Annual Report • Mar 2, 2017
Annual Report
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1: CEO statement 4 2: Corporate profile 6 3: Financial highlights 2016 10 6: The Brunel share 92 7: Annual accounts 2016 96 8: Additional information 150
| 4: | Report from the Supervisory Board | 12 |
|---|---|---|
| 5: | Report from the Board of Directors | 22 |
| Business model | 23 | |
| Organisational structure and specialism | 26 | |
| Business environment | 29 | |
| Sustainability and material issues | 30 | |
| Strategy | 42 | |
| Risks, risk management and | ||
| control systems | 57 | |
| Corporate governance | 76 | |
| Performance | 82 | |
| In control statement | 91 | |
| 9: | Independent auditor's report | 152 |
|---|---|---|
| 10: | Group financial record | 166 |
| 11: | Worldwide offices | 168 |
| Colophon | 173 |
The ongoing crisis in the Oil & Gas sector made 2016 an exceptionally challenging year for us at Brunel. A smaller but still significant part of our organisation is focused on this global market for energy projects. Over the course of the year, some of our clients put a stop to a number of projects and postponed making new investments. All of which obviously meant less demand for the services in question.
We're now working hard to adapt the organization to these changing market conditions. First and foremost, by making ourselves more efficient, leaner and smarter in existing markets. At the same time, however, we do see new opportunities emerging for this part of the company. Both in terms of expanding our services, and also by entering markets outside Oil & Gas.
However, it'll be a while before we see these initiatives and developments reflected in our results. And although recovery of the market for Oil & Gas projects is inevitable, making any more specific predictions at this time is difficult. Except for one: as always, we're confident about the resilience and entrepreneurial
qualities of our people. And as a result, optimistic about the medium-to-long term developments and opportunities for this part of the business.
In Europe, we have 54 offices and are active in 6 countries: Germany, The Netherlands, Belgium, Switzerland, Austria and the Czech Republic. Our focus is on specialists in engineering, IT, finance, legal, and marketing & communications. Overall growth and profit development in the region have been positive, but we have also seen considerable underlying differences in 2016.
The Netherlands started the year very strongly, but then saw growth completely evaporate with the introduction of new legislation for engaging freelancers. The negative effects of which were luckily a one-off phenomenon. Meanwhile Germany managed in 2016 to accelerate even the impressive growth path achieved in 2015. Even though the differences between countries are significant, the underlying results of all our European organisations in 2016 have once more been stronger across the region.
The robust organisations we have in Europe will form the basis for a return to growth. And, partly as a result of changes forced by the crisis, Energy will also soon be contributing to those growth figures. We live in times that are challenging, but also changing. And for strong organisations like Brunel, change always brings with it opportunities.
The quality of our staff, the way in which we collaborate, the choices we make — they all determine the level of our success. So I'd like to thank every member of this wonderful team — in other words, every single Bruneller — for the great efforts you put in last year and excellent results you achieved under difficult circumstances. I have complete faith in our unique company and the strength of our team. And I wish each of you every success during the exciting but demanding period that lies ahead of us. I'm sure each of you will face your individual challenges head-on and with typical Brunel vigor and optimism.
Brunel was founded in 1975 by the graduated engineer Jan Brand. Starting with the placement of a single fellow engineer, the foundation was laid for what became a global provider of business services that specialises in the flexible placement of professionals. Over the years, the company has continued to grow and diversify, but has always maintained Jan Brand's original focus: placing highly qualified, mainly technical, specialists.
Brunel serves the world market from two main perspectives. On the one hand, we aim our services at specific global business lines. Examples include our focus on the worldwide Oil & Gas industry, and on the international automotive, rail, aerospace, telecom and pharmacy sectors. On the other hand, we focus on traditional secondment in Europe, and more specifically Germany, The Netherlands, Belgium, the Czech Republic and Austria.
In everything we do, we follow our firmlyrooted cultural values: eagerness, result-driven and operational excellence. This allows us to provide added value for clients in both business and government sectors, by meeting their knowledge and project capacity needs in a highly effective way. Brunel stands out from its competitors through its superior services, which center on high-quality
account management and recruitment management, and our in-depth knowledge of the relevant market segments and related disciplines.
Today Brunel is an international group with a strong global brand. Operating from its own international network of 97 branch offices in 35 countries, we have over 10,000 employees and an annual revenue of EUR 885 million (2016).
Brunel International N.V. is listed on Euronext Amsterdam and included in the Amsterdam Small Cap Index (AScX).
Jan Arie van Barneveld was appointed Chief Executive Officer of Brunel International N.V. on 29 September 2000.
His most recent position before transferring to Brunel was as director of Avéro Life & Mortgages (part of the Achmea Insurance Group). Before that Van Barneveld held successive general management positions at Hooge Huys Insurances, Belgian insurance company Corona and engineering factory Meijn.
Van Barneveld started his career at Coopers & Lybrand. He completed his Quantitative Business Economics and Accounting studies at the Vrije Universiteit Amsterdam.
Other directorships: Member of the Supervisory Board Museum Boijmans Van Beuningen.
Peter de Laat was appointed Chief Financial Officer of Brunel International N.V. on 1 May 2014.
After having obtained his Master Degree in Business Economics, De Laat worked for sixteen years with Deloitte Accountants and was amongst others member of the team responsible for the audit of Brunel. In 2012 De Laat joined Brunel and from April 2013 held the position of Director Finance and Control.
EUR million, unless stated otherwise
| 2016 | 2015 | |
|---|---|---|
| Profit | ||
| Revenue | 884.9 | 1,228.9 |
| Gross Profit | 187.1 | 230.0 |
| Operating costs | 160.3 | 173.9 |
| Operating profit (EBIT) | 26.8 | 56.1 |
| Result before tax | 24.2 | 56.7 |
| Tax | 13.6 | 19.1 |
| Group income | 10.6 | 37.6 |
| Net income | 10.1 | 37.1 |
| Ratios | ||
| Change in revenue on previous year | -28.0% | -11.4% |
| Gross margin | 21.1% | 18.7% |
| Operating profit / Revenue | 3.0% | 4.6% |
| Group income / Revenue | 1.2% | 3.1% |
| Balance | ||
| Working capital | 259.7 | 310.4 |
| Group equity | 293.7 | 347.7 |
| Balance sheet total | 399.7 | 479.4 |
| Net cash flow | 33.3 | 53.1 |
| Ratios | ||
| Shareholders' equity / total assets | 73.5% | 72.5% |
| Current assets / current liabilities | 3.50 | 3.42 |
| Workforce | ||
| Employees total (average) | 10,796 | 12,495 |
| Employees indirect (average) | 1,481 | 1,601 |
| Employees total (year end) | 10,371 | 11,554 |
| Employees indirect (year end) | 1,446 | 1,503 |
| Shares in EUR | ||
| Earnings per share | 0.20 | 0.75 |
| Shareholders equity per share | 5.81 | 6.96 |
| Dividend per share | 0.40 | 1.50 |
| Highest price | 19.69 | 20.65 |
| Lowest price | 13.45 | 12.95 |
| Closing price at 31 December | 15.39 | 16.80 |
We hereby present the report of the Supervisory Board for the year 2016
The financial statements and the notes thereto have been audited by PricewaterhouseCoopers Accountants N.V. who provided an unqualified audit opinion. The Supervisory Board supports the proposal of the Board of Directors to declare a dividend of EUR 0.20 per share and an additional dividend of EUR 0.20 per share.
The financial statements will be presented at the General Meeting of Shareholders on 11 May 2017. We recommend the General Meeting of Shareholders to adopt the financial statements and discharge the members of the Board of Directors.
Main topics for 2016 were succession of the CEO, the change in the Board of Directors and the response and progress of the response to the current turmoil in the Oil & Gas industry.
Based on various discussions held throughout the year, and on mutual agreement, Brunel International N.V. and Mr. Arjan de Vries decided to part ways. A settlement was agreed on the termination of the contract for services. Based on this settlement agreement Brunel has paid an amount of EUR 313,410 gross to Mr. De Vries. The Supervisory Board of Brunel is very grateful for his contribution to Brunel during his long career with Brunel and regret the differences of opinion regarding the operational management and strategy. The decision has been taken to continue with a Board of Directors of two members consisting of CEO Jan Arie van Barneveld and CFO Peter de Laat.
After the departure of Mr. De Vries, the Supervisory Board has organised additional meetings with the Board of Directors to discuss:
Cost saving measures as well as new business initiatives have been discussed intensively, as well as current management potential within Energy.
Besides these items, and the periodical financial performance reviews, topics discussed during the year under review were risk assessment and risk management, the group's working capital, cash position, dividend policy. These discussions included presentations by the Board of Directors on strategy, operations and financial performance. Progress regarding the company's IT strategy and infrastructure, investments and corporate tax rate development were also reviewed. The
discussion on the strategy also included utilising the global network outside the Oil & Gas industry.
The Supervisory Board also invited directors of The Netherlands, Germany and Energy to meetings to present their strategy and organisation, also as part of the analysis of the current management potential available within Brunel.
In 2016, the Supervisory Board has approved the plan to implement an internal audit function in the course of 2017.
The solvency ratio of the company is 73.5% and the cash position is healthy. The objective to fund the projected organic growth from its own resources is achievable.
The national and international laws and regulations relating to the company cover areas such as employment, work permits, health & safety, foreign exchange and taxes. The Supervisory
Board has discussed how compliance with relevant laws and regulations can be ensured. Non-compliance is reported via
the periodic consultation with the Supervisory Board. The Supervisory Board obtains information from the
Board of Directors regarding the extent and nature of various regulations and how compliance is monitored internally.
Ir. D. (Daan) van Doorn Chairman (b.1948, male, Dutch)
Appointed: Annual General Meeting of Shareholders in May, 2006
Current term: 2014 – 2018
Former main directorship: CEO and Chairman of the Executive Board of Vion N.V.
Other directorships: Chairman of the Supervisory Board of Coöperatieve Rabobank Oosterschelde Member of the Supervisory Board of A-ware Food Group B.V.
Drs. A. (Aat) Schouwenaar Vice Chairman (b. 1946, male, Dutch)
Appointed: Annual General Meeting of Shareholders in May, 2001
Current term: 2015-2017
Former main directorship: Chairman of the Management Board and CEO of Endemol B.V.
Other directorships: Chairman of the Supervisory Board of Holland Casino (until November 2016) Vice Chairman of the Supervisory Board of Asito Dienstengroep S.E. Vice Chairman of the Supervisory Borad of Docdata N.V. (until January 2017) Member of the Supervisory Board of Stadion Amsterdam N.V.
Drs. Ing. J. (Jan) Bout Supervisory Director (b. 1946, male Dutch)
Appointed: Extraordinary General Meeting of Shareholders on 15 November 2012
Current term: 2016 - 2020
Former main directorship: Chairman of the Board of Directors of Royal Haskoning
Other directorships: Member of the Supervisory Board of Haskoning DHV Groep B.V.
The Board of Directors and Supervisory Board are responsible for compliance with the Dutch Corporate Governance Code ('the Code') and maintaining the corporate governance structure. They are collectively accountable towards these issues to the General Meeting of Shareholders. Once a year, compliance with the best practice provisions of the Code is discussed with the Board of Directors.
Compliance with the Code is described in this report in the section 'Corporate governance'. Where feasible and relevant, Brunel International N.V. will implement the changes following the 2016 revised Corporate Governance Code.
The members of the Supervisory Board are appointed for a term of four years and may thereafter be reappointed. They can remain on the board for up to twelve years from the date of their first appointment. Candidates nominated for
appointment or reappointment must meet the criteria as shown in the drawnup profile.
In deviation of article III.3.5 of the Dutch corporate governance code, because of his expertise and the phase Brunel is in, especially regarding the succession of the CEO, it will be proposed to the General Meeting of Shareholders on 11 May 2017 to reappointed Mr. Schouwenaar for an additional term of two years in addition to his term of sixteen years.
In the General Meeting of Shareholders on 17 May 2016, Mr Bout was reappointed for his second term of four years on the Supervisory Board.
Although there is currently no female representation on the Supervisory Board or the Board of Directors, with the result that we do not meet the legal objectives, the diversity of both Boards has always been a part of the selection process of new members, to ensure a diverse Board composition when possible within the required profile.
In 2016 the Supervisory Board held seven scheduled meetings, all of which were attended by the entire Board of Directors and Supervisory Board. The Supervisory Board further held four closed meetings that were not attended by the Board of Directors.
According to the guidelines of the Code, Brunel is not obliged to set up separate auditing, remuneration and selection & appointment committees. However Brunel has had an Audit Committee since 2001 and has opted to retain the structure. The complete Supervisory Board also serves as the Remuneration and Selection & Appointment Committees. By-laws and terms of reference for both the Supervisory Board
and its committees are posted on the company's website.
The performance of the Board of Directors as a whole, and of its individual members, was reviewed.
At a private meeting, the Supervisory Board reflected on its own performance and that of its individual members. In its own estimation, and in accordance with article III.2.1. of the Dutch Corporate Governance code, the Supervisory Board consists of independent members and has a balanced composition of knowledge and experience.
This committee, chaired by Mr. Schouwenaar, assesses remuneration, including the short-term and long-term bonuses of the members of the Board of Directors; prepares the remuneration report; and oversees the remuneration policy of the company. In 2014 a benchmark analysis has been performed by an external consultancy agency. The results of this benchmark were utilised in the determination of the compensation and the targets for the board.
The remuneration policy remains unchanged. The Supervisory Board believes that the remuneration policy expedites the short-term operational performance and long-term objectives of the company and provides appropriate incentives to achieve the strategic goals.
The remuneration of new members of the Board of Directors is compliant with the Dutch Management and Supervison Act ('Wet Bestuur & Toezicht'), including the applicable requirements for claw back procedures on bonus.
The remuneration structure for the Board of Directors is designed to balance short-term operational
performance with the long-term objectives of the company, with due regard for the risks to which variable remuneration may expose the enterprise. The total remuneration and the remuneration elements are based on the going rates in the international labour market and are fine-tuned using data from companies which are similar to Brunel in terms of scale and complexity.
Before the remuneration policy as a whole is determined, and the level of remuneration of individual board members is fixed, scenario analysis are made of the variable remuneration components and the consequences that they could have on the level of remuneration of the board members. The level and structure of the remuneration of the board members is determined by reference to the scenario analysis carried out and with due regard for the pay differentials within the company. In determining the level and structure of the remuneration of board members, both financial and nonfinancial indicators relevant to the long term objectives of the company are taken into account. The remuneration
package, following the adoption of the remuneration policy, contains three components: base salary, short term variable component and long term variable component.
The base annual salary is assessed periodically against a group of comparable enterprises. Before appointing the new board members, an independent benchmark was performed by an external HR consultancy agency. The variable component of the total remuneration package is performance related. It consists of short- and longterm components. Performance targets and conditions are derived from our strategy and annual business plans. The targets are assigned prior to the relevant year and assessment of realisation is conducted after year-end by the Supervisory Board. The shortterm incentive compensation is paid in cash. The short-term bonus scheme for the members of the Board of Directors rewards both financial performance and individual performance. Both elements are weighted equally. The quantitative targets (budget, sales, margin, profitability, EBIT and control of working
capital) reflect the financial parameters considered by the Supervisory Board to be critical with regard to the realisation of Brunel's strategic objectives. The Supervisory Board ensures that the targets agreed are both challenging and realistic. For commercial and competition-related considerations, Brunel does not wish to publish the targets that have been agreed. The short term bonus may not exceed 75% of the fixed annual salary of the CEO. For other board members the maximum bonus opportunity is 50% of the fixed annual salary. The realisation of each financial or individual target can independently result in bonus payment. The Supervisory Board allocates the bonus based on the achievement of the targets of members of the Board of Directors and determines the associated pay-out.
The board members have been compensated for the cap of the maximum amount of "pensionable income" at EUR 100,000 that came into effect at 1 January 2015. The expected saving on pension premium for Brunel has been added to the salaries of the
board members. This addition is not taken into account when calculating the bonus.
The remuneration report outlines the remuneration policy, provides a description of implementation of the remuneration policy in 2016, and sets out the remuneration of the members of the Board of Directors. The remuneration policy and remuneration report are posted on the company's website.
The Supervisory Board selects the external auditors. The Audit Committee has a supervisory role regarding the integrity of the internal and external financial reports of the company, risk management, and information technology. The Supervisory Board, the Board of Directors and the external auditor are represented in the Audit Committee.
The Audit Committee met five times in 2016: prior to the publication of the fullyear 2015 figures, prior to announcing
the quarterly results and to discuss the external auditor's audit plan for 2016 and interim findings.
The discussion on the scope of the audit included the key audit matters as identified by PricewaterhouseCoopers N.V.: working capital, recovery of compensable tax losses, compliance with laws and regulations and IT implementations, as well as the effectiveness of the Corporate Finance and Control (CFC) department.
The Audit Committee's chairman, Mr. Bout, held meetings with the CFO on an ongoing basis. Mr. Bout reported the committee's findings to all members of the Supervisory Board.
Recurring items for the Audit Committee meetings such as risk assessment and risk management, tax compliance, IT systems, internal controls, compliance with laws and regulations, and the quality of the finance function were discussed. Furthermore, the set up performance of the commercial team, that monitors and strengthens contractual risk management, has been evaluated.
It will be proposed to the Annual Shareholders Meeting on 11 May 2017 that PricewaterhouseCoopers Accountants N.V. will be our external auditor for the annual accounts of 2017.
From an internal control perspective, Brunel is organised in regions (Energy) and countries (Europe). In each region and country, a financial controller is responsible for internal control for the activities in his/her area. These financial controllers meet with the CFO on a monthly basis. Furthermore, compensation and hiring/dismissal of these financial controllers is the responsibility of the CFO in order to provide sufficient independence towards local general managers.
Besides the local controllers, Brunel has an independent team of controllers in Amsterdam in the CFC department. Core competences are auditing, reporting and controlling, and the majority of the team
has worked with a big four audit firm before joining Brunel. Besides group reporting, CFC performs internal audit activities, both in desktop reviews and during visits.
All entities are visited by a member of CFC at least once every two years, and significant or high risk entities are visited multiple times in a year. CFC also provides the group with accounting manuals and updates on internal control procedures. The members of CFC report directly to the Board of Directors, primarily the CFO and have the possibility to meet with the Audit Committee if deemed necessary.
In 2016, the need to implement an internal audit function within Brunel has been considered again. In previous evaluations, it was concluded that there was no need to install an internal audit function. Considerations in this evaluation were that reliable financial information is ensured by (l) reliable administration and management information systems, monitored by regional financial controllers, (ll) increased visits from central
management, (III) uniform worldwide IT systems and (lV) extended scope for external audits using locally based native-speaking audit personnel.
During the evalution in 2016, it was concluded to implement an internal audit function in the course of 2017, to increase independency of the activities and enhance support to the Audit Committee. An implementation plan has been prepared and approved.
During 2016 the Audit Committee also discussed with the Board of Directors the updated risk assessment that was performed by the Board of Directors in cooperation with commercial management and the regional financial controllers. This concerns risks associated with the strategy and the nature of the business, and the way that the Board of Directors monitors the design and operation of the internal risk management systems. Risk assessment and risk management systems are being further embedded in the reporting
structure to support decision-making and achieving of strategic objectives in the coming years. The operational and strategic risks related to the company are described in the section 'Risks, risk management and control systems' of this annual report.
In 2016, an update on the IT strategy was discussed, as well as the transfer of the responsibilities from the project organisation to the support organisation after finalisation of the main IT projects.
The Board of Directors informed the Supervisory Board on the processes for the preparation of the financial reports and how the quality of the financial reporting is monitored. On the basis of this and the report of the external auditor, the Supervisory Board believes the Board of Directors adequately interprets its responsibility for the quality of the financial information.
The Audit Committee has discussed the annual accounts, annual report, management letter and risk management policy with the Board of Directors and the external auditor. The Supervisory Board assessed the independence of the auditor. It was concluded that threats to independence are absent. The Supervisory Board believes that the external auditor provided the Supervisory Board with all relevant information in order to exercise its supervisory responsibilities.
The main items included in the auditor's board report are:
The Supervisory Board discussed with the Board of Directors how to take into account the interests of shareholders as well as the issues raised by shareholders at the last Annual General Meeting of Shareholders. The Supervisory Board believes that the company acted in a constructive and
careful way regarding the shareholders' interests.
The Supervisory Board approved the operational and financial objectives of the company, and also approved the strategy designed to achieve the objectives and the preconditions associated with that strategy. The Supervisory Board endorsed the Board of Directors' efforts on Corporate Social
Responsibility (CSR) and the particular aspects that are relevant to the enterprise.
Furthermore, no matters occurred which under the law, the statutes or the Code require the approval of the Supervisory Board.
In 2016, no matters occurred involving conflicts of interest of directors, Supervisory Board Members, shareholders and/or external auditors that are of material significance to the company and/or the respective directors, members, shareholders and/or external auditors. Information on related party transactions is included under note 20 to the annual accounts.
Amsterdam, 24 February 2017
Chairman
Vice Chairman
Supervisory Director
Brunel offers top quality account management and recruitment management, meeting stringent compliance and safety standards in every location in which our clients operate.
Our Brunel Europe division is a specialist in the flexible labour market with the expertise of Engineering, Automotive, Finance, IT, Legal and Pharma recruitments and services in The Netherlands, Germany, Belgium and other European countries.
On the other hand, Brunel Energy has established a global network of business lines based on the regions and locations with developed oil fields and their associated business. This division is expanding its services by also becoming a project resourcing specialist and unleashing the full potential of our global infrastructure by also looking into other related sectors such as mining, renewable energy and construction.
For clients and projects, Brunel is a service and solution partner. We get the job done and provide the access to a flexible and specialised knowledge base in order to meet the rising global service demand and break down today's technical boundaries.
