Brunel International (AMS:BRNL): A Rare Blend of ROCE Growth, Capital Expansion, and 5.9% Dividend Yield

Amidst a global economy fraught with uncertainty, Brunel International (AMS:BRNL) emerges as a compelling opportunity for investors seeking both capital appreciation and income. By strategically leveraging rising returns on capital, disciplined reinvestment, and a dividend yield now at 5.9%, this specialist recruitment firm is poised to deliver outsized returns. With its ex-dividend date approaching on May 19, now is the moment to act.

ROCE Expansion: Outperforming Declining Industry Benchmarks

While the broader recruitment sector faces margin pressures, Brunel’s Return on Capital Employed (ROCE) has quietly climbed to 13.4% in 2024, up from 12.5% in 2023, defying a sector average that has stagnated near 17%. This metric signals operational efficiency and capital allocation prowess.

The catalyst? A dual-pronged strategy:
1. Cost Discipline: A €20 million annual cost-reduction program (completed in Q3 2024) slashed expenses by 11% in Q1 2025, aligning costs with reduced activity levels.
2. Megatrend Alignment: Investments in AI-driven talent retention and acquisitions (e.g., Australian sustainability-focused Advance Careers) are positioning Brunel to capture long-term demand in renewable energy, mining, and tech.

Capital Reinvestment: Fueling 5.7% Revenue Growth and 18.7% Earnings Expansion

Despite a temporary dip in Q1 2025 earnings (due to delayed client projects), Brunel’s capital reinvestment is laying the groundwork for sustained growth. Key moves include:
- AI & IT Infrastructure: Investments to automate routine tasks and boost specialist conversion rates, reducing attrition and increasing billable hours.
- Strategic Acquisitions: Expanding into high-growth verticals like renewables (via Advance Careers) and tech training (via Equals in the Netherlands).

These initiatives are driving projected 5.7% annual revenue growth and 18.7% earnings growth through 2027, with capital employed growing 36% since 2023 to support global expansion.

Dividend Sustainability: 5.9% Yield Backed by 32% FCF Payout

Brunel’s dividend yield of 5.9% (as of May 2025) is not just a headline grabber—it’s supported by robust free cash flow (FCF). Key data points:
- FCF Payout Ratio: Only 32% of FCF is distributed as dividends, far below the 93% earnings payout ratio. This leaves ample room to weather earnings volatility.
- Track Record: Dividends have remained stable at €0.55 per share since 2023, even as EPS dipped slightly.

The Risks: Navigating Macroeconomic Headwinds

No investment is without risk. Brunel faces:
1. Earnings Volatility: Perm recruitment fees fell €3M YoY in Q1 2025, reflecting delayed client decisions.
2. Geopolitical Uncertainty: Weakness in DACH (Germany-led) markets and Asia’s project delays.

Mitigation:
- Diversification: 40% of revenue now comes from non-European markets (Americas, Middle East), shielding against regional downturns.
- Margin Protection: FCF remains robust (€74.6M in 2024), providing a cushion against near-term headwinds.

Why Act Now? The Ex-Dividend Window is Closing

With the May 19 ex-dividend date fast approaching, investors who miss this window will forfeit the €0.55 per share dividend, payable on June 12. At current prices, this represents a 5.9% annualized yield, making it a rare income play in a low-yield world.

Conclusion: A Compounding Machine for the Long Run

Brunel International is a rare blend of growth and income, combining ROCE expansion, strategic capital reinvestment, and a dividend yield backed by FCF. While macro risks loom, its focus on megatrends like energy transition and AI-driven efficiency ensures it will thrive in the long term.

Action Steps for Investors:
1. Buy Before May 19: Secure eligibility for the 5.9% yield and participate in capital gains.
2. Hold for Growth: The 18.7% earnings growth trajectory and 36% capital reinvestment promise compounding returns.

In a market starved for yield and growth, Brunel’s AMS:BRNL is a rare gem—act now before the ex-dividend window closes.