Report of the Supervisory Board
We are pleased to present the ICT Group Supervisory Board report for the 2016 financial year. In the past year, ICT again took a number of significant steps in the execution of the company’s strategic road map. The transition of the company into a customer-centric, business unit structured organisation paid off, as demonstrated by the healthy organic growth achieved in the year under review. The companies, Strypes and Raster, acquired in 2015, developed well and according to plan. In 2016, the company made a number of acquisitions, including BMA and Nozhup. The BMA acquisition further strengthened the company’s position in Smarter Health, and this combined with the acquisition of Nozhup puts ICT well on track to deliver on its ambition to become one of the largest Industrial Automation players in the Netherlands. The increased focus on new business development is bearing fruit, something clearly reflected in a number of new initiatives such as ICT Mobile. The Supervisory Board is pleased to see that the management’s actions have infused and continue to infuse the company with entrepreneurial spirit.
Financial statements 2016
In a meeting held on 2 March 2017, the Supervisory Board discussed the 2016 financial statements drawn up by the Executive Board. The Audit Committee discussed the financial statements and the audit findings in depth with the auditors at its meeting on 23 February 2017. The financial statements were audited by Deloitte Accountants B.V., who issued an unqualified audit opinion that is presented in full on page 126 of this Annual Report. The Supervisory Board recommends that the Annual General Meeting of Shareholders, to be held on 10 May 2017, adopts the financial statements for the year 2016 and discharges the members of the Executive Board and the members of the Supervisory Board for their management of the company and the supervision of same respectively in the year under review. Furthermore, the Supervisory Board endorses the Executive Board’s dividend proposal of the payment of an optional dividend in cash or in shares of € 0.33 per share for 2016. The dividend shall be payable as per 7 June 2017.
Activities of the Supervisory Board in 2016
In the year under review, the Supervisory Board had eight meetings in the presence of the Executive Board. An important topic during those meetings was ICT’s growth strategy. Another important item on the agenda was the span of control of the Executive Board in the light of the sector and geographical diverse acquisitions made, as was part of the discussions regarding the group’s internal risk management and control systems. The measures to embed acquired operations in the risk management structure and the mitigating measures in the interim were presented by the Executive Board and challenged by the Supervisory Board. The Supervisory Board feels confident about the approach taken by the Executive Board to the integration of its acquisitions. In July 2016, the Supervisory Board visited Strypes in Bulgaria.
Attracting and retaining people remains a top priority. The tight labour market in the Netherlands was therefore a topic discussed extensively in the Supervisory Board meetings. The Supervisory Board discussed ICT Group’s recruitment campaign and other actions aimed at its existing and future employees. Other items that were discussed over the course of the year were the company’s financial performance, the name change that was approved in the AGM in May 2016, the Balanced Scorecard achievements and targets of management, the revised Corporate Governance Code, the culture within ICT, employee satisfaction and the closure of the Polish operations.
The Supervisory Board met to evaluate the performance of the Executive Board as a whole and the members of the Executive Board individually. The Board also discussed and evaluated the performance of the Supervisory Board itself, the members of the Supervisory Board individually and its committees. In the year under review, the Supervisory Board met on five occasions in the absence of the Executive Board. Furthermore, representatives from the Supervisory Board met with representatives from the works council, to discuss matters such as ICT’s growth strategy, the share participation plan for employees and the proposed reappointments of Supervisory Board members retiring by rotation. As in previous years, cooperation between the Supervisory Board and senior management, including the Executive Board, has been both constructive and open. The Supervisory Board received all the information they required to fulfil their role effectively, both from senior management and the Executive Board.
Composition of the Supervisory Board
The composition of the Supervisory Board was unchanged in the year under review. Mr. Luthra was reappointed for another standard term of four years by the Annual General Meeting held on 11 May 2016. For personal details of the Supervisory Board members, we refer you to page 14 of this Annual Report.The Supervisory Board currently comprises four members. The various members bring experience to the Supervisory Board from a broad range of industries, geographical regions and listed companies. This is in line with our Supervisory Board profile, which is available on the ICT website, and results in a well-balanced composition of the Board in view of the nature of the business of ICT Group, and the requirements of good governance. The Supervisory Board will continue to evaluate the competencies of (new) Supervisory Board members, bearing in mind the added value of diversity in the Supervisory Board. The Supervisory Board established that its members can be considered independent in accordance with the criteria listed in the Corporate Governance Code.