For specialists and candidates, we are their growth facilitator. Specialists constantly look for assignments in their area of expertise in order to realise their career potential. They need a facilitator connecting them to challenging projects and to take care of the administration and operational process so they can focus on developing the skills which they progress towards distinction. At the same time, Brunel provides specialists the opportunities to excel through assignments and to develop cuttingedge experience.
Profitability & growth
Brunel - People & culture - Operational excellence - Risk management - Corporate governance - IT & organisational infrastructure
& Projects - Seek qualified brainpower to tackle technical challenges
Clients
Specialists - Seek employment and career
development
The essence of our strategy is to compete in attractive businesses in which our distinctive resources – Brunel's brand, positioning, infrastructure, capabilities and people, contribute to our competitive advantages.
Our business is unique in its quality, size and diversity. It is built on an effective business process, world class IT infrastructure, operational excellence and dedicated staff to maximise value for our clients, specialists and investors alike.
It is important that we continue to enhance our culture of compliance, with which the management is continuously engaged. A winning culture is the cornerstone of everything we do, underpinning our competitive advantages in the international market. In today's ever-changing environment, Brunel continues evolving to ensure we remain a market leader.
Brunel's organisation is built around our culture of business excellence and leads directly to the attraction and treatment of specialists. Having access to the right knowledge and experience is essential to Brunel.
By developing close-working relationships in the spirit of partnering, Brunel is able to fully understand and appreciate clients' and specialists' needs throughout the full project life cycle. We provide added-value via the tailor-made solutions and short lines of communication which enable us to respond quickly and accurately to their needs, wherever in the world.
operational excellence
the global talent resourcing and mobility solution specialist
Brunel Netherlands – the flexible labour market specialist Brunel Germany – the technical specialist, and other entities in Belgium, Austria, Czech Republic and Switzerland
Our business is operating in a world of constant changes. We keep monitoring a set of business environment indicators, i.e. the macroeconomic conditions, industry cycles, talent market trends, clients' behaviour, competition, regulatory environment and the emerging technology. Digital technology, in particular, is an unstoppable force which keeps evolving. It transforms the industries we are operating in, disrupts the current market, and marks changes in clients' and talents' behaviours. We embrace digital disruption and work with the trend rather than against it.
Brunel's Board and senior management have further assessed the business environment indicators in the materiality determination process and presented the results in the materiality matrix. Risks, opportunities and Brunel's activities are further explained in the "Connectivity matrix - External material matters from our business environment".
Sustainability is embedded into Brunel's business. Our role in the community goes beyond our own company and employees. The responsibility extends further to our clients, suppliers, candidates, the education sector and society in general. Sustainability is also a broad topic. It is important that we understand our key priorities in economic, social and environmental aspects so that we can align time, resources and investment accordingly to meet stakeholders' expectations.
Following the integrated reporting framework, identifying material issues is an important step to present Brunel's performance in relation to broader concepts of sustainability. We aim to provide a concise, accurate and comprehensive view of Brunel's operations and performance. It should help explain to all stakeholders, including providers of financial capital, the significance of various aspects of social, economic and
governance performance on Brunel's s ability to create value.
Material matters are those matters we believe have, or will have, a significant long-term impact on our profitability, our reputation and our operations.
We include only information we defined as material. This information covers main participations of Brunel International N.V. Beyond the physical boundary, we look at stakeholders who have a direct impact – either positive or negative- on our companies, including employees, clients, shareholders and investors, candidates, communities, candidates, government and regulators and peers (see "Stakeholder groups and relevant matters" for stakeholder groups and engagement details).
Identifying relevant matters is the starting point for identifying material issues that will be reported this year. Brunel's Board of Directors, senior management of business divisions and support units are the key personnel involved in this identification process. This process includes evaluating external business environment factors' and internal capabilities' impacts on Brunel's strategy execution and value creation, and Brunel's performance in the current business reporting cycle. Therefore, the relevant matters have been gathered through stakeholder engagement which is part of our business operations and management.
| Stakeholder groups |
Why we engage? | How we engage? | Areas of interest? | What we do? | |
|---|---|---|---|---|---|
| Employees | Employees' surveys, MeyerMonitor, performance reviews, training, talent development programs, formal or informal social events, work council meetings, intranet, B-app |
Access to information, employee performance and recognition, training & development opportunities, ethics & culture, job security, career advancement, salaries & benefits |
Management communications, performance reviews, Brunel brand and focus on one Brunel culture, education, induction and leadership program, codes of conduct, top benefits |
||
| Clients | These stakeholder groups make up the company, providing human capital, financial capital, intellectual capital and market for our |
Manage closely |
Customers' events, surveys, business meetings, site visits, tenders, contracts, service agreements |
Price and performance, liability, full service offering, on time availability, delivery and quality of services, operational excellence |
Appoint key account managers, encourage innovation, provide in-house consultation, offer added value, cross-sell of services, clients journey and on-boarding program |
| Shareholders & investors |
services to make Brunel's business possible. |
Investors roadshows, results presentations, General Meeting of Shareholders, teleconferences and one on-one meetings, Board meetings |
Growth in the share price, Brunel's reputation, strategic direction, management succession, corporate governance and ethics |
Annual review of strategy and risk assessment, remuneration committee assessment and review policy, disclosure of reliable financials, leadership training, provide financial growth, enhance business ethics |
|
| Candidates | Candidates' events, social media and marketing campaigns, workshops |
Job opportunities, job market information, individual's privacy rights |
Mentoring program for students, apprenticeship, talent scouting |
| Stakeholder group |
Why we engage? | How we engage? | Areas of interest? | What we do? | |
|---|---|---|---|---|---|
| Government & regulators |
This stakeholder group impacts the operational and regulatory environment in which we deliver services. |
Keep informed |
Governments' and regulatory bodies' publications, consultations and workshops, written communication |
Governance, compliance and remuneration practices, increased contribution to economy and job creation, on time payment tax duties, professionalism, impact on community |
Comply to corporate governance code, continue to develop and monitor legal compliance, pay tax and ensure employment of over 10,000 people |
| Community | This stakeholder group is impacted by our services, and has the ability to affect our reputation. |
Keep satisfied |
Community development, sponsorships and donations |
Local employment, economic and social contribution |
Brunel Foundation, active participation in engineering community initiatives, partnership with universities |
| Peers | This stakeholder group impacts the sector reputation, practices and environment in which we operate. |
Monitor | Industry meetings and sector publications, peers websites |
Industry benchmark, competitiveness of Brunel |
Competitive intelligence |
Identifying relevant matters provides the Board and senior management a good understanding of stakeholder groups' interests. To help determine materiality, we look at a number of factors in particular, business environment trends, possible impact on financial performance, brand, reputation, strategy and people.
For matters that are categorized as:
For matters that may occur in the future or have potential future effects, the Board assesses both the magnitude of
the effect and the likelihood of occurrence for these matters.
This prioritising process has been mainly carried out during senior management meetings of Brunel Netherlands, Brunel Germany and Brunel Energy. On the Group level, the Board prioritises the material matters based on their importance assessment and prioritization results from different divisions.
Those matters with - the greatest effect or potential long-term effect on Brunel's ability as a whole to create value from financial, operational, strategic, reputational, cultural and regulatory perspectives - are considered the most important. They cover both internal and external factors and are considered in quantitative or qualitative terms whichever is applicable.
As a direct follow-up, the Board has reviewed and updated Brunel's risk assessment and risk management system in Q3 2016 (refer to page 57-75) and discussed the matters with the Supervisory Board and Audit Committee (refer to Report from the Supervisory Board).
The material matters tables on page 36 represent the current year's most material issues.
| Report at least in narrative, wherever possible with measurable KPI's |
Report in detail, wherever possible with measurable KPI or preferably goal or assurance | ||||
|---|---|---|---|---|---|
| High | Culture of business integrity (incl, new legislation) |
Profitable growth | |||
| Create employment and be a major force in the economy |
Training and eduction | Services solutions and offerings |
|||
| Encourage win-win relationships with clients, suppliers and other partners |
Corporate governance and compliance (incl. revised governance code) |
Risk management and control environment |
Talent attraction and | Material matters are external, from business environment |
|
| Strategic acquisitions | Health & safety Innovation |
Management quality | development and retention |
Material matters are internal, from our strategy execution |
|
| ers old keh |
Provide employees optimal and appropriate working conditions Contribute to the economic and social |
Tax governance and strategy |
Dependency on industry | Dependency on key clients | Non-material topics |
| cy raised by sta | development in local community | Processes and productivity |
Client behavior and trends |
||
| en Frequ |
Ensure efficient internal processes for operational excellence |
Talent market trends |
|||
| Environmental policy | Evolving regulatory landscape |
Brand and reputation | Macroeconomics and industry cycles |
||
| CO2 neutral | New Technology and data privacy | ||||
| Climate change | Competition | IT strategy, cyber security and data privacy | |||
| Transport, Energy consumption | |||||
| w Lo |
Non-material topics, no reporting | Report at least in narrative, wherever possible with measurable KPI's | |||
| Low | Significance of economic, environmental and social impacts on Brunel's strategy execution | High |
The process for determining materiality is ongoing and evolves each year. However, the material matters which reflect Brunel's strategy execution and have impact on our financial performance remain static over the past two years, and stay relevant and applicable to Brunel in the short-term as minimum. Therefore, these matters and relevant management plans and results are periodically discussed and reviewed by senior management, the Board of Directors, the Supervisory Board, Audit Committee and external auditors (see "Report from Supervisory Board").
The materiality determination process helps us understand stakeholders' interests (see page 33-34), helps us manage risks and opportunities to generate further business values when facing every changing business environment (see "Business Environment" and "External material matters from our
business environment"), helps us determine our long-term strategic direction as One Brunel, integrates into our business practice to achieve strategic objectives (see 'Strategy" ) and complements our Enterprise Risk Management processes (see "Risks, risk management and control system"). These material issues also provide a basis of the story line when prepare this annual report.
In 2016, the Board revisits previously identified material matters. To present our efforts on an integrated way of reporting this year, we move beyond the already presented "materiality matrix" in 2015 and the material issues have been further categorized based on relevant external factors such as business environment and internal factors, such as pillars of growth strategy, to reflect the material matters determine process; and have been listed under a different time frame of effects to explain our management of these matters in practice.
Material matters relevant to Brunel's strategy have not changed this year.
For matters which have been raised in stakeholders' engagement historically but not anymore in 2016, for example, human rights, the Board has reviewed this topic. Brunel respects human rights. Our approach to human rights is informed by general concepts as described in the UN Guiding Principles and revised OECD guidelines. This matter reflects Brunel's values and has always been integrated into existing governance and business management systems, such as topics of health and safety, country risks, local content, equal opportunity policy, standards of business conduct. These topics are assessed and reported in details in this report therefore "human rights" has been removed from this year's material matters list as a stand alone issue.
Matters related to technology, corporate governance and sustainability gain in importance, which is in line with Brunel's preparation to meet new regulatory requirements in the next reporting cycle.
| Material matters | What are the risks? | What are the opportunities? | What we do? |
|---|---|---|---|
| Macroeconomics and industry cycles |
- Large dependence on economy upturn - Energy industry downturn leads pressure on our margins and ability to gain profitable businesses |
- Further build our contractor business in the emergence of specialist recruitment structural growth market - Drive growth above the economic cycle - Leverage existing global business infrastructure into new markets and sectors |
See "Directions fot growth" page 44-49, see "Risks, risk management and control system – Unfavourable macroeconomic conditions" page 66 |
| Talent market trends | - Uncertain of changing immigration regulation and other regulatory environment in local markets - War for highly-skilled talents and specialists |
- Advance Brunel's global network to offer integrated global mobility service solutions - Actively adopting technology to improve productivity - Access to additional demographic groups to meet demand for new niche specialisms |
See "Driver for growth – quality of our people & management" page 50-51, see "Risks, risk management and control system –attraction, development and retention talents" page 68 |
| Client behaviours & trends | - Increasing requirement on service speed and quality; - Stricter tender process and power in contract negotiation process - Margin pressure and liabilities |
- Open up strategic dialogues with existing clients to help them manage skilled flexible workforce and provide a total talent solution - Brunel's market position gives a competitive advantage when win new clients who are adopting the new trends - Compliance as a service |
See "Direction for growth – by adding new services" page 44-49, see "Risks, risk management and control system – contract negotiation and management" page 72 |
| Material matters | What are the risks? | What are the opportunities? | What we do? |
|---|---|---|---|
| Competition | - Margin pressure - Service delivery - Attract and retain skilled people - Reputation |
- Increase penetration rate of recruitment service in markets where Brunel has strong presence - Innovation and client centric services |
See "Risks, risk management and control system – Competition" page 67 |
| New technology & data privacy |
- Shortage of human intelligence to apply technology properly - Digital disruption |
- Service solution innovation - Unleash the benefits of Brunel's IT infrastructure - Brunel's expertise, comprehensive market knowledge and human intelligence drives better results when apply technology for clients and candidates |
See "Drivers for growth – IT infrastructure "page 50-51, see "Risks, risk management and control system – Information Technology risks" page 74 |
| Evolving regulatory landscape |
- Direct impact on the costs of our clients - Higher compliance risks and costs - Reputation damage |
- Enhance "Culture of Compliance" - Offer "Compliance as a service" - Participate in constructive social dialogue to find the appropriate balance of regulations on our industry services |
See "Risks, risk management and control system – Non-compliance with laws, regulations, local standards and codes" page 69-70 |
| Strategic objectives | Material matters | Material matters with different time frame of effects: | What we do? | ||
|---|---|---|---|---|---|
| Short-term | Medium-term | Long-term | |||
| Profitability and growth |
Profitable growth | Dependency on key clients |
See "Risks, risk management and control system – Unfavourable macroeconomic conditions" |
||
| Dependency on industry |
page 66, see "Directions for growth" page 44-49 |
||||
| Strategic acquisition | |||||
| Create employment and be a major force in the economy |
Tax governance and strategy |
See "Concentrating on profitable growth – from the prospective of sustainability" page 49 |
|||
| People and culture | Talent development | Training and education |
Attraction and retention of talents |
See "Driver for growth – quality of our people & management" page 50-51, see "Risks, risk |
|
| Management quality | Quality and retention of management |
management and control system –attraction, development and retention talents" page 68 |
|||
| Reputation | One Brunel brand, reputation |
See "Culture and distinctive resources" page 25, see "Drivers for growth – the Brunel culture" page 50-51 |
|||
| Provide employee optimal and appropriate working conditions |
See "Building a solid reputation of having good quality resources and being and industry shaper – from the prospective of sustainability" page 51-54 |
||||
| Contribute to the economic and social development in local community |
Health and safety |
| Strategic objectives | Material matters | Material matters with different time frame of effects: | What we do? | ||
|---|---|---|---|---|---|
| Short-term | Medium-term | Long-term | |||
| Operational excellence |
Ensure efficient internal processes for operational excellence |
IT strategy, cyber security and data privacy |
See "Drivers for growth – IT infrastructure "page 50-51, "Risks, risk management and control system – Information Technology risks" page 74 |
||
| Processes and productivity |
See "Achieving operational excellence – organisational and infrastructure for growth" page 55-56 |
||||
| Risk management and control environment |
See "Risks, risk management and control system" page 57-75 |
||||
| Services | Services solutions and offerings |
See "Achieving operational excellence – 100% client focus through business lines and |
|||
| Innovation | regions" page 55-56, "Directions for growth – by adding new services" page 44-45 |
||||
| Encourage win-win relationships with clients and other partners | |||||
| Governance | Corporate Governance and compliance |
Revised Governance code |
See "Corporate Governance" page 76-81, "Risks, risk management and control system – Risk management framework" |
||
| Culture of business integrity |
New legislation concerning internal Whistleblower policy, new EU regulation on privacy and data protection |
page 57-63, "Non-compliance with laws, regulations, local standards and codes" page 69-70 |
Regardless of the uncertain and dynamic environment we are operating in, Brunel maintains its growth strategy as a priority. It is vital that we make wise choices about where and how to compete in order to grow at a reasonably fast pace as a specialist in both the global market and lucrative niches.
To grow successfully and sustainably, we must at the very least meet the following three conditions:
How to create competitive returns for shareholders
Growth formula
Growth formula - directions for growth:
Brunel has a balanced business combination of Brunel Energy and Brunel Europe which can provide strong financial and operation results in different market conditions.
The significant capital expenditure cuts of our energy clients and cancellation of projects keep giving us performance pressure. More competitors offer very low rates to gain market share in this competitive environment. Brunel's global business has seen revenue decreased and profits slide. In 2016 all regions have focused on right-sizing their cost base to match the more depressed operating environment. All regions will continue to reduce overhead costs to better reflect the current market trends.
Brunel has shifted away from reactive filling vacancies and servicing nominees for our clients in energy sector and in the process to be a proactive project partner and help our clients realise their strategic goals. We keep developing a solid track record to work as their partner providing global mobility care, from immigration, logistics, payroll and taxation to healthy and safety services, medical and
emergence response. This also ties in nicely with compliance and cost efficiencies, making the move from transaction only to serve a win-win for our clients.
Brunel has developed a global infrastructure connecting all continents. All our offices are connected and supported via regional hubs by sharing financial, human and commercial resources. In today's challenging operating environment, this global infrastructure benefits the regions where Brunel is already well estabilished to focus on maximising economies of scale, whilst also providing the agility to quickly adjust our organisation to new opportunities of diversification in mining, infrastructure, renewable energy and their related sectors by leveraging the benefits of shared supports from the regional hubs.
Brunel Europe, Germany in particular has made good progress to deliver profitability. We keep increasing our content knowledge and competitive intelligence. The proactive approach has further specialised our business lines,
enabling us to better fulfil and anticipate customers' requirements, intensifying cooperation and innovation with them. Specialisation as such attracts more clients in a field of increasing technical complexity and higher requirements on specialists. Deepening these verticals brings us in niches where such advantages put us ahead of the competition and brings in higher margins.
Total
Achieving a profitable growth makes it possible for Brunel to share responsibility in society and community. Being responsible not only means creating sustainable financial returns for shareholders, but also providing sustainable value for other stakeholder groups as a knowledge partner, a resource provider, a growth facilitator and contributing to society as a major force of employment creation in the economy.
In Brunel, we see sustainability as an integration result of maintaining an effective growth strategy and operating as a socially responsible business. With regard to sustainability, we have implemented a set of principles and partnership focuses defined in the CSR policy (available at www.brunelinternational.net).
To reflect the material matters identified during materiality determine process:
we focus on the aspects that are related to work in the broadest sense: Brunel's role in the labour market as a reflection of society, promoting working environment that focuses on the safety, health, education and personal development of our people, participating in a wide range of sponsoring activities for sport and health, and fighting lifethreatening diseases at both an international level and local level.
In some markets we operate in, there has been a focus on attracting existing local expertise and, where necessary, bringing in international specialists to train and develop the local talents of the future. Our operations in Russia, Papua New Guinea and Thailand are good examples of maximising local employment opportunities to build local economic growth.
As before in 2014 when Brunel Netherlands finished first place, Brunel Netherlands was awarded again in 2016. This time as for 2nd Best Employer in the business services industry and, in the category Profit, Brunel Netherlands finished in the top 10 in ninth place. These awards were presented by the research companies Effectory and Intermediair.
The Brunel Foundation is an independent foundation that shapes the social involvement of Brunel Netherlands, Brunel Belgium and its employees. The Brunel Foundation's activities focus on making the knowledge, expertise and ability of Brunel employees available for social initiatives by deploying our employees, offering financial support, and developing and/or participating in social projects/initiatives.
The Brunel Foundation focuses on three pillars: education, innovation and contributing to or increasing awareness of social themes.
In Singapore, Indonesia, Philippines and Brazil, we donate to local charities and organise volunteer activities to support local children to participate programs of health and safety, education and sports.
● DIN EN ISO 14001. This is a certificate on operating an environmental management system and a responsible handling of all resources.
● As a Dutch stock listed company, Brunel believes that our policies comply with Dutch legislation. In 2017, we plan to work towards publicly committing to OECD Guidelines for Multinational Enterprises. This process consists of getting familiar with the process of commitment and the Guidelines themselves, self-assessment, relevance and value-adding assessment for stakeholder groups, seek practical implementation examples, good practices and tools. The outcome will provide a solid basis when we publicly commit to the Guidelines.
Pursuing a transparent and honest tax policy is part of doing business for Brunel. As such, our tax structure follows our business and Brunel has no evasive tax-structure. Complying with tax laws and paying fair share of taxes is an important part of our corporate social responsibility since it contributes to provide the basic building blocks for economic growth in the countries we operate, even more so in the developing countries. We do not only pay a substantial amount of corporate income tax, but also significant amounts on other taxes such as wage taxes, withholding taxes and VAT. Due to the nature of our business, wage tax is an important area for us, both for compliance as well as for the significance of the amounts.
Of course we also try to optimise our tax position. But once again, also for this part, tax should follow the business and all transactions must have a business rationale.
Since tax compliance is an important part of our service delivery, it is our
policy to effectively manage risk and to comply with all applicable tax laws, rules and regulations. The aim is to comply with the letter as well as the spirit of the law. Therefore,, we make use of the services of reputable tax advisors at both local and group level. We strive to establish an open and transparent relationship with the tax authorities in all countries we operate in. To achieve consistency, all significant dealings with tax authorities are monitored by the CFO.
Transactions conducted between group companies located in different countries are conducted in line with the OECD Guidelines for Multinational Enterprises and other local transfer pricing regulations.
During 2016, we reviewed the current tax policy, amongst others for compliance with the OECD BEPS developments. Considering our tax policy and structure, we believe the impact of these developments for Brunel will be limited. Country-by-country reporting will probably result in more discussions with tax authorities. We understand external country-by-country reporting will provide more insight into local tax contributions. However, especially considering the turbulent circumstances in the Oil & Gas industry and competitiveness, we decided not to introduce this reporting this year.
