Financial statements for 2018
The Supervisory Board discussed the 2018 financial statements as prepared by the Executive Board in its meeting on 28 February 2019. The Audit Committee discussed the financial statements and the audit findings in detail with the external auditor, PricewaterhouseCoopers, in its meeting of 21 February 2019. The Supervisory Board discussed the financial statements in the presence of the external auditor. Following the review of the Independent Auditor’s Report issued by PricewaterhouseCoopers as well as its findings as summarised in a report to the Supervisory Board and the Executive Board, the Supervisory Board adopted the financial statements. The Independent Auditor’s Report is presented on page 155 of this Annual Report.
The Supervisory Board recommends that the Annual General Meeting of Shareholders, to be held on 15 May 2019, adopt the financial statements for the 2018 financial year and discharge the Executive Board and the Supervisory Board for their management and supervision respectively in the year under review.
Furthermore the Supervisory Board endorses the Executive Board’s proposal to the General Meeting to distribute a dividend of € 0.38 per share for 2018. The dividend will be an optional dividend, payable in either cash or shares on 5 June 2019.
Supervisory Board activities in 2018
In the year under review the Supervisory Board held nine meetings that were attended by the Executive Board. Five meetings were held at the offices of ICT in Barendrecht and two at Amsterdam Schiphol, two meetings were by telephone. Prior to each face-to-face meeting the Supervisory Board met in a closed session without the members of the Executive Board except for the agenda items where the presence of the CEO was warranted. All Supervisory Board members were present at every meeting, except for one meeting where one supervisory board member could not be present. Furthermore the Chairman held regular working meetings with the CEO, while the CFO and the Chairman of the Audit Committee also had regular working meetings. Individual Supervisory Board members contacted each other for updates and consultation if and when deemed useful.
ICT’s new ‘Develop the Future’ strategic roadmap for 2022 was an important topic at a number of meetings. The strategy update, prepared by the Executive Board, was extensively discussed and challenged. The update, including new financial objectives, was presented during a well-attended Capital Markets Day – the first of its kind for ICT Group – in November 2018. Furthermore acquisitions and the subsequent integration were again discussed regularly during the various meetings. Monitoring the progress made towards integrating the acquired companies and evaluating the assumptions made at the time of the acquisitions are important focus areas for the Supervisory Board. In 2018 the acquisition of the remaining 50% stake in InTraffic was on the agenda, as was the integration of NedMobiel and the monitoring of progress on earlier acquisitions. The establishment of OrangeNXT following the acquisition of the remaining 49% stake in ICT Mobile was another important strategic step for the company that was extensively discussed. The launch of the new Motar platform, responding to the low-coding trend in software development, was also discussed at one of the meetings.
The Supervisory Board monitored the design and increased effectiveness of ICT’s risk management framework through regular updates on developments and improvements. Following a decision at the end of 2017 an Internal Auditor was appointed from May 2018, reporting to the CEO and the Chairman of the Audit Committee.
Attracting and retaining talents continues to be one of ICT’s main priorities in the current tight labour market. The actions (to be) taken were discussed, including cooperation with universities and an increased number of internships. Employee satisfaction is key to retaining talents and this was extensively discussed, as well as topics such as maintaining and enhancing ICT’s entrepreneurial culture and inclusiveness. The results of these actions were extensively evaluated and discussed by the Remuneration and Appointments Committee and the Executive Board, and reported on to the full Supervisory Board.
Key topics throughout the year included ICT’s financial performance, cash flow and working capital. The Supervisory Board had regular scheduled meetings preceding all key reporting dates. Performance versus budget and the group’s financial position were closely monitored and regularly reviewed. The Supervisory Board also discussed integrated reporting and the implementation of reporting on non-financial information. The external auditor was present at all Audit Committee meetings and at the Supervisory Board meeting at which the full-year results were discussed. The follow-up and implementation of recommendations made by the external auditor were closely tracked and monitored.
Composition of the Supervisory Board and Executive Board
Supervisory Board members are appointed for a period of four years and may then be reappointed once for another four-year period. Supervisory Board members may subsequently be reappointed for a period of two years, a term that can in principle be extended for no more than two years. In the event of a reappointment after an initial eight-year period, the reason for said reappointment is explained in the Report of the Supervisory Board.
