower than last year. On the cost reduction plans that we have announced, we did the EUR 20 million plan last year, fully executed last year.
This year, we announced an additional EUR 10 million, and it was already also fully executed in Q3. Very positive is that we're making strong progress on the ORIT developments and the implementations and the AI enhancements to our tools. We're seeing very positive signs on that. That is pretty promising going forward. I would like to hand it over to Tom to go more into the details.
Yeah, thank you, Peter. Good morning, everyone. Let me shed a bit more light on the specifics of the financial performance. You can see here the revenue and the underlying EBIT split by region. As mentioned, the revenue still declined year on year, organically 7%, but indeed it stabilized compared to Q2 of this year, indeed after five quarters of decline. If you then look at the specific regions, you can see here that the DACH and the NANS region have the largest declines, as expected, and in line with higher quarters. If you look at the total for the global business, we are indeed stabilizing in some regions, even growing year on year. Gross profits declined 16%, which is 14% organically. That is a combination of firm business that declined less than in prior quarters, and also some price pressures specifically in DACH.
Operating cost is well controlled year on year. After the cost reductions last year, also the cost program this year of EUR 10 million is fully implemented. We see part of those results already in Q3. The balance will follow in Q4 and the quarters after. Maybe it's good to highlight here that we've made some reallocations in our global IT cost. That is on the back of increased investments in digital and IT. We decided to further allocate those to the region. You will see some minor changes there year on year. Underlying EBIT, 31% down, organically 29% down. There's some exchange rate involved. That is mainly on the back of the low revenue and the lower gross margin, but then partly offset by favorable cost.
In terms of the split by region, revenue, and gross profit, obviously you can see that the revenue for DACH and the NANS amongst the margin has declined. Having said that, in gross profit, it is still a big part of the total. Then going deeper into the regions, this is DACH. Again, I would explain the trends year on year. You can also see here that from a revenue perspective, Q3 was better than Q2. That is partly workday driven, but we also see some stabilization there in the headcount and in the business. In the bottom line, you can see that we improved from - 1% in Q2 to + 6% in Q3. Also, that is partly working day driven, but specifically also the cost actions that we announced last quarter, which are partly included in Q3 and more to come in Q4 and beyond.
Underlying EBIT in total was then 6% for the year. I'll explain the margin trends, firm and specifically margin pressure. The Netherlands also here, headcount reduced for the same reasons. Also here, some impact of productivity. If you look at the margin percentage overall, it was stable compared to last year, whereby the impact on the EBIT was specifically the lower top line partly offset by favorable cost developments as implemented also in recent quarters. By the way, we've decided to have the more detailed slides per region moved to the backup slides as there was some repetition. If you'd like to see more details, please refer to the slides in the backup. Australasia, there we have decided to reduce some low margin business. You do see the revenue reducing and headcount reducing year on year.
Margins and also the conversion ratio have developed favorably, also in line with cost development. We see that EBIT has stabilized, but actually has increased if you compare it to last year, the prior three quarters. Here, we have highlighted before that we are further increasing our focus on defense. Here we have one project that will come online in the quarters to come. The Middle East and India, also this business continued to grow. In headcount as well as revenue year on year, margin is more or less stable. We see some minor mixed effect. Combined with good cost positions, we see that EBIT has stabilized at EUR 3.2 million compared to last year. Americas, here we see headcount improving. That is specifically in some lower margin business in Brazil. You do not see it completely back in the top line of margin.
There is some mixed effect there. Margin declined slightly, and that is primarily on the back of lower firm revenue, which was favorable last year. We see that lower this year, but combined with good cost positions, we still have an EBIT there of 4% as the firm impact was partly mitigated by higher contracting services. In Asia, also here we see the business stabilizing or even picking up again. We had a good quarter with gross margin improving with 0.4%. Combined with cost reductions, we have seen a 5% improvement organically in underlying EBIT. Rest of the world, and that is a combination of Europe, Africa, Taylor Hopkinson, and our Belgian business. We have seen there is some increase in headcount. That was specifically in Kazakhstan, which is also relatively low labor rates.
