Brunel International N.V. ($BRNL)

Ladies and gentlemen, thank you for joining us, and welcome to the Brunel International First Quarter Results 2026. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Peter de Laat. Chief Executive Officer, at Brunel. Please go ahead.

Thank you very much. Welcome, and good morning, everybody, to our results call for the first quarter of '26, and let's dive immediately into it. We started the year, as we also mentioned in our Q4 call, with a normal drop at the case of the year and returning to the run rate of EUR 300 million revenue pretty fast. In January and February, we had pretty strong months. The actual results for the quarter were slightly ahead of our expectations. We guided for an improved -- further improvement of the trends that we saw in Q4. So that was a 4% decrease in revenue and 15% in EBIT, but we had not expected that we would already return to growth in revenue and EBIT in the first quarter. So very pleased with that and especially, of course, taking into account all the events that happened in the Middle East and partly impacted March. And I would like now to hand it over to Toine to go more into detail.

Yes. Thank you, Peter. Good morning, everyone. Let me dive a bit deeper into the results by region as well as the overall P&L. As Peter already mentioned, we finished around about EUR 300 million for the quarter, still a decrease on a reported basis, but organically, taking into account specifically exchange rate, we grew with 1%, talk about exchange rate, specifically end of Q1 last year, the exchange rate changed quite a bit, specifically U.S. dollar, which impacts our business in many regions, whether it is Euro dollar-based or backed to the U.S. dollar. And that difference will run out over the coming months. So returning to growth in total, also perm revenue returned to growth. We did see there a 38% increase organically, and we're very pleased to see that after a difficult Q1 last year. Also, if you look at the regional split, basically all regions contributed to the growth organically, except the Netherlands, where we did see challenging market circumstances, and we'll dive deeper into that a bit later. Gross profit declined by 5%, reported organically 1% whereby we did see some margin challenges, specifically in Germany, and we will come back to that also later. Also, the regional mix is partly contributing, whereby we see that the European business are a bit smaller and -- than prior years and the global business is bigger, which shows a margin difference. Operating costs, as already indicated before, we have reduced quite some costs over the last few quarters. We continue to see that in the current results, but that is partly offset also by targeted investments in various countries to push sales and business development moving forward. The cost reduction plans also had a positive impact on our ratio between direct and indirect. And obviously, if you add that all up, it shows a positive impact on EBIT. Also here, same as for revenue, all regions were contributing based on margin and OpEx, except for the Netherlands, given the conditions, and we'll get back to that later. Then the split between revenue and gross profit, you can see on this slide, more or less the same as prior years. Then diving deeper into the DACH region. As we indicated in our prior call, we expected to return back to growth in Germany, and we're very happy that we could also show that in the results now in Q1. You can see a 7% increase. There's no working day impact, and that's mainly driven by also the increase in direct headcount in the region. Gross margin reduced with about 5%, which is a combination of the margin pressure in general in the market, but also some deliberate choice to go after higher volume business. We do see with certain customers that they are consolidating the supplier base, and we have opted to go for that higher volume, get a bigger share of wallet, but then at the expense of margin. What you can also see in the graph is that margin pressure was there for most of last year, specifically starting in Q2. So we expect that the comparables become a bit easier. And as you know, in the meantime, we've also adjusted our cost base quite significantly in Germany and DACH, and that will make -- then that the EBIT will further improve in DACH in the quarters to come. And the underlying EBIT was then increasing with 15% on the back of that cost reduction. Then the next slide, I think I've listed most of the topics here. So we move on to the Netherlands. Netherlands had a challenging quarter. Revenue declined by about 24%. Also you know working day impact. Gross margin actually improved a bit, although we did see quite some increases in cost. We also were able to increase our day rates. Operating costs, obviously, we've been work on that to make that reduce as well in line with lower activity, but that did not go fast enough to also offset the margin decline. And with that EBIT decreased with 75% Measures are being taken. Peter, you have been the Interim Managing Director for the last few quarters. So maybe you can give a bit more color on the Dutch situation.

Happy to do so. And let me start with that we had a new Managing Director for the Netherlands starting in April, Emlyn van der Wal, and she's in progress of implementing the updated strategy for Netherlands. And that's, yes, necessary because Toine mentioned the challenging market conditions, and they are obviously there, but there's also some internal areas for improvement. Over the last couple of years, we've been pretty successful in especially public sector and financial services. And those markets are challenged the most at the moment. And we lost a fair bit of market share in the engineering, and we need to go back in that area and that -- part of our focus in the strategy going forward in combination with more dedication on the delivery of candidates. So that's all in progress. And looking forward, what you can see here is that also for the Netherlands, the comparables for this year will become easier in the course of this year.

