Annual Report • Mar 7, 2018
Annual Report
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Brunel International N.V.
Annual report 2017
| 1: | CEO statement | 6 |
|---|---|---|
| 2: | Corporate profile | 10 |
| 3: | Financial highlights 2017 | 14 |
| 4: | Report from the Supervisory Board | 16 |
| 5: | Report from the Board of Directors | 30 |
| Long-term value creation Business model Culture and distinctive resources Organisational structure and specialism Business environment Stakeholders and material issues Strategy Risks, risk management and control systems Corporate governance Performance In control statement |
31 33 35 37 39 42 48 69 86 92 100 |
|
| 6: | The Brunel share | 102 |
| 7: | Annual accounts 2017 | 108 |
| 8: | Additional information | 176 |
| 9: | Independent auditor's report | 178 |
| 10: | Group financial record | 192 |
| 11: | Worldwide offices | 194 |
| Colophon | 202 |
Drs. J.T. (Jilko) Andringa, CEO Brunel International N.V.
2017 has been an eventful, exciting and also memorable year for Brunel. After the challenges we had in 2016, we have started to see the results of all the efforts to adapt our organisation to the changing market conditions.
In Europe, we have 59 offices and are active in 6 countries: Germany, The Netherlands, Belgium, Switzerland, Austria and Czech Republic. Our focus is on specialists in engineering, IT, finance, legal, and marketing & communications. Brunel Netherlands has proved its resilience once again and achieved strong growth, especially in the second half of the year.
Germany faced the implementation of an impactful new law, and managed that successfully. Both Brunel Germany and Netherlands have ended 2017 at a record headcount. And more important: a very promising start for 2018.
In Global Business, all the initiatives are starting to pay off. Our entrepreneurship has helped us to identify opportunities and make them work. We managed two acquisitions, SES and Celsium, and started a new business in the United States of America. These initiatives will help us in our strategy to diversify. On top of that, we are seeing the first signs of recovery and increased activities in our oil & gas markets.
The creativity of our talented employees will be essential to keep adjusting our organisation to the ever-changing market conditions. And these changes are happening faster and faster. But at Brunel we consider changes opportunities, and certainly not threats. All the people working at Brunel, either in our own offices or directly for clients, strive every day to improve step by step. This is an essential part of our distinctive culture, and that is what determines our success.
< CONTENTS 8CEO STATEMENT 2017 is also a memorable year for Brunel since it is Jan Arie's last year as a CEO, and my first year. Jan Arie has guided Brunel through many changes in his 18 years and transitioned Brunel from a predominately (distressed) Dutch operation doing EUR 200 million revenue into a very strong international company with 106 branches in 37 countries, whilst preserving the unique and entrepreneurial Brunel culture. And this culture guaranteed me a very warm reception at Brunel and will help us to achieve amazing things in the future.
So after such a remarkable year, we are even more thankful to everybody belonging to our Brunel team. Thank you all for everything you are doing every day to make Brunel and our stakeholders more successful. There is a bright future ahead of us!
Jilko Andringa CEO
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 and natural resources industries, 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, Switzerland, Czech Republic and Austria.
< CONTENTS 11CORPORATE PROFILE OF BRUNEL In everything we do, we follow our firmly-rooted 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 centre 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 106 branch offices in 37 countries, we have over 12,000 employees and an annual revenue of EUR 790 million (2017).
Brunel International N.V. is listed on Euronext Amsterdam and included in the Amsterdam Small Cap Index (AScX).
Chief Executive Officer, male (1966)
Jilko Andringa was appointed Chief Executive Officer of Brunel International N.V. on 7 December 2017.
His most recent position before transferring to Brunel was as President Northern Europe of ManpowerGroup. Before that Jilko Andringa held management positions at Randstad. Andringa started his career at Exxon (Esso) Benelux. He completed his major in Business Economics and Marketing at the Rijksuniversiteit Groningen.
Other directorships: Member of the Supervisory Board of EW Facility Services.
Chief Financial Officer, male (1972)
Peter de Laat was appointed Chief Financial Officer of Brunel International N.V. on 1 May 2014.
< CONTENTS 12CORPORATE PROFILE OF BRUNEL After having obtained his Master Degree in Business Economics, Peter 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.
Drs. J.A. (Jan Arie) van Barneveld, Drs. J.T. (Jilko) Andringa and Drs. P.A. (Peter) de Laat
Jan Arie van Barneveld was Chief Executive Officer of Brunel International N.V. from 29 September 2000 until 7 December 2017.
