Report of the Supervisory Board

We are pleased to present the 2019 ICT Group Supervisory Board report. 2019 was a year of two faces for ICT Group, with strong growth in the first half of the year and a second half in which weaker market circumstances impacted productivity. The underlying matters, its impact and the required response were main topics of discussion in the final months of the year.

We are seeing good development of the international expansion of the group and its strong position in Software as a Service (SaaS) solutions. We are pleased with the focused execution of the Group’s multi-year strategy, as formulated at the end of 2018, as well as the measures the company is taking to further implement one way of working and thereby increase efficiency throughout the Group. Despite the current uncertain market developments we are still confident of achieving the mid-term objectives that were set for 2022.

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Financial statements for 2019

The Supervisory Board reviewed and discussed the 2019 financial statements as prepared by the Executive Board in its meeting on 27 February 2020. The Audit Committee discussed the financial statements and audit findings in detail with the external auditor, PricewaterhouseCoopers, in its meeting of 20 February 2020. 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 164 of this Annual Report.

The Supervisory Board recommends that the Annual General Meeting of Shareholders on 13 May 2020 adopt the financial statements for the 2019 financial year and discharge the Executive Board and the Supervisory Board for their management and supervision in the year under review.

Furthermore the Supervisory Board endorses the Executive Board’s proposal to the General Meeting to distribute a dividend of € 0.30 per share for 2019. The dividend will be an optional dividend, payable in either cash or shares on 4 June 2020.

Supervisory Board activities in 2019

In the year under review the Supervisory Board held seven meetings in person, that were attended by the Executive Board, and four additional meetings were held by telephone. Four of the meetings in person were held at the office of ICT in Barendrecht and one at the Eindhoven office. Two meetings were held at other locations. All Supervisory Board members were present at every meeting, except for two which one member could not attend. Prior to each face-to-face meeting the Supervisory Board met in a closed session without the members of the Executive Board being 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 to consult if and when deemed useful. This was particularly the case for the two new members in the Supervisory Board, who had been briefed on specific matters relating to ICT.

Topics discussed

During the meetings in the autumn of 2019 the impact of weakening market conditions on ICT’s productivity and margins was a major topic. The Supervisory Board members discussed the measures taken by the Executive Board (in close consultation with the cluster directors), to support a recovery of the margins. Throughout the year the M&A strategy and possible candidates and cases were also areas of specific attention.

The Supervisory Board devoted considerable time to discussing the Group’s strategy and objectives with respect to long-term value creation as well as the execution and progress achieved with the Executive Board. During these sessions the Executive Board’s leadership and ideas were tested and challenged by the members of the Supervisory Board in order to ensure that decisions were reached that underpin ICT’s strategy and are aligned with the long-term value creation pursued by the company. These discussions also covered the progress achieved on the M&A paths. In this context the acquisition of Additude in Sweden, as part of ICT’s international expansion strategy, as well as the acquisition of BNV in the promising field of Mobility as a Service were addressed. 2019 also saw the introduction of the Technology Advisory Council, a group of external highly experienced technological experts, to support the Executive Board and Supervisory Board by providing valuable market insights when charting and pursuing the strategic roadmap.

Attracting and retaining talent is certainly one of ICT’s main priorities in the current challenging labour market. ICT’s recruitment strategy was discussed as well as specific actions including online and offline targeting based on a solid content strategy and the organisation of events, also in cooperation with clients or business partners. The key findings of the annual employee satisfaction survey were discussed as well as areas of attention and improvement. In order to be thoroughly informed, the Supervisory Board invited the ICT Group HR director to participate in a meeting on these specific topics. The company’s culture and inclusiveness were also topics that were discussed by the Supervisory Board.

Corporate governance-related topics, including general developments and trends as well as the implications of legislation, were also on the agenda. Other key topics throughout the year were ICT’s financial performance, cash flow and working capital. The Supervisory Board had regularly scheduled meetings prior to the key reporting dates. Performance versus budget and the group’s financial position were closely monitored and regularly reviewed. Changes in regulations and applicable IFRS standards (with specific attention for the impact of IFRS 16) were also discussed. 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

At the 2019 AGM Mr. Fröschl, whose second term ended in May 2019, resigned from the Supervisory Board while Mr. Van de Bunt and Ms. De Vries- Schipperijn were appointed to the Board for a period of four years until the AGM in 2023. Furthermore Mr. Van der Raadt was reappointed for a two-year period until the AGM in 2021. Although Mr. Van der Raadt’s second term ended on 15 May 2019, the Board felt it was important to extend his term by two years to safeguard sufficient continuity in the Supervisory Board and prevent a situation in which two of the four members would be stepping down simultaneously. His reappointment for a period of two years is in line with the Dutch Corporate Governance Code. At the AGM the shareholders approved expanding the Supervisory Board to five members.

As of the AGM on 15 May 2019, ICT Group’s Supervisory Board consisted of the following members: Theo van der Raadt (Chairman), Deepak Luthra,
Gina van der Werf, Wouter van de Bunt and Angélique de Vries-Schipperijn.