Market uncertainty, specifically in Taylor Hopkinson, led to a reduction in permanent revenue as new hires were delayed in our renewables business. In Europe and Africa, we did see some mixed back with some slowdown, but also some pockets of growth. If you add it up, Brunel International, total company, here you can see as Peter also mentioned that our revenue in Q3 has stabilized compared to prior quarter, so EUR 304 million, which is more or less the same as prior quarter. Still year on year, 10% reduction as mentioned, 7% organically. Gross profits were highlighted at - 16%. The operating expenses, again, we had EUR 45 million, which is 10% lower than last year and also significantly lower than, for example, Q1 2024, which was at EUR 54 million.
That leads then to underlying EBIT of EUR 12 million in the quarter, favorable compared to Q1 and Q2 of this year, but year on year, still around a 30% down for the regions that we mentioned, specifically in Europe. The gross profit by vertical, most verticals show here the same trend as we have highlighted before. You can see here for mobility, specifically in DACH, a larger reduction, which is on the back of the weak automotive business. The rest shows more or less all the same trends as we have highlighted before. Cash flow and cash position, free cash flow was about EUR 14 million for the first nine months compared to EUR 36 million last year. That is mainly a reduction on the back of lower earnings and higher corporate income tax payments.
Last year, the collections were relatively strong given a relatively high TDO position at the end of 2023. We see that more normalizing now in 2025. The cash balance is at EUR 11 million, which includes EUR 14 million restricted cash, which is more or less in line with last year. Obviously, the net cash balance is lower than what we saw at the end of 2024. That is a combination of what I already mentioned, the lower revenue and profitability, obviously the dividend payment in June, and also the income tax paid in the first half of the year. In that, there is some temporary impact, and we expect part of that back in the second half of this year or in Q4 specifically.
One-off cost, as you also have seen in the press release, we still book some one-off costs related to our restructuring programs, but specifically, we've seen a large write-off of EUR 4 million of a receivable, which is a bit unusual in our business. In this case, it concerns a receivable, which is linked to a local operating entity of an international group, whereby the ultimate holding company of that group recently filed for administration. Even though the operating entity is still trading, we do see a significant risk that we will not be able to collect that amount. As such, we have decided to write off the total receivable for this group. That impact is EUR 4 million. The outlook, like we've highlighted in prior quarters, we expect for Q4 the trend to be in line with what we have seen in Q3.
Peter, over to you.
Yeah, thanks. On the strategy update, we're making good progress and working on the strategy update and the implementation plan at the same moment while implementing QuickWinds as soon as we can, especially the technology part, but also our focus on our core markets, conventional energy, renewable energy, mining, defense, utilities look very promising for the future. We will share the updated strategy in the capital markets day in March 26. This is what we want to share at this moment. Looking forward to receive your questions.
Thank you. We will now begin the question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Simon van Oppe n with Kepler Cheuvreux.
Thank you. Good morning. I have two questions. Firstly, on your gross margin, we saw that your revenue went down 7% organically, whereas your gross profit declined 16% compared to last year. If you exclude mix effects, is there pressure on your gross margin due to price? If so, in which markets are you seeing that? Secondly, on cost savings, given the still weak trading environment, to what extent are you prepared to protect your global network at the expense of additional cost savings and profitability?
I'll address the first question. There is indeed some price pressure. At the moment, that's especially in Germany, where the bigger companies that are still hiring understand that they have a strong position in negotiations, and they're using that to their advantage. That's impacting our margin. The good thing is that for most cases where we encounter that, we do get some volume in return, but it will impact our gross margin. There's also another element that's more specifically for the Netherlands, with the impact of the new pension scheme for our industry and the changes in the collective labor agreement that will give us a little bit of price pressure or margin pressure in the Netherlands, especially in the first six months of next year.
Yeah, thank you.
Yeah. Simon, your question regarding costs. Yes, we will do the cost actions and right sizing where we see it as needed. You're right that we will also make sure that we protect where possible our sales force to take advantage also of the market once it turns. We have specific also programs to invest, for example, in business development in various regions. At the same time, we're also leveraging the investments we've made in our systems to drive efficiency and make sure that we have the right organization linked to the size of our business. It will be a mixed bag. Cost will be a focus, but we want to make sure that we protect our growth capabilities.
That also includes your global presence as of today.
