Q2 2020: Impact COVID-19 less than expected, strong free cash flow
Amsterdam, 31 July 2020
Key points Q2 2020
- Revenue decrease ongoing business limited to 8% (yoy) to EUR
223 million
- Restructurings in DACH region and Americas to align to lower
activity level and prepare for end date government relief in
Germany
- Good performance in the Netherlands with strict bench and cost
management
- Cost savings (14%) exceeding gross profit decline (-12%),
annualised savings of EUR 30 million
- EBIT amounted to EUR 0.8 million (Q2 2019: EUR -0.5
million)
Key points H1 2020
- Revenue decrease ongoing business 1% (yoy) to EUR 480
million
- EBIT amounted to EUR 9 million
- Strong free cash flow of EUR 22 million, cash position at EUR
111.5 million
Jilko Andringa, CEO of Brunel International
N.V.: “During these tough times, which have significantly impacted
our society, Brunel has shown to be very resilient. The impact of
COVID-19 on our business in the quarter was less than initially
expected. Our main priority was and remains the health and safety
of our people, and I am proud to see that our employees and
specialists continue to work diligently to serve our clients to the
best of their ability, at our clients, from our offices where
possible, or remote.
In Q2, we continued to see project delays,
reductions and cancellations due to the pandemic. The DACH region
has seen the biggest impact and reports a loss in the quarter,
which is also the result of seasonality and the first impact of a
restructuring. The Netherlands is flattening out and shows improved
profitability versus last year, through bench and cost management.
Being active in a cyclical business, Brunel has great cost agility
and can adjust costs levels where needed and we are prepared to
organise ourselves as agile as needed in the coming
quarters.
At the same time, we continue to execute our
diversification strategy, and our sales teams continue to find new
specialised client solutions that will help grow our business and
increase our margins in the foreseeable future. The current
circumstances bring even more internal awareness for the need to
diversify and to become more specialised.
With the duration of the pandemic unknown,
Brunel will continue to support its employees, specialists, clients
and other stakeholders where possible, while maintaining a healthy
financial basis and ensuring continued profitability and future
returns to our shareholders. The second half of this year will be
tough, but with the many great Brunellers around the world, we are
ready to show our unique combined strength, short, medium and long
term.”
Brunel
International (unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
|
Revenue |
223.4 |
258.1 |
-13% |
a |
|
481.3 |
524.2 |
-8% |
b |
Gross Profit |
41.6 |
47.0 |
-12% |
|
|
96.0 |
106.1 |
-10% |
|
Gross margin |
18.6% |
18.2% |
|
|
|
19.9% |
20.2% |
|
|
Operating costs |
40.8 |
47.5 |
-14% |
c |
|
87.2 |
94.5 |
-8% |
d |
EBIT |
0.8 |
-0.5 |
259% |
|
|
8.8 |
11.6 |
-24% |
|
EBIT % |
0.3% |
-0.2% |
|
|
|
1.8% |
2.2% |
|
|
|
|
|
|
|
|
|
|
|
|
Average directs |
10,345 |
12,607 |
-18% |
|
|
10,896 |
12,797 |
-15% |
|
Average indirects |
1,480 |
1,650 |
-10% |
|
|
1,524 |
1,630 |
-7% |
|
Ratio direct / Indirect |
7.0 |
7.6 |
|
|
|
7.2 |
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
a -13 % at constant
currencies |
|
|
|
|
|
|
b -8 % at constant
currencies |
|
|
|
|
|
|
c -14 % at constant
currencies |
|
|
|
|
|
|
d -8 % at constant
currencies |
|
|
|
|
|
|
The COVID-19 outbreak and the sharp decline in
oil price had an impact on the financial results in all our regions
in Q2. Especially in April, when countries’ lockdown measures were
at the peak, we noted a strong decrease in activities at our
clients, leading to a decrease in revenue in most regions. The
revenue decline started to ease in May and June.