In December 2019 Ms. Van der Werf informed the Supervisory Board that she would step down at the end of the year for personal reasons. The Board regrets her resignation but respects her decision and is thankful for her efforts and input. The search for a successor has commenced. Following the conclusion of his second term at the AGM on 13 May 2020, Mr. Luthra will resign from the Board at that date. Mr. Beeckmans has been nominated for appointment as member of the Supervisory Board at that AGM.

Profile and diversity

A description of the Supervisory Board’s profile is available on the ICT Group website (www.ict.eu). If and when a vacancy becomes available the general profile may be expanded with a more detailed description of the required experience and background for a specific position to ensure that the Supervisory Board has the right experience and background to fulfil its tasks. The appointment of Mr. Van de Bunt brings further in-depth experience in strategic and financial areas relevant to the industry. The appointment of Ms. De Vries-Schipperijn brings broad and in-depth knowledge and experience in the field of strategic and technological developments. Both will be of great value to the Board.

The Supervisory Board currently consists of four members and has a vacancy. The members bring a broad range of skills and experience to the Board from a wide array of backgrounds and industries. ICT aims to achieve diversity not only in experience and background (including cultural background), but also in gender and age. When proposing appointments to the AGM, all these factors are taken into account. ICT strives for women to hold at least 30% of the positions on the Supervisory Board. Female representation was 40% but currently stands at 25% after the resignation of Ms. Van der Werf at the end of the year.

The aim for a diverse composition, including the specific gender composition 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. This fits ICT’s policy to be an inclusive employer and our strong belief that diverse views and perspectives add value and are essential to drive innovation.

Corporate Governance

The Supervisory Board and the Executive Board, supported by the Company Secretary, 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 on possible changes.
The fact that a fifth member of the Supervisory Board was appointed at the AGM meant that changes to the committee structure of the Supervisory Board had been proposed and implemented in line with the Dutch Corporate Governance Code. For further details please refer to the Corporate Governance section of this Annual Report.
The Supervisory Board confirms that all its members are independent as defined in best practice provisions 2.1.7 to 2.1.9. of the Dutch Corporate Governance Code. No member of the Supervisory Board holds more than five directorships at Dutch ‘large companies’, in accordance with section 2:142a of the Dutch Civil 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 usually accompagnied the CEO and CFO at each Supervisory Board meeting to provide an update on the operational performance of the various business units. Other key managers are generally present at least once a year on a rotating basis to expand on current developments and provide insights from their business units. 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 various matters as proposed by the Works Council, such as matters related to the international expansion of ICT and employee rewards and conditions. The specific topics discussed included the integration of foreign employees within ICT as well as job opportunities for ICT employees abroad in light of the further expansion to other European jurisdictions. Furthermore there were 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 local office each year. In 2019 the Eindhoven office was visited.

The Supervisory Board members were provided with or proactively gathered relevant information from external third parties on general developments for listed companies, including corporate governance, risk management and accounting standards, as well as on technological, strategic and market developments in the ICT sector. An extensive onboarding programme was organised for both Mr. Van de Bunt and Mrs. De Vries-Schipperijn, including meetings with key staff members and business managers.

Evaluation

The performance of the Executive Board and its individual members, the Supervisory Board and its individual members and the committees were all evaluated during 2019. The Supervisory Board evaluated its own performance on the basis of the questionnaires as provided by an the external advisor who facilitated the evaluation in 2018. These extensive questionnaires were completed and individual input was received from all Supervisory Board and Executive Board members. The output was collated by the Company Secretary and subsequently shared with
the entire Supervisory Board in a closed session.

The evaluation confirmed that the Boards and Supervisory Board committees in their new composition 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. The Boards share the view that the new composition of the Supervisory Board functions well.

Supervisory Board committees

The Supervisory Board, when consisting of four members, initially had an Audit Committee (AC) and a Remuneration and Appointments Committee (RAC). The AC is chaired by Mr. Luthra and the RAC was chaired by Ms. Van der Werf. To comply with the Dutch Corporate Governance Code the RAC was split up into two new committees, being the Remuneration Committee and the Selection and Appointments Committee. Mr. Van de Bunt replaced Mr. Van der Raadt on the Audit Committee. The Remuneration Committee consists of Ms. Van der Werf as chair and Ms. De Vries-Schipperijn. The Selection and Appointments Committee is chaired by Mr. Van der Raadt, with Ms. Van der Werf as the other member. An overview of the composition of the committees at the end of 2019 is presented below:

The RAC was split up at the first meeting following the 2019 AGM, resulting in the following new committees:

Audit Committee

In the year under review the Audit Committee met four times with the CFO, the finance director, the CEO, the internal auditor and the external auditor attending all meetings. The Audit Committee also met with the external auditor without the Executive Board being present.

The Chairman of the Audit Committee reported verbally to the Supervisory Board members following the Audit Committee meeting on the principal issues discussed, the actions to be taken and the follow-up on these and any previously identified actions. The formal minutes of all AC meetings are distributed to the Supervisory Board members.