His most recent position before transferring to Brunel was as director of Avéro Life & Mortgages (part of the Achmea Insurance Group). Before that Jan Arie 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 of Museum Boijmans Van Beuningen; Chairman of the Supervisory Board of B&S Group S.a.r.l.
| 2017 | 2016 | |
|---|---|---|
| Profit | ||
| Revenue | 790 | 885 |
| Gross Profit | 183 | 187 |
| Operating costs | 165 | 160 |
| Operating profit (EBIT) | 18 | 27 |
| Result before tax | 15 | 24 |
| Tax | 7 | 14 |
| Group result after tax | 8 | 11 |
| Net income | 8 | 10 |
| Ratios | ||
| Change in revenue on previous year | -10.7% | -28.0% |
| Gross margin | 23.1% | 21.1% |
| Operating profit / Revenue | 2.3% | 3.0% |
| Group result after tax / Revenue | 1.0% | 1.2% |
| Balance | ||
| Working capital | 233 | 260 |
| Group equity | 269 | 294 |
| Balance sheet total | 379 | 400 |
| Net cash flow | -16 | -33 |
| Ratios | ||
| Shareholders' equity / total assets | 71.0% | 73.5% |
| Current assets / current liabilities | 3.21 | 3.50 |
| Workforce | ||
| Employees total (average) | 11,086 | 10,796 |
| Employees direct (average) | 9,589 | 9,315 |
| Employees indirect (average) | 1,497 | 1,481 |
| Employees total (year end) | 12,104 | 10,371 |
| Employees direct (year-end) | 10,573 | 8,925 |
| Employees indirect (year end) | 1,531 | 1,446 |
| Shares (in EUR) | ||
| Earnings per share | 0.15 | 0.20 |
| Shareholder's equity per share | 5.33 | 5.81 |
| Dividend per share | 0.15 | 0.40 |
| Highest price | 16.87 | 19.69 |
| Lowest price | 10.85 | 13.45 |
| Closing price at 31 December | 15.20 | 15.39 |
We hereby present the report of the Supervisory Board for the year 2017
The annual accounts 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 0.15 per share.
The annual accounts will be presented at the General Meeting of Shareholders on 14 May 2018. We recommend the General Meeting of Shareholders to adopt the annual accounts and discharge the members of the Board of Directors.
Main topics for 2017 were succession of the chief executive officer, changes in the Supervisory Board, the progress of the response to changed market conditions and new business initiatives, the strategy for long-term value creation, the implementation of the revised Dutch Corporate Governance Code ('the Code') and the European General Data Protection Regulation ('GDPR') and the internal audit function.
After having held the position of chief executive officer for seventeen years, Mr Van Barneveld retires on 28 February 2018. Under his leadership, the unique Brunel culture in which entrepreneurship, result orientation and excellence are combined is further consolidated. Even in difficult times he has managed to enthuse the organisation and see opportunities. The Supervisory Board is extremely grateful to Mr Van Barneveld for his unbridled commitment to Brunel and for the wonderful growth that the company has undergone under his management.
< CONTENTS 17REPORT FROM THE SUPERVISORY BOARD The Supervisory Board obviously paid a great deal of attention to the succession of Mr Van Barneveld. In the selection process of the new chief executive officer, the Supervisory Board was assisted by an external executive search agency. Taking into account the objectives of the diversity policy, female candidates were also sought for this position in the selection process. In the end, the best candidate for the job was chosen. The Supervisory Board is pleased with the appointment of Mr J.T. Andringa by the General Meeting of Shareholders of 7 December 2017, for a period of four years. In order to ensure a thorough and smooth transition, we have explicitly opted for an onboarding period of three months by Mr Van Barneveld.
The composition of the Supervisory Board was also changed during the year under review. Mr J. Bout withdrew from the Brunel International N.V. Supervisory Board in March 2017. He has been a highly valued and respected member and the Supervisory Board thanks him for his constructive input. In accordance with best practice provision 2.2.3 of the Code, the company issued a press release on 15 March 2017 regarding the resignation of Mr Bout. Following the early retirement of Mr Bout, his duties as chairman of the Audit Committee have been taken over by Mr Schouwenaar.
On May 17, 2017 Mr J.J.B.M. Spee was appointed by the General Meeting of Shareholders as a member of the Supervisory Board for a period of four years. Mr Van Barneveld was appointed by the General Meeting of Shareholders on 7 December 2017 as a member of the Supervisory Board, with effect from 1 March 2018 also for a period of four years.
< CONTENTS 18REPORT FROM THE SUPERVISORY BOARD In response to the changed market conditions in the oil & gas industry, the company's attention under the heading Global Business has been more explicitly extended to other adjacent industries. The progress of this widening has always been discussed in the Supervisory Board during the year under review. In this context, the Supervisory Board approved the acquisition of SES Labour Solutions, a company in Australia that provides services to the mining sector. In the United States of America, a new activity was started under the name Brunel Industrial Services that focuses on shutdown and maintenance activities. With the acquisition of Celsium we have expanded our global mobility services. The Supervisory Board has approved the construction of the new premises for the activities of Car Synergies in Germany. In The Netherlands, a digital service platform has been developed and new services in the field of data analysis have also been set up. Naturally, the Supervisory Board has also kept its finger on the pulse as far as cost-saving measures are concerned.