The disclosures in the financial statements on our corporate income tax rate, as well as the actual corporate income tax paid reflect our tax policy execution.
Strategic objective: building a solid reputation of having good quality resources and being an industry shaper
Growth formula - drivers for growth:
We keep sharpening our corporate image as a predominantly technical, active worldwide specialist and a knowledge and resource partner with a solid reputation.
High recognition as a specialist is vital in differentiating us from the competition. Successfully implementing complex technical or logistical projects also sets up apart as a specialist and a credible provider of high quality services. Such a profile makes us both more attractive and better positioned in the on-going battle for clients and talents.
In 2016 we have upgraded our main systems to optimise efficiency and ensure standardisation around the globe. This IT infrastructure covered business development, account management, recruitment, finance & payrolling, financial reporting and consolidation. Such a functional IT infrastructure helps to minimize the business disruption when Brunel expands its service scope and enters into new verticals.
To keep a market-leading position, Brunel needs to attract, develop and retain exceptional and motivated specialists to work within our organisation and to work for our clients and projects. A pre-existing labour shortage with the industry leads to a real manpower challenge.
This challenge affects the global Oil & Gas and engineering industries and in particular the secondment sectors. In the long run, the sectors are working with educational institutions to attract and develop young talents; in the meanwhile, we are actively applying technology to optimally utilise the knowledge sources that are already
accessible. This includes speedy selection and global full life-cycle mobility arrangement.
The talent shortage also is caused by the facts that some specialists lack the voice or skills to properly advertise themselves. Due to this, these specialists often do not succeed in utilising the full range of possibilities of their career. Brunel is to help our specialists develop and market themselves to the full extent of their abilities.
Brunel's culture of excellence comes from the development of excellent people. Our organisation is flat with few management layers. To develop excellent people demands our management to be alert and strong on coaching and leading by example. Besides, our employees need self-discipline and a strong sense of where boundaries lie. Excellent people sustain the Brunel culture and the good working culture motivates our people. We aim to create a long lasting bond with the specialists, beyond the simple paymaster throughout projects. This helps us retain knowledge and stimulate the flow of information through our network.
Contributing to develop our people and future talents is an important way for Brunel to promote sustainability. To understand the identified material matter – provide employee optimal and appropriate working conditions, it means providing people opportunities to their career advancement, using educational establishments and institutions to educate the younger generation, as well as ensuring a healthy and safe environment.
In general, we develop our people under the following guidelines:
In 2016, Brunel business units and local offices took their own initiatives and offered diverse training programs and plans such as:
Recruitment & Sales training, coaching programme and acquisition camp to grow the sales organisation and their skills
Communication training, time management training to improve employees' productivity
All the programmes will be continued and further developed by the local offices in2017.
To further develop our engineers and raise the profile of the engineering profession, Brunel Netherlands joined the partnership with the Royal Institute of Engineers (KIVI), the professional association of engineers in The Netherlands since 2015. The business line Brunel Engineering contributes to the career development and ambitions of direct employees by offering to become a certified Chartered or Incorporated Engineer. The titles "Chartered Engineer" (CEng) and "Incorporated Engineer" (IEng) are recognized internationally. This allows the engineer to prove that he or she strives for excellence and continuous development in his or her field. Brunel Engineering is the first employment agency in The Netherlands that certifies its engineers.
Brunel Netherlands has formed a partnership with TU Delft and YES! Delft Students and Honours Programme to encourage (technical) innovation,
entrepreneurship and promoting excellence among students. We also take part in the innovative educational project Youth and Technology Network Nederlands, which aims to attract college students to study engineering and technology. Regularly we organise presentations and training sessions (including job training and labour market orientation) for students to prepare them for their career start.
Brunel Netherlands offers the Young Specialist Programme to its direct employees in Insurance & Banking sector. This traineeship offers training in various required skills, combined with the opportunity to gain experience with various clients.
Brunel Germany partners with different German engineering organisations, promoting technology and helping develop dedicated engineering students. At nearly every university, we offer important soft skill training (e.g. project management) and career advice to prepare students for their professional career take-off since 2009. One aspect of our commitment to VDI, the Association of German Engineers, is to
provide exceptional engineering students a company mentor as part of the two-year programme and complete an internship lasting at least three months or alternatively write their final thesis at the partner company. During the programme, the participants also attend seven seminars and trainings in the field of soft and management skills, which have also been implemented by our partner companies.
Brunel Germany has been a main sponsor of VDI's voluntary network association since 2014 and supports the association with lectures on technology and science, valuable soft skills workshops and job application training courses and network meetings.
Since 2006, Brunel Germany has sponsored the event Formula Student Germany and ten racing teams to design and build a single seat formula race car. The team with the best overall package of construction, performance, and financial and sales planning wins the competition. For this reason, Brunel also enables the sponsored racing teams to participate in project and time
management workshops as well as training on technical and business issues such as the preparation of business plans and sales strategies. In addition, the students can take part in our development centers of Brunel Car Synergies GMbH and visit our offices.
Brunel's safety vision: we believe that every individual has the right to work and live in a safe environment. At Brunel we do everything we can to create such an environment based on the principles of care, trust, learning, ownership and accountability.
Based on our moral duty of care, local legal requirements, client and industry expectations and HSE "best practice", Brunel has introduced a Global HSE System for both contractors and employees in 2015 (see AR 2015 page 74-75). The implementation of this system was an expansion of our current local HSE infrastructure which was at different maturity levels. By the end of 2016, we have successfully completed the first stage implementation in all
regions – Emergency response and incident management, our 24/7 worldwide emergency call function is now fully active; and moved on to the second stage – HSE policy, procedure, medical fitness and injury management.
The implementation progress and results is communicated via Brunel's intranet and local initiatives such as:
In Brunel everyone from the executive to our specialists has a personal responsibility and accountability to be involved in preventing health and safety issues. The Global HSE system will be continued in 2017 to ensure all regions comply.
Growth formula - organisational and infrastructure for growth:
For Brunel, operational excellence means achieving deep commercial know-how, efficient business processes, increased productivity, improved customer responsiveness and cost minimisation throughout our organisation as a whole. To achieve this, we need motivated and committed employees. They must be backed up by an effective management system implemented company-wide and must be able to rely on a cutting-edge IT infrastructure.
Brunel is first and foremost a salesdriven and results-oriented company. Brunel has a strong culture of entrepreneurship and employee autonomy with a flat management. Brunel's sales force is organised in business lines and regions. This structure brings manageability, clear lines of accountability and helps maximise client services without loosing our focus on specific industries and key clients. A strong supporting infrastructure is vital to facilitate, manage and monitor those commercial services so that the back office does not neglect the compliance and other processes that form our operational excellence. To this end a strong centralisation has taken place in the back offices which take away the operation and compliance tasks from the sales organisation.
This centralisation has also been put in place in regards to the regions, creating centralised regional hubs. Examples of centralised back office hubs are Amsterdam, Bremen, Houston, Dubai, Rotterdam and Singapore. Overall this management structure allows commercial activity, business
development, account management and recruitment to be 100% externally focused on clients and candidates, while being fully supported by strong centralised regional hubs that help oversee and manage the potential pitfalls of a bold sales organisation such as risk management and internal control.
Brunel's risk management is aimed at long-term sustainable management of its business activities. The Board of Directors considers the ability to control strategic, operational, compliance, financial reporting and financial risks crucial to achieving set targets, and for the continuity of the company.
For this reason, Brunel has developed different risk appetites to achieve different strategic objectives and pays considerable attention at all relevant levels to risk management and internal control. Brunel has embedded the COSO ERM framework as the foundation of its risk management framework.
The Board of Directors reviews the risk management framework and assesses company's top risks on a regular basis, followed by communication and action among different level and functions within Brunel. On an annual basis, the Board of Directors discusses its risk management framework and company risks with the Audit Committee and the Supervisory Board as well as the external auditor.
The Board of Directors defines the risk appetite of Brunel i.e. the level of risk that Brunel willing to take to achieve its objectives and sets the risk appetite by our strategy, code of conduct, company values, authority schedules and policies. Our risk appetite differs by types of risk:
Brunel's internal risk management and control measures are based on the COSO ERM framework and distinguish between eight components:
The Board of Directors is responsible for coherence between the various internal control and risk management elements. Factors that influence the internal environment include integrity, management style, the tone set at the top, the risk management philosophy and risk appetite. Periodically the Board of Directors – together with a senior officer from Corporate Finance & Control if required – visits the operating companies to facilitate complex decision-making, to control financial progress and to monitor realisation of the business objectives. Another important aspect of the internal environment is the code of conduct, which includes a whistle-blower policy. The code is posted on the corporate website. To implement the new legislation concerning internal whistleblower policy, Brunel has adopted a reporting system which is developed and managed by an independent third party to protect whistle-blower's anonymity.
Brunel has set its objectives based on its strategic growth pillars. The objectives chosen support and align with Brunel's mission, and are consistent with our risk appetite.
Brunel strives to ensure that all potential events are identified that could affect the achievement of the objectives which Brunel has set itself. This includes internal and external events. During the financial controllers meeting in September 2016 updates for the risk assessment have been performed. This update will be carried out a regular basis.
Our risk assessment helps us effectively assess and prioritise the risks we face, based on the potential impact of those risks on the company and the likelihood of those risks occurring. The risk assessment enables Brunel to further improve its risk management and provide additional confidence that corporate
objectives will be achieved. The risks listed in this section are our main, material and company-specific, risks based on the risk analysis.
Our approach to risk management is not only improving the controls in place to manage these risks, but also their effectiveness. With this information, Brunel is able to determine how to manage its risks and select its risk responses, such as avoiding, accepting, reducing and/or sharing the risks. The set of actions that Brunel has developed is aligned with our risk appetite.
All Brunel divisions are subject to general policy rules and procedures aimed at controlling our risks. The implementation of our global IT systems enables us to replace manual controls by automated controls.
The most important policies and procedures are:
| Risk category: Strategic risk |
Risk management: Strategy updates Annual business reviews |
The Board of Directors reviews Brunel's strategy periodically, at least every three years, or when developments require a |
|---|---|---|
| Operational risk | Uniform IT systems Contracting procedures Weekly KPI reporting Monthly management reporting Quarterly business reviews Visits Insurances |
review of the strategy. Annual business reviews Brunel reviews all businesses at least annually during the budget cycle. The budget is prepared by all entities. All |
| Compliance risk | Reporting & disclosures Legal counselling Anti-bribery & corruption Training |
budgets are discussed with local management by the Board of Directors, supported by the Corporate Finance & Control Department. The main opportunities and threats for achieving the budget are discussed. After approval |
| Financial risk | Uniform IT systems Accounting & control manual Internal control Corporate finance & control department Monthly reporting Quarterly reviews Treasury Audit |
by the Supervisory Board, the budgets are used to set targets for local management. The Board of Directors maintains a list of breakthroughs that need to be achieved in order to successfully execute Brunel's strategy. |
Brunel has successfully integrated its local and regional IT systems under a five-year 'One Brunel, One IT" program. A distinction can be further made between IT infrastructure and applications. The IT infrastructure provides all Brunel employees access to the Brunelworkplace. The global Brunel workplace is managed centrally. Besides the ease of access to all applications and personal documents everywhere in the world, this infrastructure enables us to manage all IT risks globally.
The global implementation of all our applications was finalised at the end of 2014: most of our entities are using the same applications for front- mid- and accounting processes. Our CRM-solution is interfaced to our accounting application(s), using customised interfaces. As a result of the global setup, all commercial and compliancy information is stored, and accessible, in one secured environment. The finalisation at the end of 2014 enabled us to replace manual controls by automated controls. The IT programme has been
finalised in Q2 2016 with the release of the update of our CRM application, which will allow us to increase standardisation of processes throughout our organisation.
Brunel's management of the contracting procedures is fully functioning now since the establishment of commercial teams two years ago. For each region within Energy a risk manager has been appointed. This risk manager has been selected based on his/her experience in contracting and compliance with tax, other legislation and client requirements. All agreements or binding offerings are reviewed by the risk manager to determine the risk factor. Risk depends on a number of factors, such as margin, location, services and insurance requirements. Every high risk contract has to be reviewed by the corporate legal department and has to be approved by the CFO.
Brunel has the following reports in place to maintain full insight in performance and strategy execution:
All reports are summarised and provided to the Board of Directors. At least each quarter the reports are discussed with local management by a member of the Board of Directors, supported by the Corporate Finance & Control Department.
Brunel has an insurance manual in place, including insurance policies in the fields of employment relationships, liabilities and business continuity.
This manual includes, besides reporting policies, valuation principles and definitions:
The information and communication policy for internal risk management and control systems is aimed at acceptance and implementation at all organisational levels.
This has resulted in a generally accepted code of conduct, internal training courses for new employees, and trainingon-the-job programmes.
Relevant information on Brunel's main risks is clearly communicated throughout the organisation. Effective communication also occurs in a broader sense, flowing down, across, and up the entity. To this end various types of business deliberations are carried out. Thus every year Brunel's financial community holds an international meeting, attended by all regional financial controllers, to discuss best practices and the latest developments in financial management and internal controls, and subsequently to document and implement these company-wide.
Monitoring the adequacy and effectiveness of internal risk management and control systems is an on-going improvement process. Monitoring activities are arranged in periodic consultation between the Board of Directors and local managers, and through frequent contact between the Corporate Finance & Control department and local financial management. These discussions are partly based on the weekly operational and monthly financial reports.
Brunel currently does not have an internal audit department. However, CFC also includes controllers with an auditing background and many internal audit activities are now performed by this department. CFC is an independent department that reports directly to the Board of Directors. The activities of CFC include, amongst others, reviewing monthly reports of all entities and visiting our operating entities. During these visits, accuracy of monthly reporting and
compliance with policies and procedures is verified, amongst others.
All operating entities of Brunel are visited at least once every two years, and significant entities are visited at least three times a year. In addition, CFC advises local management in terms of possible improvements to their internal risk management and control systems.
In 2016 it was decided that Brunel will implement an internal audit function in 2017, and a plan to do so has been drawn up.
The external auditor is responsible for auditing the annual financial statements. The auditor reports findings in the form of management letters at the level of the Group or individual operating companies. In addition, he reports directly to the Audit Committee. The external auditor attends the meetings of the Supervisory Board at which the annual accounts are adopted. The auditor also attends – and is authorised to address – the General Meeting of Shareholders.
Brunel assesses risks according to their impact and likelihood (including the related mitigating actions). The resulting impact could comprise a material direct or indirect adverse effect on Brunel's business, operations, volumes, financial condition and performance, reputation and/or other interests. Below we identify and discuss our top company-specific risks, the risk trends through 2016 and our risk response plan. The risks listed and the response plans are not exhaustive and may be adjusted from time to time.
| Unfavourable macroeconomic |
|---|
| conditions/geo-political situation (S) |
Brunel's professional secondment
business in Europe is very dependent on the economic cycle. The Energy division is dependent on the Oil & Gas industry, making us vulnerable to the current capex reductions in the industry and geopolitical events.
| Key aspects: | Response plans: |
|---|---|
| Dependency on countries | Expanding, diversifying and monitoring client base |
| Dependency on industries | Closely monitoring all market developments and continuously reviewing the countries in which we do business and their geo-political events |
| Continuously exploring business opportunities in "new" Energy countries |
|
| Maintaining flexibility in cost structure and managing the share of contractors versus employees |
|
| Concentrating on projects which fit our portfolio |
In order to minimize the downside risk of adverse economic condition, Brunel manages the share of contractors versus employees in the European business. As the margin on contractors is significantly lower, the right mix needs to be carefully managed. Meanwhile, all starters are hired on a temporary contract and depending on their performance, are offered a longer term contract. In 2017 economic growth in Europe is expected to continue at a moderate pace and employment should continue to rise modestly. These factors contribute to Brunel Europe's strategy execution positively.
In a similar operating environment in 2017, our clients are not likely in a comfortable position to take larger investment decision. Therefore we do not expect aggressive performance return within Brunel's global business. Our business development in mining, engineering and new countries still require further development to pay off with profitable returns.
Competition is continuously increasing through our existing competitors, new market entrants and clients' increasing expectations on services portfolio. The intense competition puts pressure on our margins and it drives us to raise service quality.
Any reputation damage can drive our clients to our competitors.
Our mitigation measures in 2016 can be categorised mainly into "innovation", "quality and efficiency" and "knowledge sharing", in 2017, further efficiency improvement on technology applications and innovative service solution will be continued.
| Key aspects: | Response plans: |
|---|---|
| Margin pressure | Closely monitoring the trends of clients' preferences, markets and competitors |
| Service delivery Reputation |
Maintaining close contact with clients and specialists |
| Flexibility to adjust network and local operations to meet new service requirements |
|
| Focusing on Brunel's unique and tailored services | |
| Enhancing Brunel's service quality and efficiency | |
| Developing innovation team and adding value through innovation |
|
| Knowledge sharing |
The potential for inadequate succession of key personnel in Brunel's (senior) management function is due to a lack of structural attention for succession
planning, a small top management basis and the scarcity of qualified managers within the organisation. The scarcity of qualified internal staff could limit future growth and as we are just able to manage the existing business.
In 2016 Brunel has implemented various training programmes for the various levels within the organisation and they are planned to be further optimised in the coming years. Various high potential employees were given the opportunities to work in Brunel exchange programmes and the programmes will be formalised in 2017. For key employees, Brunel also has a share-option scheme. Senior management and high potentials are closely followed, monitored and coached in various talent development programmes.
| Key aspects: | Response plans: | |
|---|---|---|
| Experienced staff | Preparing current successful employees for future key positions Improving talent development programmes for sales organisation Initiating structured training programmes for other business functions Succession plan |
|
| Management potential | ||
| Retention plan | ||
| Improving employee engagement |
Brunel's global presence exposes it to a variety of regulatory, political and other environments which may affect our business and operations, especially in emerging markets where the legal systems are in varying stages of development. In specific countries with tougher business environment, we also face uncertainties which are cases of unknown probabilities. In particular, our operations in these difficult countries are subject to the uncertainty associated with the local legal system, which could adversely affect our business and limit the legal protection available. Although we cannot predict the effect of further legal developments in such countries, we make careful decisions when we tap into any new countries, in order to manage or even avoid the uncertainties.
Non-compliance with internal policies and/or external laws and regulations by employees, subcontractors or third-party suppliers could result in financial losses, loss of customers or reputational damage.
Brunel is a full member of TRACE International since 2013 and complies with global anti-corruption laws, in particular the United States Foreign Corrupt Practices Act and UK's Anti-Corruption & Bribery Act 2010.
| Key aspects: | Response plans: |
|---|---|
| HR | Increasing knowledge and awareness of laws, regulations, standards and codes |
| Legal | Monitoring, reviewing, reporting and adapting to relevant |
| HSE | (changes in) rules and regulations |
| Business conduct | Strengthening IT infrastructure for standard operational procedures and guidance |
| Anti-bribery & corruption |
Implement and update global HSE system |
| Risk-based reviews of operations by HSE professionals | |
| Increasing internal compliance awareness and effective communication between central compliance resource and country managers working in the field |
|
| Communicating and implementing business conduct standards internally |
|
| Maintaining a global whistle blower procedure |
In 2016, the global compliance risk has continued to increase in the industries and some of the countries we operate in or new countries we are looking into. Brunel has committed to maintain a strong corporate compliance culture, especially preventing illegal practices such as bribery and collusion in our industries and operation locations. Brunel has zero-tolerance to any violation on these laws. Brunel has also closely monitored the global sanction lists, implemented third-party due diligence procedure in high-risk business environment and ensured safe and legal financial transactions with international customers. Despite our continuous efforts, we expect an increased compliance risk onwards due to an increased regulatory environment.
Other top risks with medium likelihood and impact
The dependency on key clients in Europe is lower compared to Energy, since the clients in Europe have a lower revenue share for Brunel and the client base is
more widespread. Our Energy business had a first move advantage to work on global supplier agreements with international oil companies. Until recent years, our ability to grow is highly dependent on key clients and their preference to continue to do business with Brunel.
| Key aspects : | Response plan: |
|---|---|
| Damage by losing one of the key clients |
Further expanding, diversifying and monitoring client base |
| Strengthen sales organisation | |
| Complacency attitude of having business "given" by key clients |
Monitoring on an ad hoc basis the share of key clients as a percentage of total revenue |
| Improving service quality and efficiency and compliance |
as a service
and looking forward: In The Netherlands, the IT business line
Implementation in 2016
has grown in relation to engineering, making Brunel less vulnerable to the engineering sector. Brunel Germany has a strong focus on automotive industry which implies a weakness to growths. In 2016, several sales initiatives have been rolled out in different Brunel entities to strengthen our salesforce on expanding our customer base and wining new clients however it will take some time for new client base to fully pay off. We have also diversified our client profile by adding new service packages to gain market share and to be able to return to growth again, our salesforce has a focus on clients and countries with volume potential, sustainable margins and acceptable risks.
The potential of entering into burdensome, unenforceable or unfavourable contract terms or contracts that lack clear definition of business arrangements result in non-compliance with contract terms and increased costs. Due to the focus on further growth and the expanding clients the risk of entering in these contracts has increased.
| Margin pressure caused by burdensome and |
Developing and implementing commercial task force globally |
|---|---|
| unfavourable contracts | Performing go/no go client and project selection through thorough review of contract conditions, clients credit |
| Liabilities | check and risk assessment |
Setting up and updating minimum commercial, financial and legal requirements which our contracts should comply with
In 2016, the commercial team has been growing towards a more professional organisation. The team has better valuated new projects from the commercial, legal, financial and compliance aspects. This has enabled us to manage our contact negotiation and management risk while balancing the commercial benefits. We have also updated our IT systems to better facilitate the use of standard contracts.