Mr. Sinoo, whose second term ended in 2018, stepped down from the Supervisory Board at the Annual General Meeting of Shareholders (AGM) in May 2018. At the same meeting Mrs. Van der Werf was appointed to the Supervisory Board for a four-year term. In anticipation of the forthcoming retirement of Mr. Fröschl, whose second term ends in May 2019, the Supervisory Board started the search for a new member. This resulted in the nomination of Mr. Van de Bunt to be appointed at the AGM in May 2019 for a period of four years until the AGM in 2023. The reappointment of Mr. Van der Raadt, Chairman of the Supervisory Board whose second term ends on 15 May 2019, will also be on the agenda at the next AGM. His proposed reappointment would be for a two-year period until the AGM in 2021. This is in line with the Dutch Corporate Governance Code and ensures sufficient continuity in the Supervisory Board by preventing a situation in which two of the four members would be stepping down simultaneously. Both nominations will be made under the condition that the AGM does not make use of its right of recommendation. Following the proposed appointment and reappointment, the Supervisory Board will consist of Theo van der Raadt (Chairman), Deepak Luthra, Gina van der Werf and Wouter van de Bunt. The intention is for Mr. Van de Bunt to become a member of the Audit Committee in place of Mr. Van der Raadt who will continue to be a member of the Remuneration and Appointment Committee.
After the AGM in May 2018 the Supervisory Board reappointed Mr. Blejie and Mr. Wienbelt as CEO and CFO, respectively, on the Executive Board for a period of four years until the AGM in 2022. Furthermore, in February 2018 Mr. Jansen was appointed Chief Operating Officer (COO) of ICT Group, a non-statutory role in which he is responsible for the operational execution of the corporate strategy of ICT Group.
Profile and diversity
A description of the Supervisory Board’s profile is available on ICT’s website www.ict.eu. The updated profile was presented for discussion to the AGM in 2018. If and when a position becomes available the general profile may be expanded with a more detailed description of the required experience and background for a specific vacancy so that the Supervisory Board as a whole has the right experience and background to fulfil its tasks. The proposed appointment of Mr. Van de Bunt will bring further in-depth experience in strategic and financial areas relevant to our industry. The Supervisory Board currently consists of four members. The members bring a broad range of skills and experience to the Supervisory Board from a wide array of backgrounds and industries. ICT aims for diversity not only in experience and background (including cultural background), but also in gender and age. When proposing appointments to the AGM, experience, background and other diversity factors are taken into account. ICT strives for women to hold at least 30% of positions on the Supervisory Board. Female representation currently stands at 25%.
The aim for a diverse composition, including the specific gender target, also applies to the composition of the Executive Board and senior management. With the Executive Board consisting of only two positions and an industry in which female talent is still scarce, the 30% target will not easily be achieved. In view of the reappointments in May 2018 of Mr. Blejie and Mr. Wienbelt as CEO and CFO, respectively, for a period of four years and given that there is no intention to increase the number of Executive Board members, ICT does not expect to meet the 30% target at the level of the Executive Board in the coming years.
The Supervisory Board closely monitors the Executive Board’s efforts towards fostering female talent across the group, encouraging women’s networks and mentoring programmes, together with the promotion of gender equality in general.
The Supervisory Board and the Executive Board share responsibility for ICT Group’s corporate governance structure. At least once a year the Supervisory Board discusses the corporate governance rules applicable to the company and advises on possible changes.
The Supervisory Board established that its members could be deemed independent in accordance with the criteria listed in the Dutch Corporate Governance Code. There were no conflicts of interest in the year under review.
Quality of supervision
The Supervisory Board received all the information it required to fulfil its role effectively, both from senior management and the Executive Board. The COO of ICT Group is usually present at each Supervisory Board meeting, to provide an update on the operational performance of the various units. Other key managers are generally present at least once a year on a rotating basis. The Executive Board and the Supervisory Board meet annually with the Board of the Stichting Continuïteit ICT.
There was one meeting at which the Supervisory Board met with the entire Works Council to discuss matters such as strategy, the composition of the Supervisory Board and the culture within ICT. Furthermore there were a number of meetings between the Chairman and Vice-Chairman of the Supervisory Board, and the Chairman and Secretary of the Works Council to discuss progress on various initiatives and programmes. Also, introductory meetings were held with the proposed candidates for the Supervisory Board.
To enable the members of the Supervisory Board to familiarise themselves with the various offices and local management teams and to promote the feeling of being at home at all ICT locations, the members visit at least one different office each year.
The Supervisory Board members received individual training on developments in Corporate Governance, as well as on technological, strategic and market developments in the ICT sector in general. Mrs. Van der Werf followed an extensive induction programme during which she met with key staff members and business managers.
The performance of the Executive Board and its individual members, the Supervisory Board and its individual members and the committees were all evaluated during 2018. The Supervisory Board evaluated its own performance, facilitated by an external advisor. Extensive questionnaires were completed and individual interviews were held with all Supervisory Board and Executive Board members. The output was collated by the external advisor and subsequently shared with the entire Supervisory Board in a closed session.