The Group’s Q2 revenue excluding BIS decreased
by 8%, mainly due to the decrease in the DACH region. The Middle
East & India and Rest of the World regions showed growth
year-on-year in Q2. For H1, we see revenue growth in the regions
Australasia, Middle East & India, Rest of the World and the
Americas.
We have taken various cost saving measures in
most of our regions, to make sure we organise ourselves as flexible
as we can, while in the regions in which we continue to experience
revenue growth, we retain the capacity to grasp new opportunities.
In the DACH region and the Americas, where we expect the revenue
decline to continue, we have executed our restructuring plans to
adjust our organisations. As a result of the cost saving
initiatives that are already executed, the Group’s operating costs
in Q4 will be 15% lower compared to Q1, annualised a cost saving of
EUR 30 million.
The Q2 EBIT for the Group was higher than last
year. Excluding BIS the EBIT decreased by EUR 4.7 million (-83%),
mainly due to the decrease in the DACH region of EUR 4.9 million.
In absolute amounts, the other regions achieved small decreases or
slight growth in EBIT compared to Q2 2019.
H1 2020 results by
divisionP&L amounts in EUR million
Summary:
Revenue |
Q2 2020 |
Q2 2019 |
Δ% |
|
H1 2020 |
H1 2019 |
Δ% |
|
|
|
|
|
|
|
|
DACH region |
52.8 |
69.6 |
-24% |
|
122.4 |
143.2 |
-15% |
The
Netherlands |
46.4 |
51.9 |
-11% |
|
97.2 |
106.3 |
-9% |
Australasia |
28.4 |
28.6 |
-1% |
|
58.4 |
57.3 |
2% |
Middle East &
India |
30.0 |
28.6 |
5% |
|
63.7 |
55.6 |
15% |
Americas |
23.0 |
25.8 |
-11% |
|
51.6 |
48.1 |
7% |
Rest of
world |
42.8 |
39.4 |
9% |
|
87.2 |
76.2 |
14% |
Subtotal |
223.3 |
243.8 |
-8% |
|
480.4 |
486.7 |
-1% |
|
|
|
|
|
|
|
|
BIS |
0.1 |
14.2 |
-100% |
|
0.9 |
37.6 |
-98% |
|
|
|
|
|
|
|
|
Total |
223.4 |
258.1 |
-13% |
|
481.3 |
524.2 |
-8% |
EBIT |
Q2 2020 |
Q2 2019 |
Δ% |
|
H1 2020 |
H1 2019 |
Δ% |
|
|
|
|
|
|
|
|
DACH region |
-0.6 |
4.3 |
-115% |
|
3.4 |
12.8 |
-73% |
The
Netherlands |
1.7 |
1.6 |
7% |
|
4.9 |
4.4 |
11% |
Australasia |
-0.3 |
-0.4 |
34% |
|
-0.3 |
-1.0 |
69% |
Middle East &
India |
1.9 |
2.3 |
-18% |
|
5.1 |
5.2 |
-1% |
Americas |
-0.7 |
0.0 |
|
|
-1.4 |
0.3 |
|
Rest of
world |
0.8 |
-0.3 |
|
|
1.9 |
-0.6 |
|
Unallocated |
-1.8 |
-1.8 |
-2% |
|
-4.4 |
-4.2 |
-4% |
Subtotal |
1.0 |
5.7 |
-83% |
|
9.2 |
16.9 |
-46% |
|
|
|
|
|
|
|
|
BIS |
-0.2 |
-6.2 |
97% |
|
-0.3 |
-5.3 |
93% |
|
|
|
|
|
|
|
|
Total |
0.8 |
-0.5 |
259% |
|
8.8 |
11.6 |
-24% |
DACH region
(unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
Revenue |
52.8 |
69.6 |
-24% |
|
|
122.4 |
143.2 |
-15% |
Gross Profit |
14.3 |
20.6 |
-31% |
|
|
35.6 |
45.4 |
-21% |
Gross margin |
27.1% |
29.6% |
|
|
|
29.1% |
31.7% |
|
Operating costs |
14.9 |
16.3 |
-9% |
|
|
32.2 |
32.6 |
-1% |
EBIT |
-0.6 |
4.3 |
-115% |
|
|
3.4 |
12.8 |
-73% |
EBIT % |
-1.2% |
6.2% |
|
|
|
2.8% |
9.0% |
|
|
|
|
|
|
|
|
|
|
Average directs |
2,032 |
2,725 |
-25% |
|
|
2,290 |
2,712 |
-16% |
Average indirects |
481 |
516 |
-7% |
|
|
496 |
509 |
-3% |
Ratio direct / Indirect |
4.2 |
5.3 |
|
|
|
4.6 |
5.3 |
|
RevenueAs anticipated, revenue and gross margin
decreased due to the lower headcount and lower productivity for all
components within the DACH region. Short-time working (Kurzarbeit)
is still in place for 500 professionals. The short-time working
option can be used per office until 31 December 2020, but is
conditional on meeting certain requirements. With the expected
development in the remainder of the year, we are planning to
decrease the usage of this facility, which will likely result in a
higher than normal bench for H2 2020.
