Report of the Supervisory Board
We are pleased to present the ICT Group Supervisory Board report for the 2017 financial year. Last year ICT reached the milestone of more than € 100 million in revenue and saw its total workforce increase to over 1,000 employees. ICT continued its strategic path, with a clear focus on the integration and consolidation of the acquisitions made over the last two years. Nozhup was successfully integrated in the ICT Group and management continued to invest in the organisation, both in the Netherlands and in Bulgaria. During the year, the Supervisory Board approved the investments for two new acquisitions, High Tech Solutions B.V. and NedMobiel B.V. Thanks to these acquisitions and other measures, ICT further strengthened its platform for future growth.
Financial statements 2017
The Supervisory Board discussed the 2017 financial statements as prepared by the Executive Board in its meeting on 1 March 2018. The Audit Committee discussed the financial statements and the audit findings in depth with the external auditors, PricewaterhouseCoopers in its meeting of 22 February 2018. The Supervisory Board discussed the financial statements in the presence of the external auditors. Following the review of the independent Auditors Report issued by PricewaterhouseCoopers, plus its findings as summarised in a report to the Supervisory Board and the Executive Board, the Supervisory Board adopted the financial statements. The Auditor’s Report is presented on page 113 of this Annual Report.
The Supervisory Board recommends that the Annual General Meeting of Shareholders, to be held on 9 May 2018, adopts the financial statements for the year 2017 and discharges 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 pay a dividend of € 0.35 per share for 2017. The dividend will be an optional dividend, payable in cash or shares as per 30 May 2018.
Supervisory Board activities in 2017
In the year under review, the Supervisory Board had six meetings in the presence of the Executive Board. Prior to each Supervisory Board meeting, the Supervisory Board met in closed sessions, usually without the members of the Executive Board although occasionally in the presence of the CEO. All Supervisory Board members were present during all meetings. One Supervisory Board member could not participate in one additional telephone conference meeting due to prior commitments.
The chairman has regular working meetings with the CEO. The CFO and chairman of the Audit Committee also have regular working meetings. When deemed useful, individual members contact each other for updates and consultation.
One subject that was a regular item on the agenda was ICT’s growth strategy. In 2017, ICT devoted a great deal of attention to the documentation of its strategy to create long-term value for all stakeholders into a more structured model. This resulted in the value creation model based on the IIRC model as presented in this report. The Supervisory Board discussed and challenged this model and the associated stakeholder assessment. As part of the company’s long-term strategy, the company’s organic growth potential and its acquisition strategy were discussed at a number of meetings. In the context of the growth strategy, the Board discussed potential acquisitions and discussed and approved investment proposals for two of these proposed acquisitions presented by the Executive Board. In the summer of 2017, ICT acquired 100% of the shares in High Tech Solutions B.V., a high technology automation services provider based in the Netherlands. In November 2017, the company signed a letter of intent for the acquisition of all shares in NedMobiel B.V. The Board discussed ICT’s ambition to also serve its multinational clients at locations outside the Netherlands. As part of the discussion on ICT’s long-term value creation potential, the Board also discussed the company’s longer-term horizon, including the opportunities and the threats presented by developments and trends such as digital transformation and the potential of block chain technology.
The Supervisory Board supervised the design and increased effectiveness of ICT’s risk management framework via regular updates on developments and improvements. The Supervisory Board reviewed the need to appoint an internal auditor and on the advice of the Audit Committee resolved to do so towards the end of the year. Up to the end of 2017, internal audits were conducted on an ad hoc basis by in-house and external resources that had a direct reporting line to the Audit Committee. In view of the growth of the company and the need for process improvements and alignment, the decision was taken to appoint an internal auditor reporting to the CEO and the Audit Committee from 2018 onwards. A proposal for the appointment of the chosen candidate will, together with the advice of the Audit Committee to that effect, be submitted to the Supervisory Board for their approval.
Attracting and retaining talents continues to be one of the most important topics for ICT. The actions taken, the close cooperation with universities, employee satisfaction and actions aimed at improving satisfaction levels were all regular topics of discussion. In December, the Executive Board and Supervisory Board discussed the corporate culture and underlying values, as well as how these have been incorporated in the Group. The Board also discussed other aspects of ICT’s culture, including the code of conduct and employee satisfaction, as well as the need for any changes. Throughout the year, ICT reiterated its ambition to make the world a little smarter every single day. This ambition reflects the culture of technological experts, where long-term sustainable goals and value creation prevail over short-term profitability.