Moreover 2016 we have developed a training to increase the awareness of risks in contracting in all our departments. This training has been rolled out in most of our regions. In 2017 we will set up processes to encourage communications among different regions for global contracts and update our IT systems to fully facilitate the contracting process.
Brunel operates worldwide which exposes the group to various jurisdictions and complex tax systems. Depending on jurisdictions, tax rules as well as interpretations can be subject to changes, which can expose Brunel to additional tax costs.
| Key aspects : | Response plans: |
|---|---|
| Additional cost | Formal procedures and monitoring systems around tax compliance |
| Reputation damage | Engage reputable tax advisors |
| Training | |
| Implement group wide controls |
In 2016, the increased tax risks due to the budgetary issues caused by the low oil price in some developing countries remained unchanged. In The Netherlands we have adopted a new tax law for freelancers. The commercial team has put more and more attention on tax compliance in the contracting process. We have also seen a lot of changes in tax laws and interpretations. Especially in developing countries, the attitude of local tax authorities has become more opportunistic or even aggressive. This manifests itself in unexpected tax claims, a disproportionate amount of tax audits, and a tax authority that is not open to resolve disputes without going to court. Dispute resolution can be timeconsuming and costly. To minimise these tax risks, we engage reputable tax advisors to ensure our compliance. In some developing countries, we might occasionally accept an incorrect tax claim, because the actual claim is lower then the expected costs for the appeal.
In the last five years, we have been working on automation and improving working process. However regulatory requirements and scrutiny are ever increasing, rapid deployment of emerging technologies also creates risks. Cyber attacks, data fraud or theft, information mismanagement, privacy and data protection can have a big negative impact on our business continuity and reputation.
| Key aspects : | Response plans: |
|---|---|
| Change management | Formalising change management procedure |
| Security & user management |
Further attention required for segregation of duties conflicts in key applications |
| Key applications for sales, operation and finance departments |
Implement formal user management procedures for local finance applications |
| Maintain an up to date security environment | |
| Cyber security and data | |
| privacy | Further increase the awareness of data privacy among different level and functions |
Brunel's IT general controls environment is evolving and has improved compared to previous year. We are able to centrally manage all our systems and data via proven technology and professional partners. Key IT systems and system interface have been further rolled out which increased the automation of work process & control. The IT organisation is currently in the last phase of the transition period from a project development organisation to a support organisation.
The new General Data Protection Regulation (GDPR) has been adopted in April 2016 and allows organisations providing services in Europe to meet the compliance requirements before its full enforcement in May 2018. Besides the EU Regulation, our operations outside European Union are subject to other strict national Data Privacy Acts. Brunel has committed to bring our current data privacy infrastructure into a higher level to defend individuals' privacy rights and demonstrate accountability. As data breach incidents and related cyber risks
increases, Brunel is actively installing adequate measures, policies and procedures to safeguard individual's data and minimize incidents caused business disruption.
The main measure to control the quality of the financial reporting, and prevent unintentional or intentional errors is internal control. Brunel continues to standardise and to uniformise processes and procedures. As a result, more group wide controls will be implemented, as well as sharing of best practices. We are also monitoring the business environment to be able to quickly respond to changes in the control environment. In 2016, we have implemented a new application for consolidation (Tagetik) that enables us to interface data directly for the source and get more detailed insight in the financials of our operations.
This applies specifically to the secondment business in Europe, where employment contracts are based on contractual agreements with clients. Potential early termination of deployed employees can result in loss of productivity. Productivity is measured on a daily basis and reported on a weekly basis, so that corrective actions can be taken in a timely manner.
Brunel has always had exceptionally high solvency rates. The company does not use any long-term credit lines and boasts favourable liquidity positions and bank facilities that accommodate the day-today management of the working capital. During the current crisis in the Oil & Gas industry, it looks like this is increasingly becoming an advantage, as our strong balance sheet was recognised by both clients and employees.
Brunel is considered a solid partner in business and our assets include a limited amount of goodwill. As a result, impairment risks and the associated deterioration of the solvency level are highly unlikely. Brunel's most important financial assets are its account
receivables, spread over more than two thousand clients. Despite internal procedures, uncollectible debts cannot be ruled out; but the risk of a material erosion of operating profit is very small.
Brunel does incur currency risks. Main currency risk is the translation risks in connection with our accounts receivable positions and foreign participations. In the ordinary course of business, revenues and expenses are often stated in the same currency, which helps reduce the effect of exchange rate differences. However, some (developing) countries have implemented mandatory use of local currencies to protect their economies. This can increase our currency risk due to the international nature of our clients and contractors. Awarded pension schemes concern defined contribution schemes managed by external parties.
Further information is included on pages 111-113 of the financial statements.
Brunel's understanding of corporate governance is based on applicable laws, the rules and regulations applicable to companies listed on the NYSE Euronext Amsterdam stock exchange and the Dutch corporate governance code (the "Code"). The full text of the Code can be seen on www.commissiecorporate governance.nl.
The Dutch Corporate Governance code contains principles and best practices on the government of listed companies and their accountability to their shareholders on this topic. The Code was adopted in 2003 and amended in December 2008. On 8 December 2016 the Dutch Corporate Governance Code Monitoring Committee published the revised Corporate Governance Code which will take effect on January 2017.
The Board of Directors and Supervisory Board are responsible for maintaining the corporate governance structure and for ensuring compliance with that structure. They render joint account on these issues to the General Meeting of Shareholders.
Brunel is of the opinion that the vast majority of the principles and best practices of the Code are being applied. Where feasible and relevant, Brunel International N.V. will implement the changes following the 2016 revised Corporate Governance Code. Dutch listed companies are required to report in 2018 on compliance with the revised Code in the 2017 financial year. The key aspects of Brunel's corporate governance structure and compliance with the Code will be submitted for discussion at the 2018 annual general meeting.
This chapter describes the principal aspects of the corporate governance structure. If applicable, explanations for deviating from the 2008 Code's best practice stipulations are provided.
The corporate governance structure at Brunel International N.V. and the deviations from the Code are based on current conditions and views within Brunel Conditions may change which may lead to adjustments in the structure and in the way in which Brunel International N.V. complies with the Code.
Every substantial change to the corporate governance structure of the company will be submitted to the General Meeting of Shareholders for discussion on a separate agenda item.
Contrary to the provisions of best practice provision II.1.1, the CEO has been appointed for an indefinite period of time. The CEO was appointed before the Code was implemented and the Company wishes to respect the existing contract with the CEO.
After having reached the maximum term of appointment to the Supervisory Board Mr. Schouwenaar was re-appointed for an extra term in 2013. In order to secure continuity and effective succession within the Supervisory Board the Annual General Meeting of Shareholders re-appointed Mr. Schouwenaar at 30 April 2015 for an additional term of two years.
In 2005 the General Meeting of Shareholders decided to discontinue the adoption of the rules applicable to statutory two-tier entities ("structuurregime"). The Supervisory Board was granted the right to submit a binding nomination in the case of the appointment of Directors and Supervisory Directors. In deviation from best practice provision IV.1.1 such nomination may only be rejected by the General Meeting of Shareholders by means of a two-thirds majority of votes cast, representing more than half the issued capital. These criteria were prescribed as the Supervisory Board considered it necessary, in light of Brunel's specific circumstances, to ensure that its position is as strong as possible in the current structure.
Information for analysts, shareholders, the press and other parties in the financial markets is provided in accordance with the relevant recommendations in the Code. However, Brunel does not entirely comply with the public nature of meetings, for example through transmission on the internet, as we believe this implies a disproportionate burden for our organisation.
Tasked with the management of the company, the Board of Directors is responsible for setting Brunel's mission, vision and strategy; execution of its implementation; taking responsibility for Brunel's overall results, and addressing corporate responsibility issues. The Board of Directors operates in accordance with the interests of Brunel International N.V. and is to that end required to consider all appropriate interests associated with the company. The Board of Directors is responsible for complying with all relevant primary and secondary legislation, the risk profile associated with the strategy, the corporate responsibility issues relevant to the company, its financing, and its external communications.
The Board of Directors is required to report developments on the abovementioned subjects to, and discuss the internal risk management and control systems with, Brunel's Supervisory Board and its Audit Committee.
Brunel International N.V.'s Articles of Association determine that the Supervisory Board consists of a minimum of three members. The Supervisory Board determines the number of its members.
The Supervisory Board is charged with supervising the Board of Directors and the general course of affairs of Brunel, as well as advising the Board of Directors. The Supervisory Board evaluates the corporate structure and the control mechanisms established by the Board of Directors.
In performing its duties the Supervisory Board shall take into account the relevant interest of the company's stakeholders, and, to that end, consider all appropriate interests associated with the company.
Members of the Supervisory Board perform their duties without mandate and independent of any particular interest in the business of the company. The Supervisory Board is responsible for the quality of its own performance and for this purpose annually reviews its performance. The responsibility for proper performance of its duties is vested in the Supervisory Board as a whole.
Brunel ensures that there are structured reporting lines to the Supervisory Board.
The Audit Committee assists the Supervisory Board in fulfilling its supervisory responsibilities for the integrity of the financial reporting process, the system of internal business controls and risk management, the external audit process, the external auditor's qualifications, independence and performance.
The Chairman of the Supervisory Board ensures the proper functioning of the board and its committees and acts on behalf of the Supervisory Board as the main contact for the Board of Directors. The Vice-Chairman replaces the
Chairman when required and acts as contact for the other board members concerning the functioning of the Chairman.
The by-laws of the Supervisory Board and the resignation schedule are posted on the company's website, www.brunelinternational.net
The authorised capital of Brunel International N.V. is EUR 5,998,000 divided into 199,600,000 ordinary shares and one priority share. The par value of the ordinary shares is EUR 0.03 each. The par value of the priority share is EUR 10,000. On 31 December 2016 the number of outstanding shares was 50,413,624.
The priority share, which has a par value of EUR 10,000, has been issued to Stichting Prioriteit Brunel, subject to the condition precedent that the majority shareholder loses its majority share in Brunel International N.V.'s share capital. The priority share will be fully paid up as soon as the issue becomes unconditional.
The protective stipulations are included in the Articles of Association of Brunel International N.V. and are posted on the company's website.
According to The Netherlands Authority for the Financial Markets (AFM) register on notification of substantial holdings, Brunel founder Mr. J. Brand directly or indirectly holds a capital interest of approximately 63%, with corresponding voting rights.
Annual General Meeting of Shareholders Brunel International N.V. is required to hold an Annual General Meeting of Shareholders within six months after the end of the financial year in order to, among other things, adopt the financial statements and to decide on any proposal concerning dividends. Further to Dutch law, the release from liability of the members of the Board of Directors and release from the liability of Supervisory Board members for the performance of their respective duties during the financial year are also agenda items for this meeting.
Each shareholder has the right to attend General Meetings of Shareholders, either in person or by written or electronic proxy, to address the meeting and to exercise voting rights, subject to the provisions of Brunel International N.V.'s Articles of Association. An eligible shareholder has the aforementioned rights if registered as shareholder on the applicable record date as set by the Board of Directors.
Each of the shares in Brunel International N.V.'s share capital carries the right to cast one vote. Unless otherwise required by Dutch law or Brunel International N.V.'s Articles of Association, resolutions are passed by a simple majority of votes cast by the shareholders present or represented at the meeting.
The Annual General Meeting of Shareholders charges the external auditors with the task of auditing Brunel International N.V.'s annual accounts.
On 17 May 2016 the Annual General Meeting of Shareholders authorised the Board of Directors for a period of 18 months to issue (rights) to shares and to restrict or exclude shareholders' preemption rights, with due observance of the law and Articles of Association (which require the approval of the Supervisory Board). The authorisation is limited to 5% of Brunel International N.V.'s issued share capital, as at the date of issue.
A new authorisation will be submitted for approval to the Annual General Meeting of Shareholders of 11 May 2017.
On 17 May 2016 the Annual General Meeting of Shareholders also authorised the Board of Directors for a period of 18 months to acquire own shares with due observance of the law and the Articles of Association (which require the approval of the Supervisory Board) to the maximum of 10% of the issued share capital of Brunel International N.V., by means of stock market purchases or in any other way, at prices lying within the bandwidth of 10% above and 10% below the Euronext Amsterdam opening price for the company's shares on the day of the purchase, or, in default thereof, the most recent prices registered. A new authorisation will be submitted for approval to the Annual General Meeting of Shareholders of 11 May 2017.
Amendment to Brunel International N.V.'s Articles of Association can take place upon a proposal of the Board of Directors approved by the Supervisory Board and adopted by the General Meeting of Shareholders. A proposal to amend the Articles of Association must be stated in a notice convening a General Meeting of Shareholders. The proposal shall be passed upon an absolute majority of the votes cast in the General Meeting of Shareholders.
The coroporate governance statement can be found on the company's website www.brunelinternational.net.
The continuing downturn in the Oil & Gas sector has had a severe impact on our 2016 performance. This has been aggrevated by a temporary hick up in the growth in The Netherlands due to the new legislation for freelancers. Germany continued on the growth path started in 2015 resulting in strong growth in revenue and operating profit. As a result of these developments, revenue decreased by 28%.
The gross margin increased from 18.7% to 21.1% mainly as a result of a change in the mix between Europe and Energy. Gross profit was impacted by the lower revenue.
Overhead expenses for 2016 include EUR 3.9 million of one off expenses for redundancies and restructuring in Energy. The measures taken, partly offset by a higher cost level in Europe, resulted in a decline of overhead expenses of 7.8%.
Our associate in Angola continued to struggle under the difficult circumstances in Angola, resulting in a loss of EUR 1.8 million. Activities have been downsized significantly to leave a limited remaining exposure.
The effective tax rate for 2016 ended at 56%. A downward adjustment under the current circumstances of the outlook for the coming years for our activities in the USA has lead to an impairment of EUR 3.3 million of the deferred tax asset relating to these activities.
These developments have resulted in a significantly lower net result.
Our direct headcount decreased to 8,925 at 31 December 2016 from 10,051 at 31 December 2015 whilst our indirect headcount decreased from 1,503 to 1,446. Main impact was of course the lower level of activities in Energy with the headcount in Europe remaining pretty stable. For 2017 we expect a further decrease in headcount in Energy, but at a lower pace, largely offset by an increase in Europe.
Working capital decreased by 16%, mainly as a result of the lower level of activities, partly offset by some short term projects towards the end of the year. Collection remained pretty stable, with average days outstanding slightly increasing.
Investments in fixed assets in 2017 will be at a similar level as in 2016.
Brunel Netherlands initially profited from the economic climate in The Netherlands, resulting in a strong performance in Q1. The remainder of the year was severely impacted by the new legislation for freelancers that came into effect with the start of the transition period on May 1. The uncertainty around this transition period has lead to different interpretations in our industry, where we appeared to be more stringent. As a result, we have seen a considerable number of freelancers transferring to our competitors. From July onwards, the direct headcount returned to growth. Adjusted for the estimated impact of the freelancers, revenue would have grown by 7%. Business line IT was the outperformer with a growth of over 20%. Engineering remained flat and Finance struggled with the current environment in the Insurance and Banking industry.
Profitability was further impacted by a slightly lower margin, mainly due to idle time for training activities and a slightly higher bench.
Operating expenses increased following investments in the commercial organisation and the exploration of new technologies.
For 2017 we expect that the headcount growth we have resumed from July 2016 onwards will continue. This will result in revenue growth, despite the fact that we have started 2017 at a lower level than 2016. We expect profitability to improve slightly.
The growth in Germany continued in 2016 on the back of the current economical climate. The YoY growth from 2015 to 2016 in headcount is 11.8%. We are experiencing limited margin pressure, but have been able to offset this by an improved productivity. The growth has been achieved without an increase in operating expenses, resulting in a strong increase in operating profit.
In 2017 a new law will come into effect. Elements of this law are equal pay, a limit to contract periods for secondment of 18 months and a stricter regulation of types of agreements. This provides an opportunity for us rather than a threat. In anticipation on this law, and as a response to market developments, we have increased our capabilities to also offer services besides secondment. We expect we have taken the appropriate measures and expect to see the growth continuing in 2017.
In the rest of Europe a revenue growth of 21% was achieved. Austria, the Czech Republic and Switzerland all showed strong growth.
The lower operating expenses are mainly caused by lower cost for doubtful debt in Belgium.
We expect continuous growth in Austria, Switzerland and the Czech Republic. Belgium expects to make up for the lower level of activities at the beginning of 2017.
The Energy division continued to be impacted significantly by the downturn in the Oil & Gas sector, which had been more severe and lasted longer than many expected. The current level of upstream offshore projects is very low, with little new projects being initiated. Besides the decline in headcount, our revenue has also been impacted by significantly reduced contractor rates, since most of our business is priced at cost plus. In 2016, we have also seen competitors offering very low fees (markups) for their services, also impacting our markets and clients.
We have seen revenue decrease in all our regions.
Rightsizing our offices and maximising the use of our IT solutions helped us to achieve a significant cost saving. The 2016 operating expenses includes EUR 3.9 million of costs for redundancies and restructuring. Restructuring includes expenses relating to closing or pausing some of our activities in Africa and Asia. This will allow us to further reduce operating expenses in 2017 in order to achieve at least a break even operating result.
The impact of exchange rate movements on our performance was limited.
In 2017, we will see the full year impact of the decline in revenue in 2016, in combination with a further decline in headcount especially in the first half of 2017. As a result of our efforts towards new activities we expect that the revenue will be stabilizing in the second half of 2017 and we could even be returning to growth.
The Board of Directors is responsible for establishing and maintaining adequate internal risk management and control systems. The internal risk management at Brunel focuses on managing both financial risks and operational risks as described in "Risks, risk management and control systems" of the Annual Report. As a key part of its scope, Risk Management is responsible for the design, monitoring and reporting on the internal control framework.
In 2016, the Board of Directors, in accordance with best-practice provision II.1.4 of the Dutch Corporate Governance Code, reviewed and analysed the strategic, operational, financial reporting and compliance risks to which the Group is exposed, and it regularly reviewed the design and operational effectiveness of the Brunel risks and control systems, including the improvements. The outcome of these reviews was shared with the Audit Committee and the Supervisory Board.
In line with the adoption of the Dutch Corporate Governance Code, Brunel prepared the In Control Statement 2016 in accordance with the best practice provision II.1.5. of the Dutch Corporate Governance Code. Taking the risks and control systems described above into consideration, the Board of Directors is of the opinion that the internal risk management and control systems with regard to financial reporting risks have been working adequately during the year under review and provide reasonable assurance that the financial report does not contain material misstatements.
The members of the Board of Directors as required by section 5:25c, paragraph 2, under c of the Dutch Act on Financial Supervision (Wet op Financieel Toezicht) confirm that to the best of their knowledge:
These 2016 financial statements give, in accordance with IFRS as endorsed by the EU, a true and fair view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the consolidation taken as a whole.
This Annual Report gives a true and fair view of the Company's position and the undertakings included in the consolidation taken as a whole as of 31 December 2016, and of the development and performance of the business for the financial year then ended.
This Annual Report includes a description of the principal risks and uncertainties that the Company faces.
Amsterdam, 24 February 2017
J.A. van Barneveld CEO
Brunel International N.V. is a public limited liability company. Its authorised capital is EUR 6 million, divided into 199.6 million ordinary shares and one priority share. The par value of the ordinary shares is EUR 0.03 each. The par value of the priority share is EUR 10,000. The priority share has not been issued.
Brunel International N.V. ordinary shares are listed at the NYSE Euronext stock exchange in Amsterdam (ticker symbol BRNL). Since 2015, Brunel has been listed on the Amsterdam Small Cap Index (AScX). Since April 2011, options on Brunel shares have also been traded on NYSE Liffe, the derivatives market of NYSE Euronext.
The total number of shares outstanding on 31 December 2016 is 50,413,624, giving a market capitalisation of EUR 776 million at that time. The number of shares outstanding at year-end 2015 was 49,967,624. The increase in the number of shares outstanding is due to the exercise of stock option rights.
Up to 2014, option rights were granted to the members of the Board of Directors, under the Articles of Association. A note explaining these grants is included in the Supervisory Board's remuneration report, which is available on the company's website. Several senior management members were also granted option rights. In 2015 the share option scheme was revised to a Share Appreciation Rights (SAR) scheme.
According to the AFM register on notification of substantial holdings, Mr J. Brand, the company's founder, directly or indirectly holds a capital interest of approximately 63%, with corresponding voting rights.
For this year we propose to pay a dividend of EUR 0.20 per share and an additional dividend of EUR 0.20 per share to the General Meeting of Shareholders.