Headcount as of 30 June 2020 was 2,064.
Working days Germany:
|
Q1 |
Q2 |
Q3 |
Q4 |
FY |
2020 |
64 |
59 |
66 |
65 |
254 |
2019 |
63 |
59 |
66 |
62 |
250 |
Gross profitCost of sales includes savings of
EUR 6 million relating to the use of the short-time working relief
plan. Adjusted for working days, H1 gross profit decreased by 24%.
The gross margin adjusted for working days in H1 is 28.6% (2019:
31.7%).
Operating costsOperating costs include savings
of EUR 1 million relating to the use of the short-time working
relief plan, as well as EUR 0.8 million of restructuring cost.
Overall, operating costs in Q2 decreased by 9%. H1 operating costs
decreased by 1%. We have executed a restructuring to offset the
expected further decline in revenue, and to plan for the expected
end date of the relief plan, leading to further cost savings.
Brunel
Netherlands (unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
Revenue |
46.4 |
51.9 |
-11% |
|
|
97.2 |
106.3 |
-9% |
Gross Profit |
11.5 |
13.2 |
-13% |
|
|
25.6 |
28.3 |
-10% |
Gross margin |
24.7% |
25.4% |
|
|
|
26.3% |
26.6% |
|
Operating costs |
9.8 |
11.6 |
-16% |
|
|
20.7 |
23.9 |
-13% |
EBIT |
1.7 |
1.6 |
7% |
|
|
4.9 |
4.4 |
11% |
EBIT % |
3.6% |
3.0% |
|
|
|
5.0% |
4.1% |
|
|
|
|
|
|
|
|
|
|
Average directs |
1,899 |
2,284 |
-17% |
|
|
1,957 |
2,330 |
-16% |
Average indirects |
343 |
417 |
-18% |
|
|
355 |
423 |
-16% |
Ratio direct / Indirect |
5.5 |
5.5 |
|
|
|
5.5 |
5.5 |
|
RevenueQ2 revenue per working day in the
Netherlands decreased by 8.3%, with the decrease in headcount
partly offset by higher rates. Although many projects continued
unchanged (with people working from home), there was a decrease in
the number of new projects.
We applied for the Dutch government relief plan
(NOW-regeling), and received advance payments. At the time of the
application, the application was submitted as a precaution as we
could not make an exact assessment of the impact. With the impact
currently less than anticipated, the application has been withdrawn
and the advances have been repaid.
Headcount as of 30 June 2020 was 1,871.
Working days per Q 2020 / 2019:
|
Q1 |
Q2 |
Q3 |
Q4 |
FY |
2020 |
64 |
60 |
66 |
65 |
255 |
2019 |
63 |
62 |
66 |
64 |
255 |
Gross ProfitQ2 2020 had 2 less working days
compared to 2019. The gross margin adjusted for working days in Q2
is 26.6% (2019: 25.4%). The gross margin adjusted for working days
increased by 1.2 ppt.