Key topics throughout the year included ICT’s financial performance, cash flow and working capital. The Board had regular scheduled meetings ahead of all key reporting dates. Performance versus budget and the group’s financial position were closely monitored and reviewed regularly. The Supervisory Board also discussed integrated reporting and the implementation of reporting on non-financial information. The External Auditors were present in all Audit Committee meetings and in the Supervisory Board meeting at which the full year results were discussed.
Composition of the Supervisory Board & Diversity
The composition of the Supervisory Board was unchanged in the year under review. The maximum term of appointment for the members of the Supervisory Board has been brought in line with the 2016 Governance Code. Supervisory Board members are appointed for a period of four years and may then be reappointed once for another four-year period. A Supervisory Board member may thereafter be reappointed again for a period of two years and that appointment can in principle be extended by at most two years. In the event of a reappointment after an eight-year period, the reason for said reappointment will be explained in the report of the Supervisory Board.
Mr. Sinoo, whose second term ends in 2018, will not be available for re-election in May 2018. The Supervisory Board is grateful for his valuable contribution over the past eight years, in which ICT made significant steps forward. With the assistance of an independent consultant, the Supervisory Board started the process to identify the potential new member to be appointed at the AGM in May 2018. In January 2018, the company announced the nomination of Mrs. Gina van der Werf for appointment as member of the Supervisory Board as per the General Meeting of Shareholders in May 2018.
A profile of the Supervisory Board is available on ICT’s website www.ict.eu. The profile was updated in 2017 and will be presented for discussion to the Annual General Meeting in 2018. The Supervisory Board currently comprises four members. The various members bring a wide range of skills and experience to the Supervisory Board from a broad range of backgrounds and industries Two of the four members have non-Dutch nationality. ICT aims for diversity not only in experience and nationality but also in gender and age. When recommending appointments to the AGM, the experience, background and other diversity factors are taken into account. ICT strives to have at least 30% female Supervisory Board members. Subject to the appointment of Mrs. van der Werf by the General Meeting of Shareholders, female members will account for 25% of the Supervisory Board as of May 2018.
The aim for a diverse composition, and the specific gender target, also applies to the composition of the Executive Board and senior management. With an Executive Board consisting of only two positions and an industry where female talent is scarce, it will not be easy to meet this 30% target. In view of the performance in the past four years, there is no intent to amend the composition of the Executive Board, nor to increase the number of Executive Board members. As such, ICT does not expect to meet the 30% target at the level of the Executive Board in the foreseeable future.
The Supervisory Board closely monitors the Executive Board’s efforts to 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 established that its members can be deemed independent in accordance with the criteria listed in the Corporate Governance Code. There were no conflicts of interest in the year under review.
Quality of supervision
In accordance with the Dutch corporate governance codes, in 2017, the performance of the Executive Board and its individual members, the Supervisory Board and its individual members and the committees were all evaluated. These evaluations were facilitated internally based on extensive questionnaires that were completed by all Supervisory Board and Executive Board members. The input was collated by the chairman of the Remuneration and Appointments Committee and discussed in a closed session of the Supervisory Board. It confirmed that the Boards and the Supervisory Board committees continued to function effectively. The evaluation also confirmed that the culture within ICT is one in which discussions between the members of the Boards themselves and between the Supervisory and Executive Board members take place in a respectful and open manner. The discussions between representatives from the Supervisory Board with representatives from the works council on matters such as strategy, the composition of the Supervisory Board and the culture within ICT, also contributed to this open debate. The contacts between the Supervisory Board and senior management outside the Executive Board have also been both constructive and open. The Supervisory Board received all the information it required to fulfil its role effectively, both from senior management and the Executive Board.
The Supervisory Board received training on the implications of the revised corporate governance code. A gap analysis was made to identify the specific deviations and implications for ICT Group. All Supervisory and Executive Board members attended a two-day summit at Singularity University, to get updates and familiarise themselves with trends in Digital Transformation and its potential impact for ICT. In October, the Group Chief Information Security Officer updated the Audit Committee on cyber security matters and the consequences for ICT of the implementation of the Dutch General Data Protection Act.
Meetings of the Supervisory Board and its committees usually take place at the head office in Barendrecht. 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 other office each year (2016 Sofia, 2017 Eindhoven and Oosterhout). The COO of the Group is usually present at each Supervisory Board meeting, to provide an update on operational performance of the various units. Other key managers are 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.