AR '16 THE BRUNEL SHARE
| 5 May 2017 | Trading update for the |
|---|---|
| first quarter 2017 | |
| 11 May 2017 | Annual General |
| Meeting of | |
| Shareholders | |
| 15 May 2017 | Ex-dividend listing |
| 9 June 2017 | Dividend available for |
| payment | |
| Year-end | High Low |
| 18 August 2017 | Half-year |
| results 2017 | |
| 3 November 2017 | Trading update for the |
| third quarter 2017 | |
Brunel International N.V. Financial statements 2016
| Consolidated balance sheet | 97 | |
|---|---|---|
| Consolidated profit and loss account | 98 | |
| Consolidated statement of comprehensive income | 99 | |
| Consolidated cash flow statement | 100 | |
| Consolidated statement of changes in equity | 101 | |
| Notes to the consolidated financial statements | 103 | |
| Company Financial statements | ||
| Company balance sheet | 143 | |
| Company profit and loss account | 144 | |
| Notes to the company balance sheet and profit and loss account | 145 |
x EUR 1,000, before profit appropriation
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Non-current assets | ||||
| Goodwill (1) | 4,265 | 4,218 | ||
| Other intangible assets (2) | 13,905 | 13,043 | ||
| Property, plant and equipment (3) | 7,301 | 10,729 | ||
| Financial assets (4) | - | - | ||
| Deferred income tax assets (16) | 10,563 | 12,729 | ||
| Total non-current assets | 36,034 | 40,719 | ||
| Current assets | ||||
| Trade and other receivables (5) | 204,506 | 253,627 | ||
| Income tax receivables (16) | 9,922 | 5,010 | ||
| Cash and cash equivalents (6) | 149,233 | 180,037 | ||
| Total current assets | 363,661 | 438,674 | ||
| Total assets | 399,695 | 479,393 | ||
| Non-current liabilities | ||||
| Provisions (7) | 603 | 712 | ||
| Deferred income tax liabilities (16) | 553 | 1,561 | ||
| Long-term liabilities (8) | 922 | 1,074 | ||
| Total non-current liabilities | 2,078 | 3,347 | ||
| Current liabilities | ||||
| Current liabilities (9) | 100,785 | 124,932 | ||
| Income tax payables (16) | 3,146 | 3,387 | ||
| Total current liabilities | 103,931 | 128,319 | ||
| Total liabilities | 106,009 | 131,666 | ||
| Net assets | 293,686 | 347,727 | ||
| Group equity (10) | ||||
| Share capital | 1,512 | 1,499 | ||
| Share premium | 83,548 | 76,765 | ||
| Reserves | 198,042 | 231,885 | ||
| Unappropriated result | 10,050 | 37,122 | ||
| Non-controlling interest | 534 | 456 | ||
| Total equity | 293,686 | 347,727 |
| 2016 | 2015 | |||
|---|---|---|---|---|
| Revenue | 884,911 | 1,228,948 | ||
| Direct personnel expenses (13) | -697,815 | -998,939 | ||
| Gross Profit | 187,096 | 230,009 | ||
| Indirect personnel expenses (13) | -100,584 | -107,833 | ||
| Depreciation and amortisation (14) | -8,288 | -8,417 | ||
| Other expenses (15) | -51,398 | -57,640 | ||
| Total operating costs | -160,270 | -173,890 | ||
| Operating profit | 26,826 | 56,119 | ||
| Exchange differences | -1,488 | 1,781 | ||
| Interest income | 796 | 333 | ||
| Interest expenses | -96 | -641 | ||
| Financial income and expense | -788 | 1,473 | ||
| Share of profit of investments accounted | ||||
| for using the equity method (4) | -1,807 | -928 | ||
| Group result before tax | 24,231 | 56,664 | ||
| Tax (16) | -13,629 | -19,060 | ||
| Group result after tax | 10,602 | 37,604 | ||
| Net income attributable to equity holders | ||||
| of the parent (ordinary shares) | 10,050 | 37,122 | ||
| Net income attributable to non-controlling | ||||
| interest | 552 | 482 | ||
| Net income for the year | 10,602 | 37,604 | ||
| Basic earnings per share in euro (17) | 0.20 | 0.75 | ||
| Diluted earnings per share in euro (17) | 0.20 | 0.74 |
| 2016 | 2015 | |
|---|---|---|
| Net income | 10,602 | 37,604 |
| Other comprehensive income | ||
| Items that may be reclassified subsequently to profit or loss | ||
| Exchange differences arising on translation of foreign operations | 2,886 | 9,397 |
| Income tax relating to components of other comprehensive income | 643 | -825 |
| Total other comprehensive income (net of tax) | 3,529 | 8,572 |
| Total comprehensive income | 14,131 | 46,176 |
| Attributable to: | ||
| Ordinary shareholders | 13,552 | 45,630 |
| Minority interests | 579 | 546 |
| Total comprehensive income | 14,131 | 46,176 |
| 2016 | 2015 | |
|---|---|---|
| Cash flow from operating activities | ||
| Result before tax | 24,231 | 56,664 |
| Adjustments for: | ||
| Depreciation and amortisation (14) | 8,288 | 8,417 |
| Interest income | -796 | -333 |
| Interest expense | 96 | 641 |
| Share of loss/(profit from associates (4) | 1,807 | 928 |
| Other non-cash expenses (20) | 1,831 | 2,266 |
| Share based payments (11) | 497 | 2,123 |
| Changes in: | ||
| Receivables (18) | 46,632 | 78,287 |
| Provisions (7) | -109 | -144 |
| Long-term liabilities (8) | -152 | 321 |
| Current liabilities (19) | -24,511 | -32,837 |
| Income tax paid (16) | -16,991 | -28,376 |
| Interest paid | 79 | -641 |
| Interest received | 790 | 333 |
| Cash flow from operating activities | 41,692 | 87,649 |
| Cash flow from investing activities | ||
| Additions to property, plant and equipment (3) | -1,399 | -4,125 |
| Additions to intangible fixed assets (2) | -4,404 | -3,362 |
| Disposals of property, plant and equipment (3) | 31 | 271 |
| -5,772 | -7,216 | |
| Cash flow from financial operations | ||
| Issue of new shares | 6,796 | 8,129 |
| Dividend non-controlling interest | -501 | -556 |
| Dividend ordinary shareholders | -75,500 | -34,884 |
| -69,205 | -27,311 | |
| Total cash flow | -33,285 | 53,122 |
| Cash position at 1 January | 180,037 | 125,070 |
| Exchange rate fluctuations | 2,481 | 1,845 |
| Cash position at 31 December | 149,233 | 180,037 |
| Reserves | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share Capital |
Share Premium |
Trans- lation reserve |
Share based payments |
Retained earnings |
Un- appro- priated result |
Attrib- utable to ordinary shareholders |
Non controlling interest |
Total | |
| Balance at 1 January 2015 | 1,481 | 68,654 | 3,996 | 6,415 | 198,833 | 48,424 | 327,803 | 466 | 328,269 |
| Net income Exchange differences arising on translation of foreign operations Income tax relating to components |
9,333 | 37,122 | 37,122 9,333 |
482 64 |
37,604 9,397 |
||||
| of other comprehensive income | -825 | -825 | -825 | ||||||
| Total comprehensive income | 8,508 | 37,122 | 45,630 | 546 | 46,176 | ||||
| Cash dividend (10) Appropriation of result Modification of share based |
13,540 | -34,884 -13,540 |
-34,884 | -556 | -35,440 | ||||
| payment scheme (11) | -2,152 | 769 | -1,383 | -1,383 | |||||
| Share based payments (11) | 1,578 | 398 | 1,976 | 1,976 | |||||
| Option rights exercised (11) | 18 | 8,111 | -2,234 | 2,234 | 8,129 | 8,129 | |||
| Balance at 31 December 2015 | 1,499 | 76,765 | 12,504 | 3,607 | 215,774 | 37,122 | 347,271 | 456 | 347,727 |
| Net income Exchange differences arising on |
10,050 | 10,050 | 552 | 10,602 | |||||
| translation of foreign operations Income tax relating to components |
2,859 | 2,859 | 27 | 2,886 | |||||
| of other comprehensive income | 643 | 643 | 643 | ||||||
| Total comprehensive income | 3,502 | 10,050 | 13,552 | 579 | 14,131 | ||||
| Cash dividend (10) | -75,500 | -75,500 | -501 | -76,001 | |||||
| Appropriation of result | 37,122 | -37,122 | |||||||
| Share based payments (11) Option rights exercised (11) |
13 | 6,783 | 899 -1,649 |
134 1,649 |
1,033 6,796 |
1,033 6,796 |
|||
| Balance at 31 December 2016 | 1,512 | 83,548 | 16,006 | 2,857 | 179,179 | 10,050 | 293,152 | 534 | 293,686 |
Brunel International N.V.'s main participations are listed below. These are included in the consolidated financial statements of Brunel International N.V.. Unless otherwise stated, all these participations are, directly or indirectly, wholly-owned and Brunel has full or over half of the voting power. Some non-material participations are not included in the list.
Brunel Corporate B.V., Amsterdam, The Netherlands Brunel Nederland B.V., Rotterdam, The Netherlands Brunel Energy Holding B.V., Rotterdam, The Netherlands Brunel Energy Europe Staff B.V., Amsterdam, The Netherlands Brunel Energy Europe B.V., Rotterdam, The Netherlands Brunel CR B.V., Amsterdam, The Netherlands Brunel Consultants N.V., Mechelen, Belgium Brunel Energy Nederland B.V., Rotterdam, The Netherlands Brunel Engineering Consultants N.V., Mechelen, Belgium Brunel International UK Ltd, Glasgow, United Kingdom Brunel Service GmbH & Co. KG, Bremen, Germany Brunel GmbH, Bremen, Germany Car Synergies GmbH, Bochum, Germany Brunel International France Sarl, Paris, France Brunel Italia SRL, Milan, Italy Brunel Energy Norge AS, Stavanger, Norway Brunel Austria GmbH, Salzburg, Austria Brunel Switzerland AG, Zürich, Switzerland Brunel Polska Sp. Z o.o., Wroclaw, Poland Brunel Denmark ApS, Copenhagen, Denmark Brunel Recruitment Kazakhstan Atyrau LLP, Atyrau, Kazakhstan
Brunel Energy Nigeria Ltd, Lagos, Nigeria Brunel Energy LLC, Dubai, United Arab Emirates Brunel DMCC, Dubai, United Arab Emirates Brunel Oil & Gas Services WLL (75%), Doha, Qatar Brunel India Private Ltd, Mumbai, India Brunel Energy Kuwait WLL (75%), Farwania, Kuwait Ishtar Baghdad for General Services LLC, Baghdad, Iraq Brunel Technical Services Company (Kurdistan) LLC, Erbil, Iraq Brunel Energy Japan K.K., Tokyo, Japan Brunel International South East Asia Pte Ltd, Singapore Brunel Technical Services Pte Ltd, Singapore Brunel Energy Malaysia SDN BHD, Kuala Lumpur, Malaysia Brunel Energy Korea Ltd, Ulsan, South Korea Brunel Energy Hong Kong Ltd, Hong Kong, China Brunel Hong Kong Ltd, Hong Kong, China Brunel Consultancy Shanghai Ltd, Shanghai, China Brunel Technical Services Manpower Corporation, Makati City, Philippines Brunel Technical Services Philippines Inc, Makati City, Philippines Brunel Technical Services Thailand Ltd, Bangkok, Thailand
Brunel Energy (Thailand) Ltd, Bangkok, Thailand Brunel Energy Pty Ltd, Perth, Australia Brunel Technical Services Pty Ltd, Perth, Australia Brunel Construction & Maintenance Services Pty Ltd, Perth, Australia Brunel Energy Inc, Houston, Unites States of America Brunel Energy Canada Inc, Calgary, Canada Multec Canada Ltd, Toronto, Canada Brunel Energy Servicos Ltda Brasil, Rio de Janeiro, Brasil
Brunel International N.V., registered at the Chamber of Commerce under number 24261450, is a public limited liability company domiciled in Amsterdam, The Netherlands and listed on the Euronext Amsterdam. The head office of the company is located in Amsterdam, the address is:
John M. Keynesplein 33 1066 EP Amsterdam The Netherlands
The consolidated financial statements of Brunel include the company and its subsidiaries (together referred to as 'Brunel'). A summary of the main subsidiaries is included on page 102 of this report.
The financial statements were signed and authorised for issue by the Board of Directors and released for publication on 24 February 2017. The financial statements and the dividend proposal are subject to adoption by the General Meeting of Shareholders on 11 May 2017.
Unless stated otherwise all the information in these financial statements is in thousands of Euro, which is the Company's functional currency. All financial information presented in Euro has been rounded to the nearest thousand.
Brunel's activities are mainly secondment, project management, recruitment and consultancy.
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code.
The financial information relating to Brunel International N.V. is presented in the consolidated financial statements, in accordance with article 2:402 of the Netherlands Civil Code
The financial statements have been prepared under the historical cost convention, and financial assets and financial liabilities at fair value through profit and loss.
The following new and revised International Financial Reporting Standards (IFRSs) have been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
The Board of Directors does not anticipate that the new IFRS 15 and IFRS 9 standards and amendments will have a significant effect on amounts reported in the consolidated financial statements. Application of the new standards and amendments may result in more extensive disclosures in the financial statements.
The Company has a number of lease contracts for land and buildings and cars that are currently accounted for under IAS 17 as operating leases. The following changes are expected upon transition to IFRS 16: Assets and liabilities are expected to increase by an amount close to the net present value of future lease payments.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) will increase as the lease payments will be presented as depreciation and finance cost rather than operating expenses.
Operating cash flow will increase and investing and financing cash flow will decrease as the lease payments will no longer be considered as operational.
The Company will continue to analyse the impacts and practical consequences of these standard's future application.
The consolidated financial statements include the financial information of Brunel International N.V. and its subsidiaries. Subsidiaries relate to companies controlled directly or indirectly by Brunel International N.V. These companies are listed on page 102. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The results of acquired or disposed companies are consolidated from the date which control is transferred and the date the control is ceased, respectively.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from Brunel's equity therein. Non-controlling interests consist of the net equity value of those interests at the date of the original business combination and the Non-controlling interests' share of changes in equity since the date of the combination. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance.
Accounting principles for the valuation of assets and liabilities and determination of profit
Goodwill is allocated to groups of cash-generating units for the purpose of impairment testing. The allocation is made to those groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cashgenerating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
The recoverable amount is based on the higher of the fair value less cost of disposal and value in use. The value in use is determined by means of cash flow projections based on the actual operating results
adjusted for non-cash items (mainly depreciation) and the expected future performance. The latter is based on management's estimates and assumptions of revenue growth and development of operating margins, assessed with external data.
Acquisition-related intangible assets (customer databases and trade names) that are acquired by Brunel and have definite useful lives are stated at cost less accumulated amortisation and impairment losses. When an intangible asset is acquired in a business combination, its cost is the fair value at the date of its acquisition. This cost is determined on a basis that reflects the estimated amount that the entity would have paid for the asset in an arm's length transaction between knowledgeable and willing parties, based on the best information available. If the fair value cannot be measured reliably, the asset is not recognised as a separate intangible asset, but is included in goodwill. Amortisation of acquisition-related intangible assets is charged to operating expenses on a straight-line basis over their estimated useful lives, from the date they are available for use. The residual values and useful lives are reviewed at each balance sheet date and adjusted, if appropriate. Refer to Note 2 Other intangible assets for further details.
Acquired software (licenses) and developed software are stated at cost less accumulated amortisation and impairment losses. Expenditures in relation to the development of identifiable and unique software products used by Brunel, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets and amortised over their estimated useful lives. Capitalised costs include employee costs of software development and an appropriate portion of relevant overhead. Expenditures associated with maintaining computer software programs are recognised as an expense when incurred. Amortisation of software applications is charged to operating expenses and/or cost of services on a straight-line basis over their estimated useful lives, from the date they are available for use. The residual values and useful lives are reviewed at each balance sheet date and adjusted, if appropriate. Acquired computer software licenses are amortised, using the straight line method, over their useful lives.
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditures that are directly
attributable to the acquisition of the assets. Depreciation of property, plant and equipment is charged to operating expenses on a straight-line basis over their estimated useful lives, from the date they are available for use. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within depreciation and amortisation in the profit and loss account.
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The group's investment in associates includes goodwill identified on acquisition.
Funding in the company balance sheet is initially stated at fair value. Subsequent measurement is at amortised costs less provision for impairment.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
All business combinations are accounted for by applying acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any noncontrolling interest in the acquiree on an acquisitionby-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. When a company or business is acquired, the acquirer recognises goodwill as an asset. Goodwill is recognised for the future economic benefits arising from assets acquired that are not individually identified and separately recognised. The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill. Impairment of goodwill will be tested at least annually. An impairment loss recognised for goodwill is not reversed in a subsequent period. Changes in ownership interests in subsidiaries that do not result in loss of control are dealt with in equity.
Trade receivable and other receivables are initially stated at fair value. Subsequent measurement is at amortised costs less provision for impairment.
are recognised for legally enforceable or constructive obligations as a result of a past event and for which the settlement is likely to require an outflow of resources and to the extent these can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at an interest rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the obligation.
Provisions for onerous contracts are recognised if the expected benefits to be derived by Brunel from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Estimated amounts for legal claims are provided for at the lowest amount at which Brunel expects the claim to be reasonably settled. Due to the highly uncertain timing of the expected future cash out-flow, provided amounts for legal claims are categorised to be settled within one year after the balance sheet date, unless these are explicitly expected to be settled differently.
Long-term liabilities are recognised initially at fair value, net of transaction costs incurred. Long-term liabilities are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss account over the period of the longterm liabilities using the effective interest method.
Current liabilities are initially stated at fair value and subsequently measured at amortised cost using the effective interest method.
Cash and cash equivalents include cash in hand and deposits held at call with banks.
Balance sheet items denominated in foreign currencies are translated at the rates of exchange prevailing at the balance sheet date; profit and loss account items are translated at the average rates during the financial year. Exchange differences relating to transactions in foreign currency are recorded in the profit and loss account.
Exchange differences due to the consolidation of foreign companies are charged or credited directly in other comprehensive income to the translation reserve.
For the purpose of presenting consolidated financial statements, the assets and liabilities of Brunel's foreign operations are translated into Euro using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period.
Brunel operates in countries with different currencies. All companies have, as their functional currency, the local currency of the country in which they operate, which is their primary economic environment. The functional currency of the parent company, as well as of a major portion of its subsidiaries, is the Euro.
The translation reserve comprises all translation differences arising from the translation of the net investment in activities in currencies other than the Euro. Such translation differences are recognised initially in other comprehensive income and presented in this separate component of shareholders' equity and recognised in the statement of comprehensive income on disposal of the net investment. The translation reserve also includes the tax effect on translation differences.
Brunel has a share based payment arrangement under which options are granted to the directors and senior management of the company. These options are settled in ordinary shares. The grant date fair value of these options is included in the indirect personnel expenses. The expenses are credited to equity for the same amount. The fair value is calculated based on the Black-Scholes option valuation model. At each balance sheet date, Brunel revises its estimates of the number of options that are expected to become exercisable subject to continued employment based on this non-market vesting condition. The impact of the revision of original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.
The share-based payment reserve relates to options granted by Brunel to its employees under its share option plan.
In 2015 the option scheme has been replaced by a SAR scheme. The SAR granted to personnel are conditional and linked to performance targets for the year of allocation. The SAR scheme is a cash settled plan. The fair value of these SAR's is charged to the income
statement in the indirect personnel expenses from the grant date through vesting date linearly. The fair value of the SAR is determined at every year-end based on the Black and Scholes option valuation model. At each balance sheet date, Brunel revises its estimates of the number of SAR's that are expected to become exercisable subject to continued employment based on this non-market vesting condition. The impact of the revision of original estimates, if any, is recognised in the income statement with a corresponding entry to liabilities.
The SAR liability relates to SAR's granted by Brunel to its employees under its SAR scheme.
Revenue is recognised when it is probable that the economic benefits will flow to the company and when the amount can be measured reliably. Revenue for Brunel is mainly derived from the provision of services to third parties after deduction of sales tax and discounts granted. The following types of revenue are recognised;
gross amount (including true up) upon the receipt of a reimbursable claim.
Direct personnel expenses relate to costs attributed directly to the services provided.
Foreign currency transactions are translated into the functional currency at the exchange rate applicable at the date of the transactions. Currency translation differences resulting from the settlement of these transactions and the translation of the monetary assets and liabilities denominated in foreign currency at the balance sheet date are recognised as exchange differences in the consolidated profit and loss account.
Foreign exchange differences relating to bank balances are recorded in the financial income and expense, other foreign exchange differences are recorded in the gross profit.
Interest income comprises interest received on outstanding deposits and interest costs comprise interest due on funds drawn, calculated using the effective interest method.
All pension plans prevailing within Brunel are defined contribution plans, which are funded through payments to independent entities. Brunel has no legal or constructive obligations to pay further contributions if these separate entities do not hold sufficient assets to pay all employees the pension benefits relating to employee service in the current and prior periods. The regular contributions constitute net periodic costs for the year in which they are due and are included within direct and indirect personnel expenses.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivables as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Brunel's liability for current tax is calculated using applicable rates.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to funding items charged or credited directly to equity, in which case the related deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Accounting principles for determining the consolidated cash flow statement
The cash flow statement has been prepared according to the indirect method, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.
Operating segments have been identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. Information reported to the Group's chief operating decision maker is focused at components engaged in providing services in a particular economic environment from those of other segments. A geographical segment is engaged in providing services in a particular economic environment which are subject to risks and returns that are different from those segments operating in other economic environments.
In the preparation of financial statements, management makes certain critical accounting estimates and assumptions concerning the future. The resulting reported amounts will, by definition, rarely equal the related actual outcome. Estimates and judgments are continually evaluated and are based on historical experience and various other factors, including expectations of future events, which are believed to be reasonable under the circumstances. The following estimates, assumptions and judgments have an inherent significant risk of potentially causing material adjustments to the carrying amounts of assets and liabilities within the next financial year.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of the revision and future periods if the revision affects both current and future periods.
Brunel tests whether intangible assets have suffered any impairment, in case of triggering events and at least annually for goodwill. Other assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The recoverable amounts of cash-generating units have been determined using, amongst other instruments, valuein-use calculations. These calculations require the use of estimates. Based on these impairment tests, impairment losses, if any, are identified. However, should the actual performance of these cash-generating units become materially worse compared to the performance based on the estimates, possible impairment losses could arise, or could deviate from the detected impairment losses. This impairment loss or deviation could have impact on the carrying amounts of the intangible assets. For the impairment testing of goodwill, refer to note 1.
Brunel has receivables on third parties in numerous countries. These receivables include revenue to be invoiced. Significant judgment is required in determining the collectability of the receivables. When the expected payments are different from the fair value such differences will impact the valuation of the receivable. Hence an allowance for bad debts will be recognised, which will be deducted from the receivables. Refer to note 5.