Supervisory Board committees
Mr. Deepak Luthra (Chairman) and Mr. Jan Sinoo are the members of the Audit Committee. In 2016, the Audit Committee met with ICT’s Chief Financial Officer and the Finance Manager on four occasions. The external auditor was invited to attend all these meetings but could not attend one of these meetings. The Audit Committee also met with the external auditor in the absence of the Executive Board. The Audit Committee meetings are generally held slightly ahead of the Supervisory Board meetings, where the Audit Committee Chairman reports on the principal issues discussed, on any actions to be taken and the follow-up to such actions.
In recognition of the significant changes in the composition of the group, its locations and its operations since 2012, the inflation in audit costs and the statutory requirement for a change in the responsible partner at the audit firm after five years, the Supervisory Board decided to put the external audit out to tender for the financial years commencing 2017. In accordance with the new Corporate Governance Code, the Audit Committee took the lead in this process by forming a steering committee comprising the members of the Audit Committee, the Chief Financial Officer and the Finance Manager. Five audit firms were invited to tender for the audit of the ICT Group and following written and oral presentations by the firms, the selection committee selected two firms to proceed to the next phase of the selection process. In its meeting on 7 December 2016, the Supervisory Board agreed to appoint PriceWaterhouseCoopers as external auditors of ICT Group NV and its subsidiaries in principle for three years commencing with the financial year 2017, subject to approval by the shareholders at the Annual General Meeting in May 2017. Other subjects discussed during the year under review included:
– the 2016 interim (quarterly) financials and the 2017 budget;
– the risk management and internal control framework;
– the management letter, the external auditor reports, key audit matters and the follow-up by management on the recommendations made by the external auditor;
– Application of the accounting principles, including the impact of (anticipated) changes in the applicable IFRS standards and accounting by and for newly acquired interests;
– the performance of the individual units, also in the light of the annual (goodwill) impairment testing; and
– the financial and other processes relating to any strategic combinations under consideration.
Remuneration and Appointments Committee
This committee consists of Mr. Jan Sinoo (Chairman) and Mr. Theo van der Raadt. The committee held three meetings in the year under review. Subjects discussed included the remuneration policy for the Executive Board, to which a number of adjustments will be proposed to the Annual General Meeting. An external specialist was consulted to establish the market conformity of the remuneration of the Executive Board. One of the conclusions based on the findings was that the long-term element in the Executive Board remuneration policy needs to be reconsidered. The remuneration policy is therefore currently being reviewed and a new proposal will be submitted to the shareholders for their approval at the AGM to be held on 10 May 2017. The committee meetings are generally held slightly ahead of the Supervisory Board meetings, where the committee chairman reports on the significant matters discussed. The Chairman of this committee also makes recommendations on matters requiring a decision by the Supervisory Board as a whole.
Composition of the Executive Board
There were no changes to the composition of the Executive Board in 2016.
Remuneration of the Executive Board
The performance targets for the members of the Executive Board are set annually by the Supervisory Board in the balanced scorecards and are based on qualitative and quantitative criteria. The total remuneration received by the members of the Executive Board consists of the following three components:
a) fixed management fee, including a compensation plan for the costs of insurance against illness, occupational disability and pension;
b) short-term incentive as a reward for meeting short-term (one-year) performance targets as defined in the balanced scorecards, consisting of an annual bonus paid in cash;
c) long-term incentive through mandatory participation of 25% of the short-term incentive in a long-term incentive programme. In addition, the members of the Executive Board are allowed to invest a maximum € 25,000 each in ICT shares from their own funds on an annual basis, under the same incentive scheme.
Further information on the existing remuneration policy, as well as the actual remuneration of the Executive Board is included in note 24 (page 101) to the consolidated financial statements and can also be found on the ICT Group website (https://ict.eu/about-us/investor-relations).
The Supervisory Board and the Executive Board share responsibility for ICT Group´s corporate governance structure. At least once each year, the Supervisory Board discusses corporate governance rules applicable to the Company and advises on possible changes. The Supervisory Board is aware of the publication of the new Corporate Governance Code in December 2016, applicable from 2017 onwards. The Board will assess its implications for the company. As a principle, ICT Group will comply with the provisions of the new Code or explain any deviations. A separate section on corporate governance is included on page 50 of this Annual Report. This section describes the company’s approach to corporate governance and explains how the company implements the current Dutch Corporate Governance Code.
Successful execution of the strategy
The members of the Supervisory Board wish to express their appreciation to the employees of ICT Group and the Executive Board for their commitment and valuable contribution to the successful execution of the company’s growth strategy.
Barendrecht, 2 March 2017
The Supervisory Board
Th.J. van der Raadt (Chairman)