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. Last year, the Supervisory Board extensively discussed the new Corporate Governance code and the implications for ICT Group. A full gap analysis was conducted, and the Supervisory Board enhanced its understanding of the subject at a specific training course, as mentioned above. The outcome of the gap analysis can be found in the separate section on corporate governance that is included on page 36 of this Annual Report. This section describes the company’s approach to corporate governance and explains how the company is implementing the current Dutch Corporate Governance Code. In principle, ICT Group will comply with the provisions of the new Code or explain any deviations.
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 Mr. Sinoo. For a full view on the composition of the committees see the table below:
||Mr. D. Luthra
||Mr. J. Sinoo
||Mr. J. Sinoo
||Mr. Th. Van der Raadt
The Audit committee met five times with the CFO and finance director. The CEO and the External Auditors 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 reports on the principal issues discussed, on actions to be taken and the follow-up of such actions in the Supervisory Board meeting. Minutes of the Audit Committee meetings are shared with the full Supervisory Board. In the year under review, the Audit Committee reviewed and discussed the following subjects:
- Annual figures 2016 and 2017 quarterly and half year figures
- 2017 budget and quarterly performance versus budget
- 2018 budget and 2018-2022 multi-year plan
- Valuation and performance of acquisitions and purchase price allocation
- Application of accounting principles including the impact of changes in the applicable IFRS standards
- Treasury and working capital management
- Financing position and covenants
- The design and effectiveness of the risk management and control system
- (potential) legal claims and insurance
- The transition to the newly appointed external auditors and their audit plan
- The role and performance of the external auditor
- The need for the formal introduction of the internal audit function
Most of these matters were recurring items on the agenda. Following the appointment of the new auditor at the AGM in 2017, the AC spent the necessary time on establishing its working relationship with the auditor and reviewed their initial findings and audit plan for the year under review. The chairman met frequently with the CFO and finance director to prepare the AC meetings and discussed all the above items. In 2017, the AC discussed the finance organisation and considered the need for an internal audit function. It was concluded that, in view of the growth of the company and future growth initiatives, an internal audit function would enhance the risk and control framework and add value to the organisation. A profile for the function and the internal auditor to be recruited was discussed in December and expectations are that an internal auditor will be retained early 2018.
Remuneration and Appointment Committee
The RAC held four meetings in 2017. During these meetings, the RAC discussed the performance of the Executive Board members, also versus target setting and achievements in 2016. The committee set new targets for 2017 with respect to the short-term variable remuneration. The RAC also discussed the succession planning for the group and reviewed the management structure. To reduce the span of control for the Executive Board members, certain organisational changes were made, which were discussed with the RAC and subsequently adopted by the Supervisory Board on the recommendation of the RAC.
Composition Executive Board
The term of office of members of the Executive Board will end in May 2018. The RAC formulated a proposal to the Supervisory Board for the reappointment of Mr. J Blejie and Mr. J.W. Wienbelt following the General meeting in May 2018. Said proposal was adopted by the Supervisory Board. The Supervisory Board will notify the General Meeting of the intended re-appointment in the convocation with the agenda and explanatory notes to the General meeting in May 2018. The RAC further discussed new management contracts with the members of the Executive Board which were agreed by the Supervisory Board under the dissolving condition of the re-appointment of both members following the General meeting in May 2018.
Other topics discussed during the year included the composition of the Supervisory Board and its profile. In line with the 2016 Governance Code, the RAC submitted a proposal to the Supervisory Board to amend the maximum term of appointment for the members of the Supervisory Board from three times four years to two times four years A Supervisory Board member may thereafter be reappointed again for a period of two years and that appointment can in principle be extended by at most two years. This proposal was adopted by the Supervisory Board and subsequently formed the basis for a new rotation schedule. The RAC also started a search process for a new member resulting in the proposal from the RAC to the Supervisory Board to nominate Mrs Gina van der Werf as member of the Supervisory Board at the general meeting in May 2018. During 2017, the RAC reviewed the long-term incentive plan with support of an external advisor leading to a proposal to the general meeting in May 2017 where the proposal was adopted.
The chairman of the RAC reports on the deliberations in the RAC meeting at the Supervisory Board meetings, including decisions, action points and follow up. Minutes of all RAC meetings are distributed to all Supervisory Board members.
The members of the Supervisory Board would like to express their gratitude to all employees of ICT Group and the Executive Board for their hard work and their much-valued contribution to the company.
Barendrecht, 1 March 2018
The Supervisory Board
Th. J. van der Raadt (Chairman)
J.A. Sinoo (Vice Chairman)