Due to the nature of provisions, a considerable part of their determination is based on estimates and/or judgments,
including assumptions concerning the future. The actual outcome of these uncertain factors may be materially different from the estimates, causing differences with the estimated provisions. Hence, the differences between actual outcomes and the recorded provisions can impact results over the periods involved. The timing of outflow of resources to settle these obligations is subject to the same uncertain factors. Refer to note 7.
Brunel is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide deferred tax asset on, amongst other items, tax losses carry-forward. There are many uncertain factors that influence the amount of the tax losses carry-forward. Brunel recognises deferred tax assets on tax losses carry forward based on their best estimates. When the actual results are different from the amounts that were initially estimated, such differences will impact the income tax in the income statement and the deferred tax assets and/or deferred tax liabilities in the period in which these deviations occur.
Brunel manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to stakeholders through the
optimisation of the debt and equity balance. The dividend policy of Brunel is aimed at maximising the distributions to shareholders, while reserving enough capital to ensure the ability to continue as a going concern and to fund planned growth. Brunel's strategy is to use existing cash and cash flows in stead of long-term credit facilities to finance further growth. This typically leads to high solvency rates.
Brunel's activities are exposed to a variety of financial risks, including the effect of changes in debt and equity market prices, foreign currency exchange rates and interest rates. Brunel's overall risk management program focuses to minimise potential adverse effects on the financial performance of Brunel. This program is implemented and carried out under policies approved by the Board of Directors.
Brunel maintains sufficient cash to fund her ongoing operations. In addition there is the availability of funding through adequate credit facilities to minimise liquidity risk. Within Brunel derivative financial instruments are not used or hedging activities undertaken. The department Corporate Finance & Control monitors the worldwide cash position.
x EUR 1,000
Currency fluctuations affect the consolidated results, because a portion of the cash flow is generated in other currencies than Euro. Brunel limits the foreign exchange risk by maintaining a back-to-back policy, meaning that the management strives to have both income and expenses to be generated locally in the same currency. Due to the back-to-back policy, the foreign exchange risk of Brunel is limited to the exchange risk over the results in foreign currencies and the trade receivable and cash positions in foreign currencies. The foreign currencies that can have a material effect on the income statement of Brunel are the US dollar and the Australian dollar. The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
| The following table details the Group's sensitivity to a 10% increase and decrease in |
|---|
| the Euro against the relevant foreign currencies. These percentages represent |
| management's assessment of the reasonably possible change in foreign exchange |
| rates. The sensitivity analysis includes only outstanding foreign currency |
| denominated monetary items and adjusts their translation at the period end for a |
| change in foreign currency rates. A positive number below indicates an increase in |
| profit and other equity when the Euro weakens 10% against the relevant currency. |
| For a 10% strengthening of the Euro against the relevant currency, there would be |
| an equal and opposite impact on the profit and other equity, and the balances |
| below would be negative. |
| Assets 31 December |
Liabilities 31 December |
|||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| US Dollar Australian Dollar |
91,413 30,699 122,112 |
116,416 61,134 177,550 |
14,497 8,998 23,495 |
15,440 19,770 35,210 |
| US dollar Impact |
Australian dollar Impact |
|||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| Profit or loss | -583 | -149 | 167 | 797 | ||
| Other equity | 5,695 | 7,856 | 2,134 | 2,393 | ||
| Total equity | 5,112 | 7,707 | 2,301 | 3,190 | ||
| Revenue | 17,228 | 27,080 | 11,249 | 22,513 |
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Brunel has no significant concentrations of credit risk. The most important balance sheet items that are imposed to credit risk are the trade and other receivables. The trade accounts receivable include an allowance for bad debts. Reference is made to note 5. Generally services are provided to large and financially strong companies. In order to minimise credit risk exposure Brunel intensively monitors the payment behaviour of their customers. Other policies limit the amount of credit exposure to any financial institution. Despite these internal procedures, uncollectible debts can not be ruled out, but the risk of a material erosion of the operating profit is small. As per 31 December 2016 the largest receivable against a single counterparty amounted EUR 11.2 million (31 December 2015: EUR 8.1 million). For 2016, largest revenue from transactions with a single external customer amounted to EUR 63.6 million (2015: EUR 53.9 million).
Due to the nature of Brunel's business the operating cash flows are substantially independent of changes in market interest rates. Interest coverage is the leading parameter in managing interest exposure. Due to the capital structure of Brunel the interest paid and received are immaterial amounts and hence no material interest rate risk applies.
X EUR 1,000, unless stated otherwise
Movements during the year:
| 2016 | 2015 | ||
|---|---|---|---|
| At cost at 1 January | 6,634 | 6,634 | |
| Accumulated impairment and exchange | |||
| rate movements | 2,416 | -2,530 | |
| Balance at 1 January | 4,218 | 4,104 | |
| Changes in carrying amount: | |||
| Exchange rate movements | 47 | 114 | |
| Balance at 31 December | 4,265 | 4,218 | |
| At cost at 31 December * | 4,254 | 6,634 | |
| Accumulated impairment and exchange | |||
| rate movements | 11 | -2,416 | |
| Balance at 31 December | 4,265 | 4,218 |
* In 2016 a goodwill amount of 2.390 that was fully impaired has been written off from both the at cost value and the accumulated impairment.
Goodwill has been allocated for impairment testing purposes to two individual cash generating units:
| 2016 | 2015 | |
|---|---|---|
| Brunel Germany | 2,844 | 2,844 |
| Brunel Energy | 1,421 | 1,374 |
| Balance at 31 December | 4,265 | 4,218 |
In the financial year the company assessed the recoverable amount of goodwill for the main allocated amounts. The recoverable amount of the main cash-generating unit (Brunel Germany) for which goodwill is capitalised is based on value in use. The value in use is determined by means of cash flow projections based on the actual operating results adjusted for non-cash items (mainly depreciation) and the expected future performance. The latter is based on management's estimates and assumptions of revenue growth and development of operating margins, assessed with external data. The forecasted cash flows have been derived from the budget 2017.
The value in use of the main cash-generating unit resulted in no impairment compared to the carrying amount as at 31 December 2016.
Management has projected cash flow forecasts over a period of five years. The annual budget is used as a basis for the projection in the first year whereas key assumptions were applied for the extrapolation of the results to the period after the second year.
Key assumptions for 2017-2021 used in calculation of the value in use for the significant cash generating unit Brunel Germany are:
| 2016 | 2015 | ||
|---|---|---|---|
| Revenue growth | 5% | 5% | |
| Budgeted gross margin | 36.1% | 35.5% | |
| Overhead costs increase | 2% | 2% | |
| Terminal growth rate | 0% | 0% | |
| Pre tax discount factor | 13% | 14% | |
| Depreciations and investments plans | Depreciations are | Depreciations are | |
| used for new or | used for new or | ||
| replacing investments | replacing investments | ||
Key assumptions for 2017-2021 used in calculation of the value in use for the significant cash generating unit Energy are:
| 2016 | |
|---|---|
| Revenue growth | 3.5% |
| Budgeted gross margin | 11.0% |
| Overhead costs increase | 2% |
| Terminal growth rate | 1.5% |
| Pre tax discount factor | 14% |
| Depreciations and investments plans | Depreciations are |
used for new or replacing investments
All cash generating units have substantial headroom available to cover variations in assumptions.
Movements during the year:
The other intangible assets consist of the following:
| 2016 | 2015 | ||
|---|---|---|---|
| Software | 13,905 | 12,883 | |
| Trade name For All Finance | - | 160 | |
| Customer database For All Finance | - | - | |
| Balance at 31 December | 13,905 | 13,043 |
The amortisation rates are as follows:
| At cost at 1 January | 22,646 |
|---|---|
| Accumulated amortisation | -8,515 |
| Balance at 1 January 2015 | 14,131 |
| Changes in carrying amount: | |
| Additions | 3,362 |
| Disposals | - |
| Amortisation | -4,662 |
| Exchange rate | 52 |
| Total changes 2015 | -1,248 |
| At cost at 31 December | 25,928 |
| Accumulated amortisation | -13,045 |
| Balance at 31 December 2015 | 12,883 |
| Changes in carrying amount: | |
| Additions | 4,404 |
| Disposals | -2 |
| Transfer from PP&E | 2,357 |
| Amortisation | -5,743 |
| Exchange rate | 6 |
| Total changes 2016 | 1,022 |
| At cost at 31 December | 32,087 |
| Accumulated amortisation | -18,182 |
| Balance at 31 December 2016 | 13,905 |
Software mainly includes financial and business supporting software acquired. The average remaining amortisation period is four years.
| 2016 | 2015 | |
|---|---|---|
| At cost at 1 January | 965 | 965 |
| Accumulated amortisation and impairment | -805 | -483 |
| Balance at 1 january | 160 | 482 |
| Changes in carrying amount: Amortisation Balance at 31 December |
-160 - |
-322 160 |
| At cost at 31 December | 965 | 965 |
| Accumulated amortisation and impairment | -965 | -805 |
| Balance at 31 December | - | 160 |
Customer database For All Finance
| 2016 | 2015 |
|---|---|
| 3,937 | 3,937 |
| -3,937 | -3,331 |
| - | 606 |
| - | -606 |
| - | - |
| 3,937 | 3,937 |
| -3,937 | -3,937 |
| - | - |
Movements during the year:
| Office equipment | Computer systems | Total | |
|---|---|---|---|
| At cost at 1 January | 23,005 | 4,186 | 27,191 |
| Accumulated depreciation | -14,113 | -3,508 | -17,621 |
| Balance at 1 January 2015 | 8,892 | 678 | 9,570 |
| Changes in carrying amount: | |||
| Additions | 3,804 | 321 | 4,125 |
| Disposals | -243 | -28 | -271 |
| Depreciation | -2,430 | -397 | -2,827 |
| Exchange rate | 118 | 14 | 132 |
| Total changes 2015 | 1,249 | -90 | 1,159 |
| At cost at 31 December | 25,756 | 4,043 | 29,799 |
| Accumulated depreciation | -15,615 | -3,455 | -19,070 |
| Balance at 31 December 2015 | 10,141 | 588 | 10,729 |
| Changes in carrying amount: | |||
| Additions | 776 | 623 | 1,399 |
| Disposals | -150 | -16 | -166 |
| Transfer to Software | -2,380 | 23 | -2,357 |
| Depreciation | -2,037 | -347 | -2,384 |
| Exchange rate | 73 | 8 | 81 |
| Total changes 2016 | -3,718 | 291 | -3,428 |
| At cost at 31 December | 19,125 | 4,218 | 23,343 |
| Accumulated depreciation | -12,702 | -3,339 | -16,041 |
| Balance at 31 December 2016 | 6,423 | 879 | 7,301 |
| Depreciation rate | 20-40% | 20-40% | 20-40% |
No leased items are included in property, plant and equipment. Residual values are considered to be zero. The carrying amount equals the estimated fair value of the assets.
| 2016 | 2015 | |
|---|---|---|
| Balance at 1 January | -753 | 160 |
| Acquisition of associate | - | - |
| Result for the year | -1,807 | -928 |
| Exchange rate movements | 46 | 15 |
| Net assets at 31 December | -2,514 | -753 |
| Reclass negative participations to | ||
| receivable associates | 2,514 | 753 |
| Balance at 31 December | - | - |
Set out below is the associates of the group as at 31 December 2016 which, in the opinion of the directors, are material to the group. The entity listed below has share capital consisting solely of ordinary shares, which are held directly by the group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
| Name of entity | % of ownership interest | Carrying amount | |||||
|---|---|---|---|---|---|---|---|
| Country of incorporation | 2016 | 2015 | Nature of relationship | Measurement method | 2016 | 2015 | |
| IBR Solucões Limitada (1) | Angola | 49% | 49% | Associate | Equity method | - | - |
(1) IBR Solucões Limitada is an associate of Brunel International N.V. operating in Angola.
The tables on the next page provide summarised financial information for the associate that is material to the group. The information disclosed reflects the amounts presented in the financial statements of the relevant associate and not Brunel International N.V.'s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy.
| 2016 | 2015 | |
|---|---|---|
| Current assets | 4,184 | 6,698 |
| Current liabilities | -5,012 | -6,751 |
| Long-term liabilities | -1,686 | -700 |
| Net assets at 31 December | -2,514 | -753 |
| 2016 | 2015 | |
| Opening net assets 1 January | -753 | 322 |
| Profit / (loss) for the period | -1,807 | -1,139 |
| Foreign exchange | 46 | 64 |
| Closing net assets at 31 December | -2,514 | -753 |
| Summarised statement of comprehensive income |
| 2016 | 2015 | |
|---|---|---|
| Revenue | 5,137 | 7,979 |
| Profit / (loss) for the period | -1,807 | -1,139 |
The net asset value has been fully provided for and the result has been included in our consolidated profit and loss account.
| 2016 | 2015 | |
|---|---|---|
| Trade accounts receivables | 140,436 | 165,256 |
| Receivable from associates | 805 | 2,664 |
| Prepayments | 4,684 | 8,756 |
| Accrued income | 48,167 | 66,347 |
| Other receivables | 10,414 | 10,604 |
| Balance at 31 December | 204,506 | 253,627 |
All receivables have an expected term of less than one year. The carrying amount of these receivables equals the fair value. Prepayments and accrued income include a Nigerian withholding tax receivable of EUR 1,606 (2015: EUR 2,150) for which EUR 1,606 (2015: EUR 2,150) has been impaired.
The amount of trade accounts receivables above includes an allowance for bad debts. All of the amounts included in the allowance for bad debts relate to individually impaired trade accounts receivables. A provision for impairment of trade and other receivables is established when it is more likely than not that the Group will not be able to collect the amounts receivable. The provision for impairment of trade receivables is based on the trade receivable portfolio experience of subsidiaries, as well as on individual assessments of expected non-recoverable receivables. Significant financial difficulties of the debtor, the probability that the debtor will enter
into bankruptcy or financial reorganisation, and serious default or delinquency in payments, are considered indicators that the trade receivable is impaired. The amount of the provision is equal to the difference between the carrying amount of the asset and the present value of estimated future cash flows. The movement in this allowance is as follows:
| 2016 | 2015 | |
|---|---|---|
| Balance at 1 January | 7,301 | 7,404 |
| Fully provided receivables which are written off | -1,289 | -1,643 |
| Change in allowance recognised in result | 1,688 | 1,311 |
| Exchange rate movements | 134 | 229 |
| Balance at 31 December | 7,834 | 7,301 |
Ageing of past due and not impaired trade accounts receivables is as follows:
| 2016 | 2015 | |
|---|---|---|
| 60-90 days - past due, not impaired | 4,216 | 3,990 |
| 90-120 days - past due, not impaired | 2,781 | 2,013 |
| 120+ days - past due, not impaired | 5,087 | 4,857 |
| Balance at 31 December | 12,084 | 10,860 |
The specific credit terms granted vary from 14-90 days. These terms are based on the general terms and conditions of Brunel and/or specific agreements with individual customers.
Generally services are provided to large and financially strong companies, which are mainly operating in the oil industry. In order to minimise credit risk exposure Brunel intensively monitors the payment behaviour of their customers based on specific agreements with individual customers and the credit worthiness of the customer. Based on historical behaviour of their customers Brunel does not expect any material write-offs.
The current assessment of the counterparty risk of or customers is that we do not expect any material write-offs. This assumption is based on the current payment behaviour of our clients. Additionally we are in frequent contact with clients that have amounts outstanding past the due date.
This item consists mainly of bank balances, part of which EUR 10.4 million (2015: EUR 12.1 million) is not freely disposable on grounds of issued bank guarantees.
| Onerous contracts |
Legal claims |
Illness | Total | |
|---|---|---|---|---|
| Balance at 1 January | 210 | - | 502 | 712 |
| Additions | - | 26 | 22 | 48 |
| Withdrawals | -110 | - | - | -110 |
| Release | - | - | -47 | -47 |
| Balance at 31 December | 100 | 26 | 477 | 603 |
The provision for onerous contracts represents the present value of the future lease payments that the Group is presently obligated to make under non cancellable operating lease contracts for premises. The estimate may vary as a result of the utilisation of the leased premises and sub-lease arrangements where applicable.
The majority of the non-current part of these provisions is expected to be settled within three years of the balance sheet date.
The provision for illness represents the obligation for continuation of wage payment during extended periods of illness.
The long-term liabilities concerns the long-term part of the agreed rent free period for offices in The Netherlands. These amounts will expire within one to five years. The carrying amount of these liabilities equals the fair value.
| 2016 | 2015 | |
|---|---|---|
| Trade payables | 14,799 | 16,634 |
| Taxes and social security charges | 33,151 | 40,623 |
| Pensions | 1,579 | 732 |
| Accrued employee expenses | 41,714 | 38,428 |
| Accrued expenses | 5,473 | 27,181 |
| Other liabilities | 4,069 | 1,334 |
| Balance at 31 December | 100,785 | 124,932 |
Practically all liabilities have an expected term of less than one year. The majority of trade payables and taxes and social security charges are due within a range of 1–45 days.
The majority of the other liabilities and accrued employee expenses are due within a range of 1–180 days. The carrying amount of these liabilities equals the fair value.
The authorised capital is EUR 5,998,000 divided into one priority share with a nominal value of EUR 10,000 and 199.6 million ordinary shares with a nominal value of EUR 0.03. The subscribed capital consists of 50,413,624 ordinary shares (2015: 49,967,624) with a value of EUR 1,512,409.
The movement in the number of issued shares is:
| 2016 | 2015 | |
|---|---|---|
| Issued at 1 January | 49,967,624 | 49,396,624 |
| Issue of Shares | 446,000 | 571,000 |
| Issued at 31 December | 50,413,624 | 49,967,624 |
Except for the translation reserve, all reserves are freely distributable. In 2015 the cash dividend per share was EUR 0.75 and an additional super dividend of EUR 0.75 per share. The proposed dividend for 2016 will be EUR 0.20 per share and an additional dividend of EUR 0.20 per share. Further information is provided in the consolidated statement of changes in Group equity on page 101 of this report. The priority share, which has a par value of EUR 10,000, has been issued to Stichting Prioriteit Brunel, subject to the condition precedent that the majority shareholder loses its majority share in Brunel International N.V.'s share capital. The priority share will be fully paid up as soon as the issue becomes unconditional. The protective stipulations are included in the Articles of Association of Brunel International N.V. and are posted on the company's website.
The movement in non-controlling interest is as follows:
| 2016 | 2015 | ||
|---|---|---|---|
| Balance at 1 January | 456 | 466 | |
| Result for the year | 552 | 482 | |
| Dividend | -501 | -556 | |
| Exchange rate movements | 27 | 64 | |
| Issued at 31 December | 534 | 456 |
| Year granted | 2011 | 2012 | 2013 | 2014 | Total |
|---|---|---|---|---|---|
| Outstanding at 1 January 2016 | 179,000 | 142,000 | 418,000 | 467,000 | 1,206,000 |
| Performance adjustment | - | - | 12,000 | - | 12,000 |
| Exercised | -166,000 | -126,000 | -154,000 | - | -446,000 |
| Forfeited | -13,000 | - | - | -26,000 | -39,000 |
| Outstanding at 31 December 2016 | - | 16,000 | 276,000 | 441,000 | 733,000 |
| Weighted average exercise prices in EUR | 15.00 | 16.29 | 22.92 | ||
| Range of exercise prices in EUR | 15.00 | 16.29 - 17.21 | 22.92 | ||
| Expiry date | 2 March 2017 | 1 March -15 March 2018 | 1 March 2019 |
| Year granted | 2011 | 2012 | 2013 | 2014 | Total |
|---|---|---|---|---|---|
| Outstanding option rights J.A. van Barneveld | |||||
| 1 January 2016 | 100,000 | - | - | 100,000 | 200,000 |
| Performance adjustment | - | - | - | - | - |
| Exercised | (100,000) | - | - | - | (100,000) |
| Forfeited | - | - | - | - | - |
| 31 December 2016 | - | - | - | 100,000 | 100,000 |
| Exercise prices in EUR | 15.31 | - | - | 22.92 |
| 2016 Number of options |
Weighted average exercise price | 2015 Number of options |
Weighted average exercise price | |
|---|---|---|---|---|
| Balance at 1 January | 1,206,000 | 18.44 | 3,255,000 | 18.20 |
| Modification of the plan | - | - | (973,.000) | 18.25 |
| Performance adjustment during the year | 12,000 | 16.29 | - | - |
| Exercised during the year | (446,000) | 15.23 | (571,000) | 14.24 |
| Forfeited during the year | (39,000) | 20.41 | (505,000) | 21.98 |
| Balance at the 31 December | 733,000 | 20.25 | 1.206,000 | 18.44 |
The options granted to personnel are conditional and linked to performance targets for the year of allocation. The main performance targets are revenue and EBIT. The vesting period is three years. Options can be exercised during two years after vesting on condition that the employee is still in the service of the company. The method of settlement can be sale of treasury shares or share issue.
All options are granted with an exercise price equal to the market price of the shares at the day of granting.
The options granted to the Board of Directors are conditional, meaning that they can be exercised after three years on condition that the applicable board member still holds the position. This last condition does not apply to the 2014 series for the CEO.
The weighted average share price of options exercised in 2016 amounts to EUR 15.23 (2015: EUR 14.24). Options exercised by the Board of Directors are exercised at a weighted average share price of EUR 15.31 (2015: EUR 12.65). The costs for the equity settled option scheme for 2016 are EUR 0.9 million and the revaluation to the Stock Appreciation rights, related to the modification of the plan in 2015, amounted to EUR 0.1 million. The issue of shares related to the exercise of option rights led to an increase of the share capital of EUR 13k and increase of the share premium
of EUR 6.8 million. The corresponding release of the share based payments reserve to the retained earnings amounted to EUR 1.6 million.