The Supervisory Board was intensively involved in the development of the strategy for longterm value creation. On the suggestion of the Supervisory Board, the Board of Directors has received external advice. Because the Supervisory Board considers it vitally important that the recently appointed CEO can endorse the strategy, the Supervisory Board will hold an extra strategy meeting with the Board of Directors in the spring of 2018.
Following the introduction of the revised Code, in 2017 the Supervisory Board in particular supervised the amendment of the internal regulations to the new Code. The most significant changes are: focus on the creation of long-term value, strengthen the internal audit activities, and adopt adequate risk control management to ensure the continuity of the company. The implementation of the GDPR, which will take effect in May 2018, was also discussed in the Supervisory Board.
Besides these items, and the periodical financial performance reviews, topics discussed during the year under review were: risk assessment and risk management, fraud risk, the group's working capital, cash position, dividend policy and Team Brunel rejoining the Volvo Ocean Race. 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 have also been reviewed.
< CONTENTS 19REPORT FROM THE SUPERVISORY BOARD The national and international laws and regulations relating to the company cover areas such as employment, work permits, health and safety, anti-bribery and corruption, 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.
The Supervisory Board also invited management to present their strategy and organisation on their new business initiatives.
The group equity/total assets solvency ratio of the company is 71.0% and the cash position is healthy. The objective to fund the projected organic growth from its own resources is achievable.
Drs. J.J.B.M. (Just) Spee, Ir. D. (Daan) van Doorn and Drs. A. (Aat) Schouwenaar
Chairman (b. 1948, male, Dutch)
Appointed: AGM May, 2006
Current term: 2014 – 2018
Former main directorship: CEO and Chairman of the Executive Board of Vion N.V.
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: AGM May, 2001
Current term: 2017-2019
Former main directorship: Chairman of the Management Board and CEO of Endemol B.V.
Vice-Chairman of the Supervisory Board of Asito Dienstengroep S.E. Member of the Supervisory Board of Stadion Amsterdam N.V.
Drs. J.J.B.M. (Just) Spee Supervisory Board member (b. 1965, male, Dutch)
Appointed: AGM May, 2017
Current term: 2017 - 2021
Former main directorship: CEO of Stage Entertainment B.V
< CONTENTS 21REPORT FROM THE SUPERVISORY BOARD Member of the Supervisory Board of Stage Entertainment B.V., CTS Eventim, Asito Dienstengroep S.E., OLVG and Duinrell Advisory Board member of Redevco
The members of the Board of Directors and Supervisory Board are responsible for compliance with 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.
The members of the Supervisory Board are appointed for a term of four years and may thereafter be reappointed for another four-year period. They may then subsequently be reappointed again for a period of two years, which appointment may be extended by at most two years. Candidates nominated for appointment or reappointment must meet the criteria as shown in the drawn-up profile.
In deviation of best practice provision 2.2.2 of the Code, the Annual General Meeting of Shareholders of 11 May 2017 reappointed Mr Schouwenaar for an additional term of two years in addition to his term of sixteen years, because of Mr Schouwenaar's expertise and the phase Brunel was in, especially regarding the succession of the CEO.
< CONTENTS 22REPORT FROM THE SUPERVISORY BOARD In the five years prior to his appointment as member of the Supervisory Board, Mr Van Barneveld was director of the company and is not considered independent within the meaning of best practice provision 2.1.8 of the Code. The Supervisory Board is of the opinion that Mr Van Barneveld has excelled in his position as CEO. With Mr Van Barneveld's appointment as a member of the Supervisory Board, his personal qualities and acquired knowledge and insight into the company and the specific markets in which Brunel operates will be retained for the company. Mr Van Barneveld fits the profile drawn up by the Supervisory Board and is suitable for the performance of the duties of a member of the Supervisory Board.
With the appointments of Mr Spee and Mr Van Barneveld to the Supervisory Board, there is currently no female representation on the Supervisory Board, with the result that we do not meet our objectives on diversity. However, the diversity of the 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.
Supervisory Board members' meeting attendance 2017
| Supervisory Board members |
Supervisory Board |
Audit Committee |
Remuneration Committee |
|---|---|---|---|
| Ir. D (Daan) van Doorn | 6/6* | 2/2 | |
| Drs. A. (Aat) Schouwenaar Drs. J.J.B.M. (Just) Spee** |
6/6 2/3 |
5/5 | 2/2 |
* In 2017, the Supervisory Board held six scheduled meetings, all of which were attended by the entire Board of Directors and Supervisory Board except for a one-time absence of Mr Spee. The Supervisory Board further held five closed meetings that were not attended by the Board of Directors.