That is correct. We will make decisions where needed if there's really low margin business, obviously, as we've also done in the past. By and large, we will protect our global network.
Thank you.
You're welcome.
Thank you. Just as a reminder, it's star one to ask your question. Our next question comes from [Martin van Weert] with [the idea].
Good morning. It's Martin van Weert with the Corporate Reporting Commission. I personally used to be a defense order in Australia. Can you provide us with a bit of information about how it works with all these reasons? The size of such content and the expertise you are offering, is that something you can offer to other countries as well? Will there be content-type specialization for what we know?
Yeah. Thanks for your question, Martin. This specific job in Australia relates to the construction of a submarine, which is pretty similar to all the construction work we do in the energy space. We are also working on tenders in other parts of the world on that specific part of the defense industry. That is pretty adjacent to what our people always have done. We are looking forward to winning more work in that space. You also asked about the volume. Unfortunately, I cannot answer that at the moment because we are part of a panel of suppliers, and it is up to us to make sure that we get our fair share. I only know that in total, they are looking for 3,000 contractors, but that will be a mix between 10 suppliers and partly hired directly by the client.
It's hard to put an amount like that.
Okay. If you also inform us about Taylor Hopkinson's efforts to stage, because what we do see is that a lot of tenders do not find any candidates to execute such a tender. We do know the situation in the Americas. Also, we see that in not just Northwestern Europe, but also in Australia and other parts of Asia where, yeah, companies are not really reluctant to develop any offshore wind parks. How is the situation at Taylor Hopkinson at this stage?
Yeah. The part where you refer to the offshore wind, specifically the tender for the Netherlands, that's something that we've seen also the last two years happening in the U.K. and even in Denmark. That was linked to the pricing mechanism that was connected to those tenders. Most countries have now found a solution for that with a different pricing, so there's a variable pricing, so that also the ones that will build the wind turbines are kind of protected. That clearly also needs to happen in the Netherlands. The one that recently received no bid was the last one where they did not yet apply this new pricing mechanism. If you read all the articles about it, there's more positive expectations around that going forward. That's also what we see in other parts of Europe where projects are continuing.
Also in Asia, we see that. Of course, we also agree with what you described about Americas where offshore wind is not really a big sector at the moment.
Could you provide a bit more information about the two systems you will implement, your mid-office system and your new system? What kind of impact that will have on one hand on your sales capacity to win new orders and on the other hand on your cost disruption?
Yeah. The main impact we're aiming to achieve is increasing the speed of everything we do. That will help us to become more effective, and that should support the top line. Of course, there will be some element that we will become more efficient, and we can do more with the same group of people. We're focusing on also getting the maximum benefit there. The key area where we're looking at is the effectiveness and to support our top line. We see nice progress on that so far with more to come. What we're doing, we basically have three areas of tools. Obviously, our front office, so sales and recruitment, our mid-office, and our back office. The front office will be fully done in Q1 next year. That means that the last region will migrate to that solution.
Mid-office will be completely done by the end of next year. That is mainly streamlining the workflow process also to increase the speed and everything we do. The back office part, we are aiming to do it. We just did the first go live, and we are continuing to do that in the course of next year.
Lastly, for the moment, we took a 1.5%. You elaborated on what we're able to also achieve. Still needs 1.7%. Is that an additional cost implementation you will implement?
No, that's part of the amount that we already announced in Q2. If you remember in Q2, we announced that the one-off cost related to the EUR 10 million cost saving program would amount to roughly EUR 8 million. We did not account for the full EUR 8 million in Q2. This is a follow-up on that. The cost incurred relates to the cost saving measures in Q3.
Also the planned cost savings remains the same.
Yeah.
Okay. Thanks so much for the moment.
Thank you, Mark.
Thank you. Just as another reminder, if you'd like to ask a question, it's star one on your telephone keypad. A final reminder that it's star one on your telephone keypad to ask a question. As we have no further questions in the queue, I will hand back over to Peter for any closing comments.
Thank you very much all for joining the call. The trend continued as we expected, and it will not change in Q4. Like I said, with our focus on the market supported by our technology, I'm convinced that we will return to profitable growth in 2026. I look forward to tell you more about it in the next call. Enjoy the rest of your day.
Thank you.
Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect your lines. Have a great rest of your day.