Okay. Thank you, Peter, for that update. If we then move on to Australasia. Australasia had a good quarter. We did see increased revenue with 3% organically. Margin also -- margin also improved with about 1 point year-on-year. And then in combination with cost control, our underlying EBIT improved with 26% organically. I think I've listed most topics here, so let me go to the Middle East. Yes, obviously, as also Peter already mentioned, Middle East has gone through a difficult quarter. The first two months were good. Of course, March is where the volatility started with the geopolitical uncertainty. In Q1, the impact was still relatively limited. And maybe good to say here that we're very proud of what the team has done in the Middle East to manage through this situation with our indirect staff and also with our direct staff. And also the specialist has been very committed to the customers and many states in region to support our customers through this difficult phase. As such, the impact was relatively limited for our current business in Q1. Of course, there's quite some uncertainty. And we also see that there are some delay in the start of new projects, which I think has no surprise. Overall, still revenue increased with [ 9% ]. Sorry, you want to add...

What's clearly visible is, of course, a slight drop in headcount, and it's remarkable it's only a slight drop in March. So that typically the people that are working offshore in the Strait of Hormuz that obviously have been demobilized to protect them and keep them safe. But the impact so far is limited and we haven't seen any further decline since March.

Yes, correct. And we'll go back to the Middle East situation in a bit more detail later on to give some more color. But again, as mentioned, so far, Q1 was good and also EBIT remained organically more or less flat compared to last year. It was 7% of revenue overall. Then moving on to the Americas. Also here, we did show a good quarter with revenue up 3% reported and organically even 13%. Again, the U.S. dollar worked quite significantly against us over the last year, but still a good performance. Perm revenue also up, which improved gross margins Operating costs did increase. These are targeted investments in business development and sales, given the potential that we see there in future growth. And then underlying EBIT all in all, increased by 6% and [ 70% ] even organically. Then I move on to Asia. Asia did show some decline in organic revenue. Maybe that's good to mention that there's always quite some mix difference in our business, specifically also in Asia and dependent on the project, sometimes we take the full revenue at a bit lower margin or we have part of the revenue for some services that have a higher margin percentage. And in this case, we did focus on more higher value activities, which makes sure that the gross profits and the gross margin increased with about 3 points but the expense of a higher top line. Then operating costs also here, we have seen quite some investments with the potential that we see in the region. So that increased with 19%, but still also EBIT increased with 19% organically as well. So also here a good quarter for the region. The Rest of World, which is a combination. Rest of World, which is a combination of our Europe and Africa business, Belgium and [indiscernible]. We did see in Q1 a recovery of the perm revenue, specifically in our global renewable business. So we're happy to see that. And that then increased revenue as well as gross profit on a reported and organic basis. Operating costs decreased on the back of the cost savings we implemented last year and an EBIT turned positive actually from about EUR 0.5 million negative to EUR 0.5 million positive this year.

Maybe good to highlight, if you look at the headcount graph, the headcount is significantly lower, especially at the start of the year than compared to last year, and that's a result of that we stopped our activities in Kazakhstan in the fourth quarter of last year.

Yes. That's a good add. Thank you. Then the total for Brunel, I've highlighted most of the elements there. I think also good to see -- to show that the underlying EBIT percentage was equal to last year at 2.7% which is a good starting point for the rest of the year. Then if we turn on to the next page, gross profit by vertical. I think what I can highlight here is that Future Mobility, which a big part is Germany, is down. But then given the growth in total of DACH that is offset by other verticals. So we're happy to see that the diversification is further working out there. And you can see in the gross profit development of public sector and financial services, that is specifically in the Netherlands, where we are dealing with the market circumstances that also Peter highlighted before. Then the cash flow and cash position. The free cash flow was about negative EUR 19 million in Q1, which is slightly lower than -- slightly better actually than the negative cash flow last year, and that more or less reflects the usual seasonal outflow in the first quarter, that we see in our business. Then the net cash balance was around EUR 14 million. That compared to about EUR 32 million at the end of 2025, again, linked to this negative free cash flow that you just mentioned, there was about EUR 11 million in restricted cash in that cash number. Then we said we would give some more color on the Middle East. So maybe, Peter, you can also add here some more color going forward.