H1 2020 had 1 less working day compared to 2019.
The gross margin adjusted for working days increased by 0.2 ppt.
mainly due to higher rates and slightly higher productivity.
Operating costsIn Q2 the operating costs
decreased by EUR 1.8 million, following cost saving initiatives and
a reduction of indirect headcount.
Australasia
(unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
|
Revenue |
28.4 |
28.6 |
-1% |
a |
|
58.4 |
57.3 |
2% |
b |
Gross Profit |
2.2 |
2.4 |
-6% |
|
|
4.8 |
4.7 |
1% |
|
Gross margin |
7.8% |
8.3% |
|
|
|
8.2% |
8.2% |
|
|
Operating costs |
2.5 |
2.8 |
-11% |
c |
|
5.1 |
5.7 |
-11% |
d |
EBIT |
-0.3 |
-0.4 |
34% |
|
|
-0.3 |
-1.0 |
69% |
|
EBIT % |
-0.9% |
-1.4% |
|
|
|
-0.5% |
-1.7% |
|
|
|
|
|
|
|
|
|
|
|
|
Average directs |
1,040 |
908 |
15% |
|
|
1,049 |
908 |
16% |
|
Average indirects |
83 |
85 |
-2% |
|
|
82 |
85 |
-3% |
|
Ratio direct / Indirect |
12.5 |
10.7 |
|
|
|
12.7 |
10.7 |
|
|
|
|
|
|
|
|
|
|
|
|
a 1 % at constant
currencies |
|
|
|
|
|
|
b 6 % at constant
currencies |
|
|
|
|
|
|
c -8 % at constant
currencies |
|
|
|
|
|
|
d -7 % at constant
currencies |
|
|
|
|
|
|
RevenueAustralasia, which includes Australia and
Papua New Guinea, managed to keep revenue stable compared to a year
earlier. The region continues to see opportunities, although it
currently experiences some impact of travel restrictions and cost
saving initiatives at clients.
Gross ProfitThe decreased gross margin is mainly
the result of an adverse development in the exchange rate for the
activities in Papua New Guinea (impact -0.4 ppt.).
Operating costsIn Q2, the operating costs
decreased by 11%, mainly as a result of several cost saving
initiatives.
Middle East
& India (unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
|
Revenue |
30.0 |
28.6 |
5% |
a |
|
63.7 |
55.6 |
15% |
b |
Gross Profit |
4.5 |
5.2 |
-13% |
|
|
10.4 |
10.0 |
4% |
|
Gross margin |
15.0% |
18.0% |
|
|
|
16.3% |
17.9% |
|
|
Operating costs |
2.6 |
2.9 |
-10% |
c |
|
5.3 |
4.8 |
10% |
d |
EBIT |
1.9 |
2.3 |
-18% |
|
|
5.1 |
5.2 |
-1% |
|
EBIT % |
6.3% |
8.0% |
|
|
|
8.0% |
9.3% |
|
|
|
|
|
|
|
|
|
|
|
|
Average directs |
2,506 |
3,697 |
-32% |
|
|
2,608 |
3,815 |
-32% |
|
Average indirects |
141 |
137 |
3% |
|
|
144 |
133 |
8% |
|
Ratio direct / Indirect |
17.8 |
27.0 |
|
|
|
18.2 |
28.6 |
|
|
|
|
|
|
|
|
|
|
|
|
a 4 % at constant
currencies |
|
|
|
|
|
|
b 13 % at constant
currencies |
|
|
|
|
|
|
c -9 % at constant
currencies |
|
|
|
|
|
|
d 9 % at constant
currencies |
|
|
|
|
|
|
RevenueIn Q2 2020, the region continued to
deliver a strong performance and attained 5% higher revenue
compared to Q2 2019. Qatar is the main contributor to the increase,
partially offset by lower revenue in other countries of the region.
The activities in the Middle East are heavily dependent on our
ability to mobilise specialists to the Middle East. We do have a
healthy pipeline of projects, however the starting moment of these
projects is uncertain due to the current travel restrictions.
