Brunel stops activities in BIS - Earnings outlook substantially adjusted downwards
October 22 2019 - 2:00PM
Brunel stops activities in BIS - Earnings outlook
substantially adjusted downwards
Amsterdam, 22 October 2019
- BIS activities are loss-making and causing one-off
costs
- Profitability further under pressure due to the
performance in the Netherlands and expected tougher conditions in
Germany
After careful consideration, Brunel has decided to stop Brunel
Industrial Services (BIS) in Texas, US. Since 2017, BIS has
worked on various construction and maintenance projects, including
large projects in shale oil & gas. As announced in Brunel´s Q2
results this August, we encountered issues with a project for a
water treatment plant, which we won in 2018, leading to a one-off
loss of EUR 5.5 million. We replaced the general manager and
rebuild the organization, but at the same time we saw the market
for shale oil & gas experiencing a slowdown with changing
clients’ behavior in their contracting model from T&M to fixed
pricing. As a consequence, our BIS-activities in Q3 were at a very
low level, causing a disbalance with our organizational capacity
and resulting in significant operational losses. After a thorough
re-evaluation of the strategic rationale of this business, it was
decided to stop the BIS-activities as soon as practicable. Until
then, existing commitments, including the water treatment plant
project, will be delivered on in close collaboration with the
client for an optimal outcome. All commitments are expected to be
delivered and finalized in Q2 2020. Brunel has no similar contracts
anywhere else in the world.
OutlookWe expect that the operational losses
for BIS in the second half of the year will amount to EUR 9
million. Additionally, we will encounter one-off costs of EUR 8
million to cease activities and speed up the finalization of
current projects.
At the same time, the performance in the Netherlands is still
hindered by the scarcity in specialized IT and Engineering talent.
To improve profitability, we are speeding up our activities
to start 2020 with a leaner organization from top to
bottom, with full focus on the newly identified growth areas. In
Germany, more automotive projects are being stopped than
forecasted, and although this only has a limited impact on revenue
growth, it does decrease the profitability of our business due to a
slightly higher bench in Q4.
While we reiterate our revenue outlook for the full year and
continue to expect revenue to be between EUR 1.025 billion and EUR
1.075 billion, our EBIT will be significantly impacted and is
expected to be between EUR 15 million and EUR 20 million for the
full year 2019. Further details of the third quarter results will
be released on November 1, 2019.
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