Thanks. So what we've seen in March is of that we had to stop a small group of people to keep them safe. And once again, there's no further decline in headcount at the moment. That's of course, hard to predict how that will develop going forward. It also means that the growth that we were expecting for this region is not materializing yet because we are also not onboarding new people to the region because of all the restrictions. So that's the short-term impact. And we also see a potential risk of the events impacting other markets because of the higher energy prices. And most likely or most like country to be most impacted most is Germany because of the high energy intensity and high energy prices. We are not seeing that yet. But if you look at the reports on the macroeconomic conditions in Germany, that's flagged many times. Longer term, we mainly see a positive for Brunel. First of all, there's to be done some significant rebuild in -- especially Qatar. Those are facilities that we've helped constructing initially. And so we are also very well set up to also contribute in the rebuilding. The other part is that this once again made the world realize that energy security is a very big thing. And Europe already announced to start investing more in offshore wind, especially before the conflict in Middle East started, and we expect that could be accelerated. And the same thing would apply for the dependency on LNG of Qatar, so that could accelerate planned projects in, for instance, Papua New Guinea and Mozambique. Overall, a greater focus on energy security could have a positive impact on our medium- to longer-term activities. That brings me to the outlook for Q2. So we expect the current trend to continue. So that means organic EBIT growth in most of the regions and still a challenging market in the Netherlands. The development in Netherlands and Germany will be supported by easier comparables in the course of the year. But of course, a lot will also depend on what will happen in the Middle East. The Middle East will see a slightly weaker trend than Q1, obviously, because of the offboarding that happened in March. So overall, yes, in Q2, we obviously will see the normal seasonality with the public holidays impacting our profitability, specifically this quarter. That brings us to the Q&A part. So happy to take any questions at the moment.

We will now begin the question-and-answer session. [Operator Instructions] Your first question come from Konrad Zomer with ABN AMRO.

My first question is on your indirect headcount. I think it was great to see the 1% organic revenue growth in Q1. At the same time, during Q1, you also reduced your indirect headcount in literally every region you report on. How do you look at it now? And what do you think is going to happen in the next few quarters? Do you think indirect headcount will return to growth? Or do you think there is more effect from the cost-saving measures you put in place in recent quarters?

Thanks. The biggest decrease in indirect headcount year-on-year is obviously in the DACH region. And since that's returning to growth, I don't expect any further decreases there. Pretty much the same applies for most other regions that are also growing -- showing growth and see plenty of opportunity in the market. The only thing where we still have some uncertainty is in -- obviously, in the Netherlands, where it depends on how fast we can start returning to growth there. So overall, I don't expect any further decrease in the total number of indirects, and we slowly will start to reinvest in more -- especially more salespeople.

Right. Okay. And then my second question on the Dutch market. New management coming in, have they've been given [ card bunch ] to do whatever they think is necessary? Or do you think you would like to keep the franchise as it is, but just more efficient, lower costs, maybe, I don't know, some more focus into different regions. But can you just give us a bit more insight into the options that new management has to potentially restructure the business?

Yes. Nice question. And between the two options that you provided, I think it's more towards the [ card bunch ] than towards second option. But there's one key condition, and that's that we need to win market share in engineering again. That's our profile, that's our history, and we want to be one of the leading companies in the engineering space. So kind of [ card bunch ], but with a focus on engineering.

Right, right. Okay. And then my last question for now is on the Middle East. I think you had an outstanding performance in Q1. But clearly, the unrest of the war only started in March, and you indicate that there are some delay in projects for Q2. Can you maybe help us a little bit in quantifying the impact it might have on your revenues? Because obviously, if all comes to a standstill, then the impact is a lot bigger than if there's just a little bit of like delay in projects. Just how severe is the current situation for the 2,000 people you employ in the Middle East?

Yes. Like I said, we onboarded roughly just over 100 people so far. And at the moment, it stays at that level. That means that the full revenue for the quarter was EUR 43 million and that the run rate for March was just over EUR 10 million revenue. And I expect based on what the situation is today that it will remain at that level. I don't see any further offboarding. But on the other hand, I don't see any additions, yes, coming into.

[Operator Instructions] Your next question comes from the line of the Marc Zwartsenburg with ING.