Gross ProfitThe gross margin has reduced
following a reduction in our services due to the challenging
environment. We have also seen some margin pressure and a change in
the mix of clients.
Operating costsOperating costs decreased by 10%
as a result of various cost saving measures.
Americas
(unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
|
Revenue |
23.0 |
25.8 |
-11% |
a |
|
51.6 |
48.1 |
7% |
b |
Gross Profit |
2.5 |
3.0 |
-18% |
|
|
5.7 |
5.9 |
-3% |
|
Gross margin |
10.7% |
11.6% |
|
|
|
11.0% |
12.2% |
|
|
Operating costs |
3.2 |
3.0 |
7% |
c |
|
7.1 |
5.6 |
27% |
d |
EBIT |
-0.7 |
0.0 |
|
|
|
-1.4 |
0.3 |
|
|
EBIT % |
-3.0% |
0.1% |
|
|
|
-2.8% |
0.7% |
|
|
|
|
|
|
|
|
|
|
|
|
Average directs |
747 |
856 |
-13% |
|
|
812 |
827 |
-2% |
|
Average indirects |
102 |
130 |
-21% |
|
|
112 |
127 |
-12% |
|
Ratio direct / Indirect |
7.3 |
6.6 |
|
|
|
7.3 |
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
a -7 % at constant
currencies |
|
|
|
|
|
|
b 9 % at constant
currencies |
|
|
|
|
|
|
c 10 % at constant
currencies |
|
|
|
|
|
|
d 30 % at constant
currencies |
|
|
|
|
|
|
RevenueWhile we still saw growth in Q1, revenue
has decreased over Q2, mainly caused by a high number of projects
that have been stopped or paused in the US. Canada, Brazil and
Mexico still managed to achieve growth.
Gross ProfitThe gross margin and gross profit
are impacted by a lower recruitment revenue. Adjusted for the
impact of the lower recruitment revenue, the gross margin is at the
same level as in Q2 2019.
Operating costsWe reduced our cost level and
aligned the organisation with the expected lower business volume.
This already resulted in a cost decrease of 20% when compared to Q1
2020, and we expect to see the full impact of these measures in Q3
of this year.
Rest of
world (unaudited) |
P&L amounts in EUR
million |
|
|
|
|
|
|
|
|
|
Q2 2020 |
Q2 2019 |
Δ% |
|
|
H1 2020 |
H1 2019 |
Δ% |
|
Revenue |
42.8 |
39.4 |
9% |
a |
|
87.2 |
76.2 |
14% |
b |
Gross Profit |
6.7 |
6.1 |
10% |
|
|
14.0 |
11.7 |
19% |
|
Gross margin |
15.6% |
15.5% |
|
|
|
16.0% |
15.4% |
|
|
Operating costs |
5.9 |
6.4 |
-8% |
c |
|
12.1 |
12.3 |
-2% |
d |
EBIT |
0.8 |
-0.3 |
|
|
|
1.9 |
-0.6 |
|
|
EBIT % |
2.0% |
-0.6% |
|
|
|
2.2% |
-0.8% |
|
|
|
|
|
|
|
|
|
|
|
|
Average directs |
2,105 |
1,837 |
15% |
|
|
2,150 |
1,818 |
18% |
|
Average indirects |
264 |
290 |
-9% |
|
|
270 |
283 |
-5% |
|
Ratio direct / Indirect |
8.0 |
6.3 |
|
|
|
8.0 |
6.4 |
|
|
|
|
|
|
|
|
|
|
|
|
a 9 % at constant
currencies |
|
|
|
|
|
|
b 14 % at constant
currencies |
|
|
|
|
|
|
c -7 % at constant
currencies |
|
|
|
|
|
|
d -2 % at constant
currencies |
|
|
|
|
|
|
RevenueRest of World includes Russia &
Caspian, Belgium and Asia. Total revenue in the region increased,
mainly driven by growth in China, while Russia and Belgium saw
declines in revenue over the quarter.