In the reporting year the Audit Committee reviewed and discussed the following matters:

  • the 2018 annual results and the quarterly and half-year results for 2019;
  • the 2018 consolidated financial statements and the 2018 Annual Report;
  • the 2019 budget and the quarterly performance against the budget;
  • the 2020 budget and 2021-2023 multi-year plan;
  • the key findings of the due diligence conducted prior to acquisitions and the purchase price allocation following acquisition;
  • the valuation and performance of acquisitions including the outcome of the required (annual) impairment tests;
  • the application of accounting principles including the impact of changes in applicable IFRS standards;
  • treasury and working capital management;
  • the financing position and compliance with bank covenants;
  • the design and effectiveness of the risk management and control system;
  • the Group’s susceptibility to fraud as well as its fraud risk assessment and mitigation procedures;
  • the upgrade, if necessary, and implementation of the controls and risk mitigation procedures at the newly acquired subsidiaries to comply with the Group’s risk control framework;
  • the review of compliance with GDPR requirements and the measures to be taken;
  • the review of the tax position including current developments;
  • 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; and
  • the Internal Audit Plan for 2020 and the findings of the internal audits performed in 2019. The Internal Audit Plan for 2020 was adopted by the Audit Committee and subsequently approved by the Supervisory Board.

A significant number of the above matters were recurring items on the agenda. The Chairman of the Audit Committee met frequently with the CFO and the finance director to discuss all the above items in preparation for AC meetings.

REMUNERATION COMMITTEE AND SELECTION AND APPOINTMENT COMMITTEE

Introduction

At the 2019 AGM an additional member was appointed to the ICT Group Supervisory Board, increasing the number of Supervisory Board members from four to five. In line with best practice 2.3.2 of the Dutch Corporate Governance Code the Remuneration and Appointments Committee (RAC) was split into a Remuneration Committee (RC) and a Selection and Appointments Committee (SAC). Before the 2019 AGM the RAC held one meeting. Following the 2019 AGM the new committees each held two meetings.

Remuneration Committee (RC)

The RAC and subsequently the RC discussed the performance of the Executive Board members, also against the targets set and performance achieved in 2018. The committee set new targets for 2019 with respect to the short-term variable remuneration.

In a telephone meeting in February 2019 the RAC and the Chairman of the AC validated the financial aspects and methodology of calculation of the Short Term Incentive (STI) and Long Term Incentive (LTI) for the Executive Board members. The LTI calculations and the outcome hereof were based on the agreed methodology and validated by the external auditor PwC.

The Committee discussed the realisation of the Short Term Incentive for 2018 and discussed amendments to the qualitative bonus criteria for 2019. In light of the increasing importance of non-financial criteria in assessing the performance of a company, the RAC proposed to the Supervisory Board to alter the qualitative performance criteria used to determine the short-term incentive of the Executive Board members.

Also, the RC discussed the 2020 Balanced Scorecard parameters, especially the qualitative criteria, in light of the discussion mentioned above, to be used for coming financial year.

For a complete overview of the remuneration of the Executive Board and Supervisory Board members reference is made to the Remuneration Report on page 80 hereof and which document is separately available on the Company’s website as well.

People are ICT Group’s greatest asset and the scarcity of talent is one of the main strategic risks to the company. Employee satisfaction and talent recruitment are therefore very important topics for the RC and SAC. The results of the Employee Satisfaction Survey were discussed as well as employee rewards and conditions in a meeting with the Works Council attended by the Chair of the RC.

During the Supervisory Board meetings the Chair of the RAC/RC reported on the discussions held in the RAC/RC meetings. The discussion of the topics included decisions, action items and follow-ups. The minutes of each RAC/RC meeting were distributed to all Supervisory Board members.

Selection and Appointments Committee (SAC)

Succession planning for ICT Group and the associated management structure is a topic that is regularly discussed by the RAC/SAC. These discussions offer important insight for the Supervisory Board to assess the quality and growth potential of management in light of company targets.

Other topics discussed during the year under review included the composition of the Supervisory Board and its profile. In view of the proposed expansion of the Supervisory Board from four to five members in 2019 and the imminent retirement of Mr. Luthra at the AGM in May 2020, the RAC/SAC performed an extensive search for new members resulting in the nomination and the subsequent appointment of both Mr. Van de Bunt and Ms. De Vries-Schipperijn at the AGM in May 2019 as well as a proposal from the SAC to the Supervisory Board to nominate Mr. Beeckmans as a member of the Supervisory Board at the AGM in May 2020. During the Supervisory Board meetings the Chair of the RAC/SAC reported on the discussions held in the SAC meeting. The topics discussed included decisions, action items and follow-ups. The minutes of each SAC meeting were distributed to all Supervisory Board members.

In conclusion

The members of the Supervisory Board wish to thank the employees of ICT Group and the Executive Board for their continued dedication and commitment to the company. The members would also like to thank the company’s other stakeholders, including customers, business partners and shareholders, for their long-term relationship with and trust in the company.

Barendrecht, 27 February 2020

Supervisory Board
Th.J. van der Raadt (Chairman)
D. Luthra (Vice Chairman)

W. van de Bunt
A. de Vries-Schipperijn

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