Notes to the results

Revenue
In 2017, ICT Group’s revenue came in at € 105.0 million, 17% higher than the € 89.7 million reported in 2016. Organically, revenue increased by 7%. Acquisitions accounted for 10% of ICT Group’s revenue growth. Organic growth was driven mainly by the increase in the number of FTEs, higher average rates and improvements in a number of markets. Added value increased by 18% to € 93.4 million in 2017.

Revenue at ICT Netherlands increased by 18% to € 81.3 million in 2017 from € 69.0 million in the previous year. Nozhup, which ICT acquired in September 2016, and fully integrated within ICT Netherlands in the first half of 2017, was the main contributor to this increase. Productivity levels were in line with last year. The average tariff increase was in line with the average salary increase.

Strypes Bulgaria (“ICT Nearshoring”) reported a 27% increase in revenue to € 9.6 million in 2017, from € 7.6 million in 2016. This increase was recorded at both existing and new clients.

The segment ‘Other’ recorded revenues of € 16.4 million in 2017 (2016: € 14.3 million). The slow start of Improve was balanced by its recovery in the second half and the good start to the year for Raster was offset by a more moderate second half. In 2017, BMA benefited from the delayed launch of a new generation of foetal heart monitors, which resulted in a substantial increase in revenue.

Costs/personnel expenses
Personnel costs increased to € 62.5 million (2016: € 52.0 million), as a result of the marked increase in the number of employees and an increase in salaries. Other operating expenses increased by 11%, as a result of recent acquisitions and higher costs for recruitment, office accommodation and a further professionalization of the organisation. The costs related to strategic initiatives and the realisation of acquisitions and partnerships amounted to € 0.2 million (2016: € 0.5 million).

EBITDA
EBITDA for the full year 2017 increased by 17% to € 12.0 million, compared to € 10.3 million in 2016. The increase was mainly due to the higher EBITDA at ICT Netherlands (up 25% to € 8.3 million in 2017, from € 6.6 million in 2016). This was the result of both the organic growth realised and the full year consolidation of Nozhup, plus the consolidation of HTS from June 2017. Strypes Bulgaria recorded higher EBITDA of € 1.9 million (up 12%). In 2017, ICT continued its investments in the organisational effectiveness of Strypes Bulgaria, to safeguard continued and sustainable strong growth of its nearshoring activities. The segment Other recorded EBITDA of € 1.8 million (2016: € 2.0 million). In 2017, Raster experienced margin pressure as a result of the adverse impact of two projects in the second half of 2017, which resulted in substantially lower results. As a result of a good performance in the second half of the year, BMA recorded substantially better results compared to the previous year.

The overall EBITDA margin declined slightly to 11.4% in 2017 from 11.5% in 2016.

Amortisation and depreciation
ICT has valued and is amortising a number of intangible assets, including order backlog, software and the customer relations of its recent acquisitions. Amortisation in 2017 amounted to € 2.7 million (2016: € 2.3 million). Depreciation amounted to € 0.9 million in 2017 (2016: € 0.6 million).

Operating profit increased 14% to € 8.4 million in 2017 (2016: € 7.4 million). The operating margin came in at 8.0%, compared with 8.2% in 2016.

The results from joint ventures and associates
The total result from joint ventures and associates amounted to a loss of € 0.4 million (2016: € 0.8 million loss). InTraffic contributed
€ 0.1 million to the results (2016: € 0.2 million).

In November 2017, the minority stake (25%) in Strypes Nederland B.V. (held by Strypes Bulgaria) was divested to the existing majority shareholders. This divestment resulted in a book profit of € 0.2 million.

In 2017, LogicNets’ revenue was stable when compared with the previous year. LogicNets did manage to win new reputable customers but the company is still loss-making. ICT still believes in the strategic importance of the platform, but it will take some time before the company realises substantial growth and moves into profit. ICT therefore decided to fully impair its stake in LogicNets in the fourth quarter of 2017. The downward valuation of LogicNets, including our share in its loss for the year, amounted to € 0.5 million.

Interest expenses came in at the same level as last year at € 0.5 million (2016: € 0.5 million).

Taxes
In 2017, corporate income taxes related to the continuing business operations amounted to € 1.9 million, compared with € 1.7 million taxes in 2016. In 2017 there have been no one-off tax items, whereas in 2016, following the official liquidation of the German activities, taxes from discontinued operations for 2016 amounted to a one-off tax credit of € 0.8 million.

Net profit for the full year 2017 came in at € 5.2 million, a slight increase compared to last year (€ 5.0 million). Excluding the one-off tax gain of € 0.8 million recorded in 2016, net profit was up by 24%. Earnings per share amounted to € 0.56 in 2017 (2016: € 0.56). The number of outstanding ordinary shares had increased to 9,411,301 at year-end 2017 (31 December 2016: 9,288,309), due to shares issued for stock dividend and the employee share participation plan.

Cash flow movement
The cash flow from operating activities amounted to € 7.9 million positive in 2017 (2016: € 5.1 million positive). This increase was the result of the growth of the company and the fact that there were no cash tax payments in 2017, as a result of the tax benefits related to the liquidation of the German activities in December 2016. Working capital increased in line with the increased activity levels, as well as the increased average scope of projects. ICT maintains disciplined working capital management.

Cash outflow on investment activities amounted to € 2.9 million in 2017, compared with € 8.4 million in 2016. The purchase price cash consideration for the acquisition of HTS (€ 1.2 million) and investments in office accommodation (€ 1.3 million) had the largest impact. The divestment of Strypes Netherlands had a positive impact of € 0.7 million.

Cash flow from financing activities amounted to € 4.3 million negative (2016: € 2.2 million positive), as a result of the net effect of dividend paid (€ 2.1 million), the repayments of existing acquisition financing (€ 2.6 million) and the proceeds from the issuance of shares (€ 0.5 million cash inflow).
The net cash flow amounted to € 0.7 million (2016: € 1.1 million negative).

Balance sheet structure
As a result of the net effect of the payment of a dividend of € 2.1 million, and net profit of € 5.2 million, shareholders’ equity increased to € 47.7 million in 2017 (2016: € 43.7 million). The balance sheet total increased to € 81.6 million at year-end 2017, from € 79.2 million at year-end 2016. Solvency (shareholders’ equity/total assets) stood at 58% at year-end 2017, compared with 55% at year-end 2016, which represents a sound financial basis.

Dividend proposal
ICT proposes a dividend of € 0.35 per share for the 2017 financial year (2016: € 0.33). The dividend payment is subject to the approval of the Annual General Meeting of Shareholders (AGM) to be held on 9 May 2018. For the calculation of the proposed dividend, the realised net profit is adjusted for the non-cash amortisation amounts and the downward valuation of LogicNets. This results in an adjusted net profit for the full year 2017 of € 8.3 million. The proposed dividend represents a pay-out ratio of 40% of the adjusted net profit. ICT offers an option for payment in cash or in shares.

ICT will determine the dividend payment in shares one day after the end of the optional period on the basis of the average price of ICT shares during the last five trading days of the optional period, which shall end on 28 May 2018. The dividend will be payable, in cash or in shares, on 30 May 2018.