Gross ProfitThe gross margin in the region in Q2
was in line with Q2 2019.
Operating costsThe operating costs in the rest
of world decreased mainly as a result of government relief plans in
Asia and cost saving initiatives.
Asia is the main contributor to the higher
EBIT.
Closure of Brunel Industry
Services Early July, we finalised our work
on the only remaining project of Brunel Industry Services in the
US, which we decided to terminate in October 2019. During the
quarter, we have been able to collect most receivables and
terminated the remaining leases, and we will continue to employ a
small group of people in Q3 to deal with the final financial
settlement, mainly the collection of the agreed amounts.
Effective tax
rateThe effective tax rate in the first half year
of 2020 was 56.4% (2019 at 52.0%). We expect the effective tax rate
for the full year to come down to around 50%.
Risk
profileOur company’s risk profile as presented in
our 2019 Annual Report (pages 52 – 73) is impacted by the COVID-19
crisis in different ways. The crisis brings increased uncertainty
in areas such as: workplace health & safety, changing
regulatory and economical environment, contract liability &
delivery, credit risk, information technology and cyber security
and tax and labor law compliance. We have implemented processes and
procedures to deal with these increased uncertainties to the extent
possible under the current circumstances. For example: our health
& safety procedures for all our staff, credit management, and
information security measures, are re-evaluated based on emerging
risks from this pandemic and are continuously being upgraded
where needed. These evaluations and adjustments are part of our
continuous monitoring processes and operational flexibility, which
include international exchange of protocols and good practices
between our operating companies in all mentioned areas. The crisis
has also brought opportunities for acceleration of our digital
transformation, where for example clients have been working with us
over the past months to further digitalise exchange of data to
improve efficiency in their and our processes.
We continue to closely monitor the key risks and
opportunities, and will respond appropriately to any emerging risk.
We have a wide geographical coverage, which spreads our exposure
across mature and emerging markets, which are experiencing
different economic conditions. Since it remains difficult to
predict future economic developments, we focus on responding to
actual performance in each of our local markets. Our business
model, processes and weekly indicators help to ensure that we are
flexible enough to respond to these economic conditions.
Cash
positionBrunel was able to attain a strong free
cash flow of EUR 22 million over Q2. This results in an increased
cash position of EUR 111.5 million (EUR 96.8 million
non-restricted).
Outlook for
2020We expect the impact of COVID-19 on our
society and the global economy to continue. In the DACH region, we
do not see signs of a recovery yet and we expect productivity to be
under pressure due to the reduction of the use of short-time
working towards the end of the year.
In the Netherlands, headcount is stabilising.
The second half of the year might see some lower productivity
because of postponed vacations of our specialists.
Activities in Australasia are expected to remain
pretty stable, with the results supported by further cost
savings.
The restructuring positions the Americas well to
recover quickly once the COVID-19 situation eases.
In the Middle East & India and in the Rest
of the World we have secured new projects through our improved
sales activities, but the start of these are dependent on an ease
in flight and travel restrictions. If we are not able to
mobilise our specialists, we might experience a small decrease due
to projects that are finalising.
Overall, we expect slightly lower revenue in Q3
(compared to Q2), but at a higher profitability, due to the cost
measures taken, as well as due to seasonality.
Statement of the Board of
DirectorsThe Board of Directors of Brunel
International N.V. hereby declares that, to the best of its
knowledge:
- the interim financial statements give a true and fair view of
the assets, liabilities, financial position and result of Brunel
International N.V. and the companies jointly included in the
consolidation, and
- the interim report gives a true and fair view of the
information referred to in the eighth and, insofar as applicable,
the ninth subsection of Section 5:25d of the Dutch Act on Financial
Supervision and with reference to the section on related parties in
the interim financial statements.
Amsterdam, 31 July 2020Brunel International
N.V.
Jilko Andringa (CEO)Peter de Laat (CFO)Graeme
Maude (COO)
- Press Release Q2 2020 - Appendix
- Press Release Q2 2020.
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