A question on the announced cost savings. You mentioned the EUR 20 million and the EUR 10 million reinvestment. How much of that EUR 10 million have already as a run rate been visible in Q1? So we get a bit of a feel for what we still can expect to come. But -- and a bit linked to that, you mentioned also investments in some of the global businesses where the costs are then up double digit. Well, actually, if you look at margins, it is just turning back to a bit more normalized margin, then you start investing already. How can we -- is that part of that reinvestment of that EUR 10 million that you mentioned? Or is it on top -- and why would you invest so quickly? So I would expect that given the lower margins that you still have that you would have some overcapacity that there will be a bit more operational leverage in the model. Can you help me with that?

Yes. Thanks, Marc. In terms of the OpEx savings, the EUR 10 million, let's say that about half of that we already have invested. The other half will come into the year gradually. Obviously, we will be vigilant on those investments dependent on how the business continues, specifically given the geopolitical situation. So we're watching that. The investments also with this uncertainty, we will be mindful where to invest. I mentioned the Americas, for example, where we see investments in Australia, we already have made investments. Those regions are growing and performing well. Obviously, there where we have more concerns about if the markets continue to perform like in Germany, Middle East, we will face the investments until we have more certainty. So...

So I mean, half of your investments of the EUR 10 million, invested.

That is correct.

That is in the run. The run rate of Q1,yes.

And then the savings on the other half is EUR 10 million savings, how much is already Q1, the run rate.

We have basically all the savings are there, Marc. We have taken out virtually all the costs in Q3 and Q4 with very limited further headcount reductions in Q1.

Okay. So this is a bit of run rate going forward?

Correct.

Or OpEx.

Correct.

And then maybe on Germany, you're back to growth, but you also see pressure on that gross margin. Can you explain a bit more what the pressure on the gross margin is? Is that because you're moving into areas where the gross margin is simply lower like a mix effect? Or is it that you're taking -- is that in general, just pricing pressure? Or are you taking -- accepting a bit of lower margin for volume? Can you maybe give a bit more color on what's going on there?

It's a bit of the last two items. We do recognize that the German market overall is still pretty challenging. And the clients that are still hiring understand that very well. So they use it in their advantage to get -- to put pressure on the pricing. And on top of that, we see a further professionalization in that part in a procurement manner. So supplier consolidation that Toine already mentioned and where we deliberately look at all options, whether we want to participate or not. So there is some overall price pressure, but also some deliberate decisions to win in supplier consolidation. And the biggest impact is in the last part at the moment.

And how should we think about the growth in Germany going forward? Because you have, say, you're a bit mindful of the knockover effect in Germany from the Middle East situation. But looking at the current trends on your pipeline and expected starts and stops, should we see a further acceleration of the growth?

Unfortunately, not. We did have a very strong of the year, supported by the supply consolidation, but we've seen headcount stabilizing basically pretty fast -- pretty soon after the conflict in the Middle East started. So it's stabilizing, but that still means that our growth will increase year-on-year because of easier comparables.

And then on the Netherlands, UMD is in place. The top line decline is quite severe. Your volume decline in terms of people is 27% and volumes, I guess, even higher in our work. That's so severe. If you look at the headcount decline, that's not near that number, of course. Otherwise, you kill your growth. But how would you look at that going forward? What are your actions there? Would you keep the headcount as it is at the moment? Or would you take further actions on top of the EUR 10 million cost savings that you already announced to further improve the profitability in the Netherlands because the margin, of course, is not Brunel like, I would say.

No, I fully agree. And then I have to give you the same answer as I did before. It depends on how fast we can turn the business around, because there is still plenty of opportunity in the Dutch market, and it's even with our existing client base, and we just need to be more successful in grabbing those opportunities.

So for now, no further cost savings, I would assume then you first give the MD a chance to get the upward trend.

Yes, that's a nicer way to phrase it.

Your next question comes from the line of Maarten Verbeek with IDEA.

It's Maarten with IDEA. A couple of questions from my side, please. Firstly, did you provide an answer but I couldn't hear it well, development in the rest of world, whereby revenue increased quite nicely, but the average number of directs declined by 18%. You commented on it, but I couldn't hear it well. So could you give a bit more color on that?

Yes, that's an easy one. We stopped our activities in Kazakhstan in Q4, and we had roughly 300 directs working there. So that the number obviously dropped to 300. And those who are specialist at a relatively low day rate, and that's why you -- the revenue impact is much less -- much lower than the headcount impact.

Okay. Got it. Secondly, when we look at permanent recruitment, up 38% against a drop of minus 50% in the first quarter of last year. So how would you characterize the permanent recruitment market at this stage? Is it really getting a bit better? Or is because of those very easy comparisons, you showed that growth, but still it's a difficult to market?