The reference dates are the date of granting, and precisely three years later. As per 31 December 2016 only the 2012 and the 2013 outstanding options can be exercised.
Shares will be issued by Brunel on the day of exercising the options. No financing arrangement is in place in relation to the share options granted. Brunel does not hold any treasury shares.
For the Dutch participants the option scheme has been modified in 2015 based on IFRS 2 guidance for options that had not vested yet. The only adjustment was that the possibility to settle options in shares had been cancelled. As a consequence the scheme for these participants is a cash settled plan. This modification was accounted for by a reclass from equity to liabilities. This modification had been done to align our compensation scheme with current practises
In 2015 the option scheme has been replaced by a SAR scheme. The SAR's granted to personnel are conditional and linked to performance targets for the
year of allocation. The main performance targets are revenue and EBIT. The vesting period is three years. Options can be exercised during two years after vesting on condition that the employee is still in the service of the company. This last condition does not apply to the SAR's granted to the CEO. The SAR scheme is a cash settled plan. There is no incremental fair value as a result of the settlement method modification.
Due to the cash settlement method of the SAR's, the rights are subject to a mark-to-market valuation exercise to measure the fair value on the specific balance date. When (re)measuring the fair value on the latest reporting date, the expected life of the right is determined based on the expectation regarding exercise behaviour of the participants (in line with IFRS 2 B16-21). Exercise behaviour is influenced by for example share price development.
The grant date fair value of the SAR's is determined based on the Black and Scholes option valuation model. In this model the expected volatility is based on historical volatility for the corresponding periods of the Company shares (26,86% - 31,01%), the expected dividend yield is based on the dividend policy and set at 3.0%, an expected life of five years and a risk free interest of -0.822%. The risk free interest is based on the yield of AAA rated EU government bonds with a one year maturity. The weighted average fair value of SAR's
granted in 2016 amounts to EUR 2.07. During 2016 662,500 SAR's have been granted conditionally and 70,000 have been granted unconditionally to the CEO, 115,000 SAR's have been exercised and 719,000 SAR's were forfeited. At 31 December 2016 a total of 378,000 SAR's can be exercised. The total costs of the SAR scheme in 2016 recognised in the P&L amount to EUR -/-424k. Per year end the total liability for the SAR scheme amounts to EUR 733k. Costs are spread over the period in which employees provide services
Brunel has entered into long-term non-cancellable commitments under rent and lease contracts. Brunel leases all of its offices under operating lease arrangements. Some of the arrangements include renewal options. Other lease commitments relate to company cars for which operational lease arrangements apply with commitments up till five years.
| 2016 | 2015 | |
|---|---|---|
| Expire in year 1 | 13,878 | 13,531 |
| Expire in years 2-5 | 26,220 | 22,973 |
| Expire in years 6 and later | 8,470 | 9,011 |
| Balance at 31 December | 48,568 | 45,515 |
The profit and loss account includes the following amounts:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Salaries | 500,526 | 69,822 | 760,950 | 79,999 |
| Social charges | 36,323 | 10,137 | 31,226 | 9,564 |
| Pension charges | 14,877 | 1,369 | 20,236 | 2,088 |
| Other | 146,089 | 19,256 | 186,527 | 16,182 |
| Total | 697,815 | 100,584 | 998,939 | 107,833 |
The relative share social charges has increased in 2016 as a result of the increased share of staff in the Netherlands and Germany, where social charges are relatively high. The pension schemes in the group can all be classified as defined contribution.
The directors' remunerations charged to the results in 2016 (2015) are set out below:
| Short-term employee benefits | ||||||||
|---|---|---|---|---|---|---|---|---|
| Salary | Bonus | Pension | Other * | Termination benefit ** |
Share based payments |
Total | ||
| Board of Directors: | ||||||||
| J.A. van Barneveld, CEO | 600 (600) | 158 (180) | 34 (60) | 157 (157) | - | -195 (326) | 754 (1,323) | |
| P.A. de Laat, CFO | 300 (280) | 53 (65) | 7 (6) | 10 (10) | - | 52 (71) | 422 (432) | |
| J.A. de Vries, COO Energy | ||||||||
| (stepped down per 19 August 2016) | 200 (280) | 23 (25) | 8 (8) | 13 (13) | 418 (-) | -197 (129) | 465 (455) | |
| Supervisory Board: | ||||||||
| D. van Doorn | 64 (55) | - | - | - | - | - | 64 (55) | |
| A. Schouwenaar | 56 (50) | - | - | - | - | - | 56 (50) | |
| J. Bout | 56 (50) | - | - | - | - | - | 56 (50) | |
| 1,276 (1,315) | 234 (270) | 49 (74) | 180 (180) | 418 (-) | -340 (526) | 1,817 (2,365) |
* Other benefits concern the compensation for the cap of the maximum amount of "pensionable income" at €100,000 that came into effect at 1 January 2015. The expected saving on pension premium for Brunel has been added to the salaries of the Board members.
** Includes a termination benefit of EUR 313 and EUR 105 salary for notice period, both including the compensation for "pensionable income" cap
| Year granted | 2012 | 2013 | 2014 | 2015 | 2016 | Total |
|---|---|---|---|---|---|---|
| J.A. van Barneveld, CEO P,A, de Laat, CFO J.A. de Vries, COO Energy |
150,000 - |
75,000 10,000 |
- 20,000 |
70,000 50,000 |
70,000 50,000 |
365,000 130,000 |
| (stepped down per 19 August 2016) Range of exercise prices in EUR |
- 15.00 |
- 16.29 - 17.21 |
- 22.92 |
- 17.68 |
- 17.26 |
- |
The costs for depreciation and amortisation in the profit and loss account consist of:
| 2016 | 2015 | |
|---|---|---|
| Other intangible assets (2) | 5,904 | 5,590 |
| Property, plant and equipment (3) | 2,384 | 2,827 |
| Total | 8,288 | 8,417 |
The 2016 other expenses amount to EUR 51.4 million (2015: EUR 57.6 million) and include EUR 13.1 million (2015: EUR 14.2 million) rental costs and leasing costs.
| Pricewaterhouse Coopers Accountants N.V. |
Member firms / affiliates |
Total 2016 |
Pricewaterhouse Coopers. Accountants N.V. |
Member firms / affiliates |
Total 2015 |
|
|---|---|---|---|---|---|---|
| Audit fees | 455 | 683 | 1.138 | 488 | 729 | 1.217 |
| Audit related fees | - | - | - | 9 | 31 | 40 |
| Tax services | 16 | 152 | 168 | - | 89 | 89 |
| Other non-audit fees | 27 | 20 | 47 | - | 63 | 63 |
| Total | 498 | 855 | 1.353 | 497 | 912 | 1.409 |
| 2016 | 2015 | |
|---|---|---|
| Current tax (Income) / expense | 12,255 | 19,994 |
| Deferred tax (Income) / expense | 1,374 | -934 |
| Tax (Income) / expense | 13,629 | 19,060 |
In 2016, the effective tax rate on the result before tax is 56.2% (2015: 33.6%).
The reconciliation between the actual tax expense and the tax expense based on the Dutch corporate income tax rate (2016 and 2015: 25%) is as follows:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Income tax at Dutch corporate | ||||
| income tax rate | 6,058 | 25.0% | 14,166 | 25.0% |
| Permanent differences: | ||||
| Difference with foreign tax rates | 2,992 | 12.3% | 3,961 | 7.0% |
| Weighted average applicable tax rate | 9,050 | 37.3% | 18.127 | 32.0% |
| Adjustment previous years | 70 | 0.3% | -2,678 | -4.7% |
| Non-taxable items | -938 | -3.9% | -778 | -1.4% |
| Tax losses not recognised as | ||||
| deferred tax asset | 1,975 | 8.2% | 1,920 | 3.4% |
| Impairment of deferred tax assets | 3,773 | 15.6% | 918 | 1.6% |
| Other taxes | -301 | -1.2% | 1,551 | 2.7% |
| Effective tax charge | 13,629 | 56.2% | 19,060 | 33.6% |
The effective tax rate is strongly effected by impairment of deferred tax assets (USA EUR 3,291 and Brazil EUR 482) and changes in the mix of results of subsidiaries in countries with different tax rates and/or systems. Countries with alternative minimum taxes had a relatively lower share in the results.
The adjustment previous years mainly relate to the settlement of withholding tax receivables in 2016, that was not anticipated hence the receivable was fully provided for. Other taxes mainly relate to taxes on dividend and interest payments.
| Current | Deferred | Total | |
|---|---|---|---|
| Balance at 1 january 2016 | |||
| Tax assets | 5,010 | 12,729 | 17,739 |
| Tax liability | -3,387 | -1,561 | -4,948 |
| 1,623 | 11,168 | 12,791 | |
| Movements during the year | |||
| Paid / received | 16,991 | - | 16,991 |
| Through profit and loss | -12,255 | -1,374 | -13,629 |
| Through other | |||
| comprehensive income | 643 | - | 643 |
| Transfer from prepayments | -481 | - | -481 |
| Exchange rate adjustment | 255 | 216 | 471 |
| 5,153 | -1,158 | 3,995 | |
| Balance at 31 December 2016 | |||
| Tax assets | 9,922 | 10,563 | 20,485 |
| Tax liability | -3,146 | -553 | -3,699 |
| 6,776 | 10,010 | 16,786 |
During the financial year an amount of EUR 643 was debited directly to other comprehensive income (2015: EUR -825) for tax relating to foreign exchange results recorded directly in the shareholders' equity.
The deferred tax assets originate from accumulated tax losses (mainly from USA, Germany and Austria), foreign tax credits and temporary differences. Recognition of these assets is based on the forecasted results for the relevant group companies.
The deferred tax liabilities relate to temporary differences and retained earnings in foreign subsidiaries which will be subject to Dutch corporate income tax once distributed to the relevant parent company.
| Opening balance | Recognised in P&L | Exchange rate adjusted | Closing balance | |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Deferred tax assets in relation to: | ||||
| Temporary differences in allowance for doubtful debt | 481 | -94 | 15 | 402 |
| Temporary differences valuation other intangible assets | 2,395 | 1,262 | - | 3,657 |
| Temporary differences in accruals employee expenses | 1,237 | -116 | -22 | 1,099 |
| 4,113 | 1,052 | -7 | 5,158 | |
| Recognised tax losses | 8,616 | -3,443 | 232 | 5,405 |
| Total deferred tax assets | 12,729 | -2,391 | 225 | 10,563 |
| Deferred tax liabilities | ||||
| Deferred tax assets in relation to: | ||||
| Temporary differences valuation other intangible assets | -40 | 40 | - | - |
| Temporary differences in accruals employee expenses | -156 | 48 | -9 | -117 |
| Retained earnings from subsidiaries | -1,365 | 929 | - | -436 |
| Total deferred tax liabilities | -1,561 | 1,017 | -9 | -553 |
| Total deferred tax assets and liabilities | 11,168 | -1,374 | 216 | 10,010 |
Deferred tax assets amounting to EUR 5,405 (2015: EUR 8,616) are dependent on future taxable profits in excess of the profits arising from the reversal of existing temporary differences. The part of deferred tax assets that is expected to be recovered within one year is estimated at EUR 214. Unused tax losses for which no deferred tax assets have been recognised amount to EUR 38,858 (2015: EUR 12,803). All tax losses, either recognised or unrecognised can be offset with future profits. Dependant on the country EUR 1,775 of the unrecognized losses will expire within 5 years, the remainder can either be offset within 15 years or indefinitely. In addition tax credits amounting to EUR 3,370, which are dependent of the composition of future profits, have not been recognised.
| 2016 | 2015 | |
|---|---|---|
| Weighted average number of ordinary shares for the purpose of basic earnings per share |
50,190,624 | 49,682,124 |
| Effect of dilutive potential ordinary shares from share based payments |
392,000 | 321,000 |
| Weighted average number of ordinary shares for the purpose of diluted earnings per share |
50,582,624 | 50,003,124 |
| Net income for ordinary shareholders in EUR | 10,050,198 | 37,122,000 |
| Basic earnings per share in EUR Diluted earnings per share in EUR |
0.20 0.20 |
0.75 0.74 |
The majority of the items on the consolidated cash flow statement are, on an individual basis cross-referenced to the relevant notes on the consolidated income statement and balance sheet. For the remainder of the material items, the reconciliation between amounts included in the consolidated cash flow statement and related amounts in income statement and balance sheet are shown below.
| 2016 | 2015 | |
|---|---|---|
| Balance at 1 January | 253,627 | 323,956 |
| Change in allowance for bad debt | -1,688 | -2,266 |
| Change in receivables | -46,632 | -78,287 |
| Reclass negative participations to | ||
| receivable associates | -1,807 | -753 |
| Exchange rate movements | 1,006 | 10,977 |
| Balance at 31 December | 204,506 | 253,627 |
| 2016 | 2015 | |
|---|---|---|
| Balance at 1 January | 124,932 | 152,333 |
| Change in current liabilities | -24,511 | -32,837 |
| Change in SAR liability | -1,267 | 1,530 |
| Exchange rate movements | 1,631 | 3,906 |
| Balance at 31 December | 100,785 | 124,932 |
The other non-cash expenses include the change in allowance for bad debts recognised in the result (Note 5) and the impairment of other receivables.
The Board of Directors, the Supervisory Board, majority shareholder and participations are considered to be related parties. For information about the Directors' remuneration reference is made to note 13. Transactions with related parties were made on terms equivalent to those that prevail in arm's length transactions. Included under other operating expenses is an amount of EUR 79 (2015: EUR 79) paid as consultancy fee to the majority shareholder of Brunel International N.V.. Additionally there is an amount receivable from the majority shareholder of Brunel International N.V. of EUR 123 (2015: EUR 110) for expenses paid on behalf of the majority shareholder of Brunel International N.V..
x EUR 1,000, unless stated otherwise
The reportable segments are identified at components engaged in providing services that are subject to risks and returns that are different from those of other segments in a geographical overview of these activities. The Energy division supplies engineers, project management and consultancy services to oil
and gas companies and related industries. As the Energy operations are similar in the nature of the products and services, the type of customers and the methods used to provide the services, a further stratification of this segment is not deemed to be useful.
| Revenue | Gross profit | Operating profit | ||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Energy * | 447,108 | 813,696 | 49,220 | 96,348 | -1,614 | 29,040 |
| Europe | ||||||
| Germany | 210,509 | 196,412 | 75,199 | 70,050 | 24,689 | 19,434 |
| Netherlands | 191,373 | 188,437 | 54,495 | 55,713 | 12,943 | 15,444 |
| Other regions | 35,921 | 30,403 | 8,182 | 7,635 | 206 | -525 |
| Total Europe | 437,803 | 415,252 | 137,876 | 133,398 | 37,838 | 34,353 |
| Unallocated | - | - | - | 263 | -9,398 | -7,274 |
| 884,911 | 1,228,948 | 187,096 | 230,009 | 26,826 | 56,119 | |
* In the segment Energy a revenue of EUR 13.9 million (2015: EUR 17.5 million) is generated in The Netherlands.
| Balance sheet total | Non-current assets | Investment in IA & PPE | ||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Energy | 213,103 | 302,485 | 7,330 | 8,700 | 434 | 1,146 |
| Europe | ||||||
| Germany | 64,800 | 56,858 | 7,464 | 7,941 | 822 | 970 |
| Netherlands | 59,469 | 61,600 | 3,697 | 4,518 | 470 | 191 |
| Other regions | 62,323 | 58,450 | 17,543 | 19,560 | 4,077 | 5,180 |
| Total Europe | 186,592 | 176,908 | 28,704 | 32,019 | 5,369 | 6,341 |
| 399,695 | 479,393 | 36,034 | 40,719 | 5,803 | 7,487 |
| Tax expense | Current & Long-term liabilities | Depreciation and Amortisation | ||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Energy | 6,083 | 11,898 | 51,981 | 81,579 | 1,119 | 1,624 |
| Europe | ||||||
| Germany | 5,658 | 4,263 | 16,699 | 13,575 | 1,083 | 915 |
| Netherlands | 3,233 | 3,857 | 30,819 | 30,329 | 1,292 | 1,702 |
| Other regions | 425 | -73 | 6,510 | 6,183 | 301 | 302 |
| Total Europe | 9,316 | 8,047 | 54,028 | 50,087 | 2,676 | 2,919 |
| Unallocated | -1,770 | -885 | - | - | 4,493 | 3,874 |
| 13,629 | 19,060 | 106,009 | 131,666 | 8,288 | 8,417 |
The total number of direct and indirect employees with the group companies is set out below:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Energy | 4,596 | 571 | 6,333 | 707 |
| Europe | ||||
| Germany | 2,209 | 402 | 2,074 | 439 |
| Netherlands | 2,178 | 395 | 2,143 | 370 |
| Other regions | 332 | 113 | 344 | 85 |
| Total Europe | 4,719 | 910 | 4,561 | 894 |
| Total | 9,315 | 1,481 | 10,894 | 1,601 |
| Total workforce | 10,796 | 12,495 |
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |||
| Energy | 4,134 | 500 | 5,248 | 614 | ||
| Europe | ||||||
| Germany | 2,267 | 397 | 2,139 | 426 | ||
| Netherlands | 2,197 | 427 | 2,334 | 377 | ||
| Other regions | 327 | 122 | 330 | 86 | ||
| Total Europe | 4,791 | 946 | 4,803 | 889 | ||
| Total | 8,925 | 1,446 | 10,051 | 1,503 | ||
| Total workforce | 10,371 | 11,554 |
Other segment information provides an overview of the activities with regard to professional specialisation.
| Revenue | Operating profit | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Engineering | 308,546 | 290,860 | 29,661 | 26,121 |
| Energy | 447,108 | 813,696 | -1,614 | 29,040 |
| IT | 67,585 | 58,188 | 4,915 | 4,233 |
| Unallocated | 61,627 | 66,204 | -6,136 | -3,275 |
| 884,911 | 1,228,948 | 26,826 | 56,119 |
The total number of direct and indirect employees with the group companies is set out below:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Engineering | 3,228 | 574 | 3,101 | 598 |
| Energy | 4,596 | 571 | 6,333 | 707 |
| IT | 776 | 115 | 660 | 102 |
| Unallocated | 715 | 221 | 800 | 194 |
| 9,315 | 1,481 | 10,894 | 1,601 | |
| Total workforce | 10,796 | 12,495 |
| 2016 | 2015 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Engineering | 3,337 | 582 | 3,155 | 585 |
| Energy | 4,134 | 500 | 5,248 | 614 |
| IT | 781 | 119 | 739 | 107 |
| Unallocated | 673 | 245 | 909 | 197 |
| 8,925 | 1,446 | 10,051 | 1,503 | |
| Total workforce | 10,371 | 11,554 |
x EUR 1,000, before profit appropriation
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Non-current assets | ||||
| Other intangible assets (23) | 11,576 | 11,853 | ||
| Property, plant & equipment | - | 159 | ||
| Financial assets (24) | 276,841 | 270,757 | ||
| Deferred tax income assets | 3,930 | 2,723 | ||
| Total non-current assets | 292,347 | 285,492 | ||
| Current assets net of current liabilities | ||||
| Trade and other receivables (25) | 42,148 | 83,555 | ||
| Income tax receivables | 2,940 | 232 | ||
| Cash and cash equivalents | 25,001 | 27,841 | ||
| Total current assets | 70,089 | 111,628 | ||
| Total assets | 362,436 | 397,120 | ||
| Non-current liabilities | ||||
| Deferred income tax liabilities | 436 | 436 | ||
| Total non-current liabilities | 436 | 436 | ||
| Current liabilities | ||||
| Current liabilities (26) | 68,848 | 49,413 | ||
| Total current liabilities | 68,848 | 49,413 | ||
| Total liabilities | 69,284 | 49,849 | ||
| Net assets | 293,152 | 347,271 | ||
| Shareholders' equity (27) | ||||
| Share capital | 1,512 | 1,499 | ||
| Share premium | 83,548 | 76,765 | ||
| General reserve | 182,036 | 219,381 | ||
| Translation reserve | 16,006 | 12,504 | ||
| Unappropriated result | 10,050 | 37,122 | ||
| Total shareholders' equity | 293,152 | 347,271 |
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Revenue | 11,262 | 15,520 | |||
| Direct personnel expenses (13) | - | - | |||
| Gross Profit | 11,262 | 15,520 | |||
| Indirect personnel expenses | -8,700 | -8,498 | |||
| Depreciation and amortisation (23) | -4,493 | -3,874 | |||
| Other expenses | -7,467 | -10,699 | |||
| Total operating costs | -20,660 | -23,071 | |||
| Operating profit | -9,398 | -7,551 | |||
| Exchange differences | -10 | -30 | |||
| Interest income | 232 | 3,017 | |||
| Interest expenses | -9 | -54 | |||
| Financial income and expense | 213 | 2,933 | |||
| Share of profit of investments accounted | |||||
| for using the equity method (24) | 17,465 | 40,855 | |||
| Result before tax | 8,280 | 36,237 | |||
| Tax | 1,770 | 885 | |||
| Net result | 10,050 | 37,122 |
x EUR 1,000, unless stated otherwise
The financial statements of Brunel International N.V. have been prepared using the option of section 362, subsection 8, of Book 2 of Dutch Civil Code, meaning that the accounting principles used are the same as for the consolidated financial statements. Foreign currency has been translated, assets and liabilities have been valued, and net income has been determined, in accordance with the principles of valuation and determination of income on pages 104 until 109.
Subsidiaries of Brunel International N.V. are presented using the equity method.