The evaluation confirmed that the Boards and Supervisory Board committees continued to function effectively. It also confirmed that discussions between the members of the individual Boards and between the Supervisory and Executive Board members are open and respectful. A number of practical matters and suggestions were adopted to further improve the functioning of the Supervisory Board and to ensure that the focus of the Supervisory Board going forward is aligned with the strategic objectives of ICT.
Supervisory Board committees
The Supervisory Board has an Audit Committee (AC) and a Remuneration and Appointments Committee (RAC). The AC is chaired by Mr. Luthra and the RAC by Mrs. van der Werf. A complete overview of the composition of the committees at the end of 2018 is presented below:
||Mr. D. Luthra
||Mr. Th.J. van der Raadt
||Mrs. G.A. van der Werf
||Mr. Th.J. van der Raadt
The Audit Committee met four times with the CFO and finance director during the year under review. The CEO and the external auditor were present at all meetings. The Audit Committee also met with the external auditor in the absence of the Executive Board.
The Chairman of the Audit Committee reported on the principal issues discussed, actions to be taken and the follow-up on such actions in the Supervisory Board meeting. The minutes of AC meetings are distributed to all Supervisory Board members.
The minutes of the Audit Committee meetings are shared with all Supervisory Board members. In the reporting year the Audit Committee reviewed and discussed the following subjects:
- the 2017 annual results and the quarterly and half-year results for 2018
- the 2018 budget and quarterly performance against the budget
- the 2019 budget and 2019-2022 multi-year plan
- the valuation and performance of acquisitions and purchase price allocation
- the application of accounting principles including the impact of changes in the applicable IFRS standards
- treasury and working capital management
- the financing position and covenants
- the design and effectiveness of the risk management and control system
- the review of the tax position including developments in meetings and discussions with the tax advisors
- any actual and/or potential legal claims and insurance matters
- the External Audit plan: approach, scope and coverage and key audit matters
- the role and performance of the external auditor
- the appointment of an internal auditor and the Internal Audit Plan for group-wide internal audit activities
Most of these matters were recurring items on the agenda. The Chairman of the Audit Committee met frequently with the CFO and the finance director to prepare for AC meetings, discussing all the above items.
As mentioned in last year’s report, a decision was taken to establish an Internal Audit position. An internal auditor was recruited and appointed in May 2018. An Internal Audit Charter for the company was adopted by the Audit Committee and subsequently approved by the Supervisory Board. The Audit Committee discussed the findings of the 2018 internal audits and the Internal Audit Plan for the 2019 financial year in detail. The latter was adopted and subsequently approved by the Supervisory Board.
Remuneration and Appointments Committee
In 2018 the Remuneration and Appointments Committee (RAC) held four meetings, during which it discussed the performance of the Executive Board members, also versus the targets set and realisations in 2017. The committee established new targets for 2018 with respect to the short-term variable remuneration. Succession planning for ICT Group and the associated management structure is also a topic that is regularly discussed in the RAC. This is considered an important topic as it enables the Supervisory Board to assess the quality and growth potential of management in the light of the company targets.
At the start of 2018 the committee formulated a proposal for the reappointment of Mr. Blejie and Mr. Wienbelt, a proposal that was adopted by the Supervisory Board. The Supervisory Board reappointed Mr. Blejie and Mr. Wienbelt as CEO and CFO, respectively, following approval at the AGM in May 2018. Furthermore the RAC discussed new management contracts with the members of the Executive Board, as agreed by the Supervisory Board.
Other topics discussed during the year under review included the composition of the Supervisory Board and its profile. In view of the forthcoming retirement of Mr. Fröschl at the AGM in May 2019, the RAC also performed an extensive search for a new member resulting in a proposal from the RAC to the Supervisory Board to nominate Mr. Van de Bunt as a member of the Supervisory Board at the AGM in May 2019.
The remuneration policy of the Supervisory Board is reviewed every three years and was up for review in 2018. As a result of a benchmark study as well as internal deliberations, a proposal to adjust the remuneration of the Supervisory Board will be submitted for approval to the AGM in 2019.
People are ICT Group’s greatest asset and scarcity of talent is one of the main strategic risks for the company. Employee satisfaction and talent recruitment are therefore very important topics for the RAC. In order to be thoroughly informed and able to operate as effectively as possible, the RAC invites the ICT Group’s HR director to participate in its meetings for these specific topics.
The Chairman of the RAC reported at the Supervisory Board meetings on the discussions held in the RAC meeting. This included discussions on decisions, action points and follow-up. The minutes of each RAC meeting were distributed to all Supervisory Board members.