Unfortunately, it's the last part. The strong growth we achieved in Q1 is mainly the very weak Q1 we had last year. And it's not -- there's no strong -- further strong improvements because the EUR 4.5 million is not significantly higher than we achieved in Q2 and Q4 last year.

You started recording or presenting permanent recruitment just for a couple of quarters here now. In a normal situation, how much of your revenue would stem from permanent recruitment?

That -- it's easier to look at that as a percentage of GP because compared to revenue, it will always be very minimal. But we're aiming for that it should contribute around 15% of our GP.

1-5. Okay.

Yes.

And then lastly, just to get back to Middle East and India, just to get a bit more feel for your revenue exposure. You mentioned that you are active in 5 countries over there, Qatar, Kuwait, Dubai, Iraq and India. If we just look at those 3, Qatar, Kuwait and Dubai, how much percentage of your Middle East revenue does that represent?

So let's do it the other way around. So India is roughly 5% of the revenue of the region. So the 95% has exposure to the conflict in the Middle East.

Your next question comes from the line of Simon Van Oppen Keplex, Cheuvreux.

I have a question on your activities in Asia. So you delivered minus 2% organic growth in the first quarter against a relatively easy comparison base last year. And this is a break in the trend that we observed in the last two quarters of last year. Could you please highlight what caused this slowdown? And what should we expect for the remainder of this year? And then secondly, I was wondering, since the European Union has quite ambitious plans when it comes to investments in renewable energy and offshore wind. How are you positioning your Taylor Hopkinson activities to benefit from the investments which are likely coming in the years ahead?

Yes. Let me start with Asia first. Fair observation about the revenue, but Toine already mentioned that we're focusing on the mix in business is slightly different. So for part of our business, the largest part, we report full revenue and then a normalized margin. But we also have revenue where we only account for the fee business because it's structure is slightly different. And the mix has changed compared to last year, and that you can also see in the gross margin improvement and actually gross profit still continue to grow year-on-year. So it's much more a mix than it is a lower activity level. Then the -- what the question?

Sorry, could you highlight what the mix changes are specifically in that market?

Yes. So the biggest -- where we only report 3 is activities where we are not have the full employment of the specialist. So the specialists are employed by our clients. So that's a different risk profile and hence, you don't have to account for the revenue or report on revenue for that activities. So it's still, yes, around specialists working with our client, but a slightly different risk profile. And on the [indiscernible] business, let me start with, yes, Europe has ambitious plan, but also Europe is -- has a track record of being pretty slow in executing that plan. So unfortunately, we also see that in offshore wind industry. But we are very well positioned with Taylor Hopkinson because we are working with all the companies involved in that industry. So as soon as we will see projects starting there, you will also see that in our numbers.

Your next question comes from the line of Konrad Zomer with ABN AMRO.

I had just one follow-up on the Dutch performance. I remember that the pension charges went up as from the 1st of January, which in itself raised your bill rates. At the same -- I think you also mentioned that in your -- the first bit of your presentation. But I'm wondering how much negative impact did that have on demand for your people because obviously, with the 24% decline organically, the impact must have been quite severe. Is that one of the key reasons of the weak performance? Or can you maybe clarify that a little bit more?

The 24% is not too far off from the [ 20% ] -- the year-on-year performance we reported in Q4. So there's no additional impact from the pension part, although there was already a bit of that in Q4. But there are a couple of developments impacting our business and the CLA and hence the pension and hence higher cost is part of it, but we also have the AI impact where we see it's impacting the demand in the financial services industry. And there's also the impact of the freelance law that we saw starting beginning of last year and resulted in a decrease in the number of freelancers we use in the course of '25. So it's a couple of trends. It's not just the pension part.

Right. But the fact that [indiscernible] have become more expensive versus permanent employees did not lead to an additional decline in demand.

No, that's correct. But I would -- I might need to have to add not yet because it does make [indiscernible] much more expensive. So it could change our behavior of our clients. And hence, why we want to focus more on the engineering business where we expect that, that will be less impacted.

There are no further questions at this time. I will now turn the call back to Peter de Laat, CEO, for closing remarks.

Thank you very much. Once again, we are pretty happy with the change in trends we observed in Q1 and managed to return to growth and are, of course, for many reasons, hoping that the conflict in the Middle East will be settled really soon and then look forward to see all the long-term upsides that will provide materializing as soon as possible. So thank you very much, and see you soon.

This concludes today's call. Thank you for attending. You may now disconnect.