This concerns software. Movements during the year:
| 2016 | 2015 | |
|---|---|---|
| At cost at 1 January | 22,361 | 17,774 |
| Accumulated amortisation | -10,508 | -6,944 |
| Balance at 1 January | 11,853 | 10,830 |
| Changes in carrying amount | ||
| Additions | 3,886 | 4,587 |
| Amortisation | -4,163 | -3,564 |
| Balance at 31 December | 11,576 | 11,853 |
| At cost at 31 December | 26,247 | 22,361 |
| Accumulated amortisation | -14,671 | -10,508 |
| Balance at 31 December | 11,576 | 11,853 |
The financial assets consist of the following:
| 2016 | 2015 | ||
|---|---|---|---|
| Subsidiaries | 275,222 | 267,291 | |
| Funding of group companies | 1,619 | 3,466 | |
| Balance at 31 December | 276,841 | 270,757 |
Movements during the year:
| 2016 | 2015 | |
|---|---|---|
| Balance at 1 January | 267,291 | 227,915 |
| Capital contributions | 6,507 | 3,942 |
| Profit for the year | 17,465 | 40,855 |
| Dividend payment | -15,000 | -13,000 |
| Reclass negative participations to | ||
| funding of group companies | -4,273 | -1,217 |
| Exchange rate movements | 3,232 | 8,796 |
| Balance at 31 December | 275,222 | 267,291 |
Movements during the year:
| 2016 | 2015 | |
|---|---|---|
| 3,466 | 2,389 | |
| 4,274 | 1,217 | |
| -7,209 | -1,945 | |
| 1,129 | 1,579 | |
| -41 | 226 | |
| 1,619 | 3,466 | |
| 2016 | 2015 | |
|---|---|---|
| Group companies | 40,754 | 83,015 |
| Other receivables | 1,394 | 540 |
| Balance at 31 December | 42,148 | 83,555 |
| 2016 | 2015 | ||
|---|---|---|---|
| Group companies | 66,241 | 46,877 | |
| Other liabilities | 2,607 | 2,536 | |
| Balance at 31 December | 68,848 | 49,413 |
Composition of and changes in shareholders' equity:
| Share Capital | Share Premium | General Reserve | Translation reserve (legal reserve) |
Unapropriated result |
Total 2016 | Total 2015 | |
|---|---|---|---|---|---|---|---|
| Balance at 1 january 2016 | 1,499 | 76,765 | 219,381 | 12,504 | 37,122 | 347,271 | 327,803 |
| Exchange differences result | 3,502 | 3,502 | 8,508 | ||||
| Result financial year | 10,050 | 10,050 | 37,122 | ||||
| Cash dividend (10) | -75,500 | -75,500 | -34,884 | ||||
| Appropriation of result | 37,122 | -37,122 | |||||
| Modification of share based | |||||||
| payment scheme | -1,383 | ||||||
| Share based payments (11) | 1,033 | 1,033 | 1,976 | ||||
| Option rights exercised (11) | 13 | 6,783 | 6,796 | 8,129 | |||
| Balance at 31 December 2016 | 1,512 | 83,548 | 182,036 | 16,006 | 10,050 | 293,152 | 347,271 |
In the year under review the cash dividend per share was EUR 0.75 per share and an additional super dividend of EUR 0.75 per share. The proposed dividend for 2016 will be EUR 0.20 per share and an additional dividend of EUR 0.20 per share.
Information on outstanding options is provided in the notes to the consolidated balance sheet. The details on the composition of and changes in the shareholder's equity of 2016 are disclosed in the consolidated statement of changes in group equity.
Salaries, social securities charges and pension expenses amounted to EUR 3.5 million, EUR 0.4 million and EUR 0.2 million, respectively for 2016 (2015: expenses of EUR 3.1 million, EUR 0.4 million and EUR 0.2 million, respectively). At the end of 2016 Brunel International N.V. employed 17 people (2015: 15), all in The Netherlands. Besides the Board of Directors and their personal assistants, these concern the group finance and legal department. Additionally at the end of 2016 a total of 31 people (2015: 25) have been allocated to Brunel International N.V. for it's global IT department.
| 2016 | 2015 | ||
|---|---|---|---|
| Profit group companies (22) | 17,465 | 40,855 |
Disclosures of director's remuneration and audit fees are included in note 13 and 15 to the consolidated financial statements.
The company has guaranteed the liabilities for its Dutch participations Brunel Nederland B.V. and Brunel Energy Holding B.V.. Brunel International N.V. has guaranteed towards Brunel GmbH its receivable on Brunel Car Synergies GmbH. At 31 December 2016 this receivable amounts to EUR 3.8 million (2015: EUR 6.7 million). No other guarantees have been provided (2015: EUR 0.7 million).
Brunel International N.V. is part of fiscal unities for corporate income taxes, as well as for value-added taxes. As a consequence, the company bears joint and several liabilities for the debts with respect to corporate income taxes and value-added taxes of the fiscal unities. The company settles corporate income taxes, based on the fiscal results before taxes of the subsidiaries belonging to the fiscal unity.
Amsterdam, 24 February 2017
| The Board of Directors | The Supervisory Board |
|---|---|
| J.A. van Barneveld | D. van Doorn |
| P.A. de Laat | A. Schouwenaar |
| J. Bout |
Events after balance sheet date / Subsequent events
No events of interest to thegroup as a whole took place after the balance sheet date.
Profit appropriation according to the articles of association
Article 26.2 The Board of Directors determines the part of the Company's profits which will be added to the reserves, subject to the approval of the holder of the priority share*.
Article 26.3 The remaining part of the Company's profits is at the disposal of the shareholders for distribution of profit.
It will be proposed to the General Meeting of Shareholders that a dividend of EUR 0.20 per share will be paid in cash.
It will also be proposed to pay an additional dividend of EUR 0.20 per share out of retained earnings.
The priority share, which has a par value of EUR 10,000, has been issued to Stichting Prioriteit Brunel, subject to the condition precedent that the majority shareholder loses its majority share in Brunel International N.V.'s share capital. The priority share will be fully paid up as soon as the issue becomes unconditional. The protective stipulations are included in the Articles of Association of Brunel International N.V. and are posted on the company's website.
*) Pursuant to Article 4.3, as long as the priority share is not subscribed, the rights attached to this share are exercised by the General Meeting of Shareholders
To: the general meeting and supervisory board of Brunel International N.V.
In our opinion:
We have audited the accompanying financial statements 2016 of Brunel International N.V., Amsterdam ('the company'). The financial statements include the consolidated financial statements of Brunel International N.V. and its subsidiaries (together: 'the group') and the company financial statements.
The consolidated financial statements comprise:
The company financial statements comprise:
The financial reporting framework that has been applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the section 'Our responsibilities for the audit of the financial statements' of our report.
We are independent of Brunel International N.V. in accordance with the 'Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten' (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the 'Verordening gedrags- en beroepsregels accountants' (VGBA).
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Brunel International N.V. provides business services, specialising in flexible deployment of professionals. The group comprises of components in several international regions and therefore we considered our group audit scope and approach as set out in the scope of our group audit section. We paid specific attention to the areas of focus driven by the operations of the company, as set out below.
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. The result of Brunel is significantly lower than last year. This affected the materiality we used in our audit as explained in the materiality section of this report.
In particular, we looked at where the board of directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain. In paragraph "critical accounting estimates, assumption and judgements" of the financial statements the company describes the areas of judgement in applying accounting policies and the key sources of estimation uncertainty. Brunel's Energy division is dependent on the Oil & Gas sector. This sector is given the low oil prices, under pressure. This resulted in a down turn in business activities in this sector and pressure on liquidity at clients. This increased the counterparty risk and affected the collection of the company's accounts receivables and accrued income. Given this risk and the related estimation uncertainty in the valuation of accounts receivables and accrued income in the Energy business we considered this to be a key audit matter as set out in the key audit matter section of this report. Furthermore, we identified the recoverability of the deferred tax asset in the USA, given the level of judgement applied, and the compliance with laws and regulations relating to salaries of direct employees, considering the complexity and magnitude as key audit matters. This is further explained in the
key audit matter section of this report. Besides the key audit matters, another area of focus was the reconciliation between capacity (payroll) and billing at all entities. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the board of directors that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams both at group and at component level included the appropriate skills and competences which are needed for the audit of a company providing business services specialising in flexible deployment of
professionals. We therefore included specialist in the areas of payroll, social charges and wage tax laws in our audit team.
The outlines of our audit approach were as follows:
• Overall materiality: EUR 1,029,000 which represents 3.5% of operating profit.
| The scope of our audit is influenced by |
|---|
| the application of materiality which is |
| further explained in the section 'Our |
| responsibilities for the audit of the |
| financial statements'. |
We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements on our opinion. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
| Overall group materiality | EUR 1,029,000 (2015: EUR 1,965,000). |
|---|---|
| How we determined it | 3.5% of operating profit (equals EBIT as reported by Brunel), considering the impact of a late adjustment with an incidental nature. |
| Rationale for benchmark applied |
We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements. On this basis we believe that operating profit is an important metric, based on Brunel's reporting to the stakeholders, for the financial performance of the company. The materiality decreased compared to last year due to the decrease in operating profit of the Company. |
| Component materiality | To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components varied between EUR 100,000 and EUR 1,000,000. |
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.
We agreed with the supervisory board that we would report to them misstatements identified during our audit above EUR 52,500 (2015: EUR 98,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Brunel International N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of Brunel International N.V.
The group audit focussed on the significant components in the Netherlands, Germany and Singapore. We consider these component locations as significant due to the size of the companies.
Five components in those countries were
subjected to audits of their complete financial information as those components are individually financially significant to the group. Additionally, based on discussion with management and risk analysis, sixteen components were selected for audit procedures to achieve appropriate coverage on the financial line items in the consolidated financial statements.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
| Revenue | 83% |
|---|---|
| Total assets | 83% |
| Operating profit | 80% |
None of the remaining components represented more than 1% of total group revenue or total group assets. For those remaining components we performed, amongst others, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.
The group's accounting process is structured around regional shared service centres and national accounting offices. The regional offices maintain the accounting records and controls for different entities ('components') in the region and report on behalf of local management to the head office finance team in Amsterdam through an integrated consolidation system. As a consequence we audit the relevant processes for the audit centrally for the entities served in those regional offices.
We used component auditors who are familiar with the local laws and regulations in each of the territories to perform audit work locally.
Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. Among others we assessed that local component teams tested the reconciliation between capacity (payroll) and billing at all entities.
The group engagement team visits the component teams on a rotational and risk basis, taking into consideration any specific country risks. In the current year the group engagement team visited Brazil, because of the growing activities and the higher fraud and bribery risk in this country. Furthermore we visited Germany, because this is the largest component of Brunel in terms of contribution to the consolidated operating profit. For all components in scope of our group audit, we held multiple conference calls throughout the audit to share knowledge, instruct the teams, discuss the audit approach and evaluate audit findings.
The group consolidation, financial statement disclosures and a number of items are audited by the group engagement team at the head office. These include, valuation of goodwill, valuation of deferred tax assets and share based payments.
By performing the procedures above at components, combined with additional procedures at group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group as a whole to provide a basis for our opinion on the consolidated financial statements.
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the supervisory board, but they are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.
The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of the financial statements. Any comments we make on the results of our procedures should be read in this context.
Last year we reported the key audit matter "valuation and accuracy of accounts receivables and accrued income", mainly because timely and accurate invoicing is inherently more complex in the energy sector when compared to other industries due to the location of projects and specific invoicing arrangements agreed with global clients. We did not identify any material findings last year in this respect also because Brunel further improved their invoicing process. Therefore we do not consider the accuracy of the accounts receivable and accrued income in the Energy Business as a key audit matter anymore.
Valuation of accounts receivables and accrued income in the Energy business [Refer to note 5 in the financial statements]
Approximately 46% of the Group's total assets relate to accounts receivables and 'accrued income' (EUR 188,6 million) of which EUR 90.0 million relates to the Energy business. The accounts receivables and accrued income were important to our audit due to their magnitude and given the current challenging environment in the energy sector which increased the 'counterparty risk'. Due to this increased risk the company has to apply judgement as to the future collection and to whether any receivables should be impaired. This increased judgement leads to a higher risk of overstatement of the accountants receivables and accrued income. Therefore we considered this area a key audit matter.
Compliance with laws and regulations relating to salaries of direct employees
Brunel operates worldwide and has to comply with different laws and regulations in around 30 countries. Given the large number of countries in which Brunel operates and the regulatory environment in some of the countries in the Middle East, Asia and Africa, we observe higher complexity to comply with all the laws and regulations. Furthermore, due to the nature of the business small errors in the calculation of expenses and payments of wage tax and other payroll related charges may have a material impact on the financial statements. Hence, we focused on this increased risk of error due to non-compliance with applicable laws and regulations.
Due to the higher risk in the energy sector we especially focused on outstanding positions within this sector. We determined that the accounts receivables not impaired older than 60 days increased compared to last year which is mainly caused by the outstanding balance of one large customer in the Asian region. We tested the aged positions, in particular the aforementioned large customer in the Asian region, by reviewing correspondence with clients where we specifically focused on management's assessment of the liquidity of these clients combined with publicly available information. We noted no material findings based on these procedures performed. Our audit procedures also included substantive testing on payments subsequently received during the year and after year end, testing on credit notes, reconciliation of revenue to be invoiced to positions with timesheets and client contracts. Some of the aforementioned procedures focus primarily on existence, however they also provide audit evidence on the valuation of the balances.
We tested controls on group level that were implemented to comply and monitor compliance with laws and regulations. We determined that we could rely on those controls for the purpose of our audit. We also performed substantive audit procedures and tested the effectiveness of internal controls on the accuracy and completeness of gross versus net salary calculations and the accuracy of filings- and payments for wage tax and other payroll related charges to fiscal authorities. We involved payroll specialists within PwC to perform these procedures and to test whether applicable local taxes and other charges were contributed to the local tax authorities. We also obtained and reviewed correspondence with fiscal authorities and tested the reconciliation between the salary administration and the finance administration. We have not noted any material non-compliance.
Valuation of the deferred tax assets in the USA [Refer to note 16 in the financial statements]
Significant tax losses were incurred in previous years by a subsidiary located in the USA. Based on the expected taxable income of this subsidiary and considering the related and inherent uncertainty, the company recognised an impairment of EUR 3.3 million and therefore the valuation of the deferred tax assets decreased to EUR 1.2 million. Due to the inherent level of uncertainty, the recent history of fiscal losses and the significant management judgement involved we considered the valuation of the deferred tax asset in the USA as significant to our audit. The main assumptions underneath the estimates made are the revenue growth, the margin development, the productivity of indirect employees, the potential cost savings when budgeted growth is not met, the development of the worldwide oil prices and the local expiry period of fiscal losses.
We performed procedures on the assumptions and methodologies used, the accuracy and completeness of the fiscal losses, we have challenged the assumptions applied by group and local management and determined if the assumptions are substantiated by convincing evidence in accordance with IAS 12. This was done by, amongst others, comparing the assumptions on revenues, margins and productivity to internal budgets, the historic performance of the company, local economic developments and external market information. We reviewed cost saving measures which are planned to be implemented by management when necessary. In addition, we considered the local expiry periods together with any applicable restrictions in recovery for this jurisdiction. We found the assumptions to be consistent and well balanced.
We recalculated taxable profits based on the applicable tax rates and we checked the adequacy of the disclosures in note 16 of the financial statements. We used corporate tax specialists within PwC to assist us.
In addition to the financial statements and our auditor's report thereon, the annual report contains other information that consists of:
Based on the procedures performed as set out below, we conclude that the other information:
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures were substantially less than the scope of those performed in our audit of the financial statements.
The board of directors is responsible for the preparation of the other information, including the report from the board of directors and the other information pursuant to Part 9 Book 2 of the Dutch Civil Code.
We were appointed as auditors of Brunel International N.V. on 15 August 2013 by the supervisory board following the
passing of a resolution by the shareholders at the annual meeting held on 15 August 2013 and the appointment has been renewed annually by shareholders representing a total period of uninterrupted engagement appointment of 4 years.
The board of directors is responsible for:
As part of the preparation of the financial statements, the board of directors is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the board of directors should prepare the financial statements using the going-concern basis of accounting unless the board of directors either intends to liquidate the company or to cease operations, or has
no realistic alternative but to do so. The board of directors should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the financial statements. The supervisory board is responsible for overseeing the company's financial reporting process.
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
Utrecht, 24 February 2017
PricewaterhouseCoopers Accountants N.V.
P. Jongerius RA
In addition to what is included in our auditor's report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.
We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among other things of the following:
• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or
error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/ or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the company to cease to continue as a going concern.
• Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the company's consolidated financial statements we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.
We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
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x EUR million unless stated otherwise
| 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Profit | |||||||||||
| Net revenue | 884.9 | 1,228.9 | 1,386.6 | 1,283.4 | 1,236.5 | 972.4 | 720.9 | 738.4 | 714.2 | 579.9 | 499.1 |
| Gross profit | 187.1 | 230.0 | 249.0 | 230.7 | 223.4 | 189.5 | 152.0 | 151.8 | 167.0 | 136.3 | 115.3 |
| Operating profit | 26.8 | 56.1 | 74.7 | 72.3 | 70.0 | 60.9 | 37.3 | 45.1 | 62.1 | 51.2 | 35.3 |
| Result before tax | 24.2 | 56.7 | 75.4 | 72.5 | 69.4 | 61.7 | 38.4 | 44.7 | 62.5 | 51.3 | 35.3 |
| Group result after tax | 10.6 | 37.6 | 48.9 | 49.9 | 44.5 | 39.7 | 25.6 | 32.1 | 45.6 | 36.9 | 24.2 |
| Net income | 10.1 | 37.1 | 48.4 | 49.5 | 44.1 | 39.4 | 25.2 | 31.1 | 44.8 | 36.1 | 26.3 |
| Cash flow (net profit + depreciations/impairment) | 18.3 | 45.5 | 56.7 | 55.9 | 48.9 | 43.4 | 29.2 | 35.5 | 48.0 | 39.2 | 29.7 |
| Depreciation and amortisation | 8.3 | 8.4 | 7.8 | 6.0 | 4.5 | 3.7 | 3.6 | 3.4 | 3.2 | 3.1 | 3.0 |
| Additions to tangible fixed assets | 1.4 | 4.1 | 3.1 | 2.6 | 2.8 | 2.7 | 2.3 | 5.3 | 4.0 | 4.3 | 4.5 |
| 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Workforce | |||||||||||
| Average over the year | 10,796 | 12,495 | 13,725 | 13,073 | 11,219 | 9,545 | 7,656 | 7,847 | 7,904 | 7,248 | 6,148 |
| Balance sheet information | |||||||||||
| Non-current assets | 36.0 | 40.7 | 41.4 | 36.0 | 37.7 | 31.4 | 27.6 | 28.9 | 19.6 | 17.3 | 15.1 |
| Working capital | 259.7 | 310.4 | 290.8 | 246.1 | 228.1 | 202.8 | 175.0 | 152.5 | 144.6 | 118.6 | 99.0 |
| Group equity | 293.7 | 347.7 | 328.3 | 278.1 | 264.2 | 232.9 | 202.2 | 180.9 | 163.8 | 135.4 | 113.6 |
| Balance sheet total | 399.7 | 479.4 | 492.6 | 438.5 | 419.5 | 381.4 | 294.2 | 254.7 | 235.4 | 197.9 | 178.5 |
| Ratios | |||||||||||
| Change in revenue on previous year | -28.0% | -11.4% | 8.0% | 3.8% | 27.2% | 34.9% | -2.4% | 3.4% | 23.2% | 16.2% | 28.0% |
| Gross profit / net revenue | 21.1% | 18.7% | 18.0% | 18.0% | 18.1% | 19.5% | 21.1% | 20.6% | 23.4% | 23.5% | 23.1% |
| Operating profit / net revenue | 3.0% | 4.6% | 5.4% | 5.6% | 5.7% | 6.6% | 5.2% | 6.1% | 8.7% | 8.8% | 7.1% |
| Group result / net revenue | 1.2% | 3.1% | 3.5% | 3.9% | 3.6% | 4.4% | 3.6% | 4.3% | 6.4% | 6.3% | 4.8% |
| Group equity / total assets | 73.5% | 72.5% | 66.5% | 63.4% | 62.9% | 61.0% | 68.7% | 71.0% | 69.6% | 68.5% | 63.6% |
| Current assets / current liabilities | 3.50 | 3.42 | 2.81 | 2.57 | 2.48 | 2.38 | 2.91 | 3.08 | 3.03 | 2.91 | 2.54 |
| Shares (in euros) | |||||||||||
| Earnings per share | 0.20 | 0.75 | 0.99 | 1.02 | 0.93 | 0.85 | 0.55 | 0.68 | 0.98 | 0.80 | 0.58 |
| Shareholder's equity per share | 5.81 | 6.96 | 6.64 | 5.71 | 5.45 | 4.95 | 4.35 | 3.91 | 3.58 | 2.97 | 2.50 |
| Dividend per share | 0.40 | 1.50 | 0.70 | 0.55 | 0.50 | 0.45 | 0.40 | 0.40 | 0.40 | 0.35 | 0.25 |
| Highest price | 19.69 | 20.65 | 26.00 | 23.25 | 19.57 | 17.48 | 14.82 | 11.92 | 9.28 | 13.33 | 17.47 |
| Lowest price | 13.45 | 12.95 | 12.73 | 15.50 | 11.61 | 10.00 | 9.73 | 3.51 | 4.05 | 7.43 | 8.48 |
| Closing price at 31 December | 15.39 | 16.80 | 13.60 | 22.25 | 18.30 | 11.39 | 14.75 | 11.73 | 4.28 | 8.18 | 13.00 |
John M. Keynesplein 33 1066 EP Amsterdam The Netherlands T +31 20 312 5000 [email protected]
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Research and texts annual report Kaikai Jing, Brunel International N.V.
Printing Drukkerij Perka
Design Wim Bosboom, B-AD|D
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