Press Release Brunel Q3 2020: Strong profitability and cash flow driven by operational discipline

Working days Netherlands:

Gross Profit
The gross margin was down 0.7 ppt in Q3. This is the result of an increase in the proportion of freelancers, who have a lower margin compared to own employees. The YTD gross margin adjusted for working days decreased by 0.1 ppt to 26.9%.

Operating costs
In Q3 the operating costs decreased by EUR 1.7 million, as a result of cost saving initiatives, including a reduction of indirect headcount executed in Q2.

a -12 % like-for-like
b -0 % like-for-like
c -19 % like-for-like
d -11 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Revenue
Following a stable Q2, Australasia, which includes Australia and Papua New Guinea, has seen some impact of COVID-19 in Q3. Clients terminate contracts, are looking for salary reductions and a reduction of working hours (overtime) to achieve cost savings. Our activities in PNG continue to be hindered by the travel restrictions.

Gross Profit
The increased gross margin is the result of a change in the mix due to the lower revenue at Oil & Gas clients.

Operating costs
In Q3, the operating costs decreased by 21% as a result of continued cost saving initiatives. These cost savings helped us achieve a positive result for the quarter.

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b 6 % like-for-like
c -12 % like-for-like
d 2 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Revenue
Following a positive development in Q2, the revenues in the Middle East & India were impacted by the weakening of the US dollar. Our strong development is hampered by our ability to mobilize specialists for new projects due to travel restrictions, whilst some of the existing projects are finalized. This resulted in a decrease in headcount and revenue for the period. Our pipeline continues to be healthy.
Gross Profit
The gross margin reduced somewhat due to a change in the mix of clients and some margin pressure.

Operating costs
Even though we still experienced growth in Q2, we started adapting the organisation in Middle East & India, anticipating the impact of the travel restrictions. Further cost measures lead to a decrease in operating costs of 16%.

a -26 % like-for-like
b -4 % like-for-like
c -31 % like-for-like
d 3 % like-for-like
Like-for-like is measured excluding the impact of currencies and acquisitions

Revenue
Our activities in the US continue to be the most impacted by COVID-19 within our group, following a significant number of terminations at our clients. The devaluation of the US Dollar and Brazilian Real significantly impacted the revenue development in the region.

Gross Profit
Just like in the previous quarter, the gross margin and gross profit were impacted by a lower recruitment revenue. Adjusted for the impact of the lower recruitment revenue, the gross margin was at the same level as in Q3 2019.

Operating costs
The operating costs further decreased and are now 14% lower than in Q2, while we had also seen a 20% decline in Q2 compared to the previous quarter. This is largely the result of the full effect of the cost saving measures taken in that quarter.

a -6 % like-for-like
b 7 % like-for-like
c -17 % like-for-like
d -7 % like-for-like
Like-for-like is measured excluding the impact of currencies, acquisitions and discontinued operations

Revenue
Rest of World includes Russia & Caspian, Belgium and Asia. We still managed to achieve growth in China, but saw a decline in the other regions. The pipeline for Asia and Russia remains very healthy, but again this will only materialize once travel restrictions ease.

Gross Profit
The gross margin in the region in Q3 was in line with Q3 2019.

Operating costs
The operating costs in the rest of world decreased as a result of government relief plans in Asia and cost saving initiatives throughout the regions. As a result, EBIT for the quarter increased to EUR 1.1 million.

Cash position

In the first nine months of this year, we achieved a strong free cash flow of EUR 38 million. This results in a cash position of EUR 130 million (30 September 2019: EUR 82 million).

Outlook for 2020

At the moment, the headcount in DACH and the Netherlands is pretty stable, and we expect the normal seasonal pattern in the remainder of Q4.
For all other regions, we are still hindered by travel restrictions. With the increasing number of COVID-19 cases in many regions, we do not expect these to ease significantly in the remainder of the year. Although we have a healthy pipeline, this will delay the start and the contribution of new projects we have secured.
In line with our normal seasonality, revenue and profitability in Q4 will be lower than in Q3.