** Mr Spee was appointed as a new member of the Supervisory Board by the Annual General Meeting of Shareholders of 11 May 2017.
According to the guidelines of the Code, Brunel is not obliged to set up separate audit, 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, has been reviewed.
< CONTENTS 23REPORT FROM THE SUPERVISORY BOARD 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 best practice provision 2.1.4 of the Code, the Supervisory Board has a balanced composition of knowledge and experience. The results of the self-evaluation led to the conclusion that the Supervisory Board continues to function well. The composition of the Supervisory Board is such that the members are able to operate independently and critically vis-à-vis one another, the management board, and any particular interests involved within the meaning of best practice provisions 2.1.7, 2.1.8 and 2.1.9 of the Code.
< CONTENTS 24REPORT FROM THE SUPERVISORY BOARD This committee, chaired by Mr Schouwenaar, oversees the remuneration policy to be pursued with regard to the Board of Directors, assesses remuneration, including the shortterm and long-term bonuses of the members of the Board of Directors, and prepares the remuneration report. The Remuneration Committee submits the proposal to the Supervisory Board concerning the remuneration of individual members of the Board of Directors. The proposal is drawn up in accordance with the remuneration policy that has been established and will, in any event, cover the remuneration structure, the amount of the fixed and variable remuneration components, the applicable performance criteria, the scenario analyses that are carried out and the pay ratios within the company and its affiliated enterprise. The Remuneration Committee met twice in 2017.
The remuneration policy remains unchanged with the provison that following best practice provision 3.1.2 of the Code, the pay ratios within the company and its affiliated enterprise are taken into consideration. The Supervisory Board believes that the remuneration policy expedites the short-term operational performance and the objectives for the strategy for long-term value creation within the meaning of best practice provision 1.1.1 of the Code.
The remuneration of the members of the Board of Directors is compliant with the Dutch Management and Supervision Act ('Wet Bestuur & Toezicht'), including the applicable requirements for claw back procedures on bonus. Their severance pay is limited to one year's salary. They have no entitlement to severance pay if the Director terminates the agreement early or is guilty of seriously culpable or negligent conduct.
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.
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. In determining the level and structure of the remuneration of board members, both financial and non-financial 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 variable component of the total remuneration package is performance related. It consists of short- and long-term components. Performance targets and conditions are derived from our strategy and annual business plans. The targets are assigned prior to the relevant year and the
< CONTENTS 25REPORT FROM THE SUPERVISORY BOARD assessment of realisation is conducted after year-end by the Supervisory Board. The short-term 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 upon. The short-term bonus may not exceed 75% of the fixed annual salary of the chief executive officer. For the 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 payout.
The remuneration report outlines the remuneration policy, provides a description of implementation of the remuneration policy in 2017, 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, the Board of Directors and the external auditor are represented in the Audit Committee. The Supervisory Board selects the external auditor. 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 Audit Committee met five times in 2017: prior to the publication of the full-year 2016 figures, prior to announcing the quarterly results and to discussing the external auditor's audit plan for 2017 and interim findings.
The discussion on the scope of the audit included 2017 key audit matters as identified by the external auditor: compliance with laws and regulations relating to salaries of direct employees, valuation of the deferred tax assets in the USA, and accounting for acquisition of SES Labour Solutions Pty Ltd in Australia.
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 and performance of the commercial team, that monitors and strengthens contractual risk management, has been evaluated.
< CONTENTS 26REPORT FROM THE SUPERVISORY BOARD The Audit Committee's chair, Mr Schouwenaar, held meetings with the CFO on an ongoing basis. Mr Schouwenaar reported the Committee's findings to all members of the Supervisory Board. The findings include: (I) the effectiveness of the design and operation of Brunel's internal risk management and control systems; (II) effectiveness of the internal audit activities and external audit processes; (III) integrity and quality of our financial reporting and relevant accounting principles; and (IV) the way material risks and uncertainties that are relevant to the expectation of Brunel's continuity in the next twelve months have also been analysed and discussed.
It will be proposed to the Annual Shareholders Meeting on 14 May 2018 that PricewaterhouseCoopers Accountants N.V. will be our external auditor for the annual accounts of 2018.
From an internal control perspective, Brunel is organised in regions (Global Business) 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 a separate team of controllers in Amsterdam in the Corporate Finance and Control (CFC) department. Core competences are auditing, reporting and controlling. The majority of the CFC team members has worked with a big four audit firm before joining Brunel.
In addition to group reporting, CFC performs internal audit activities, both in desktop reviews and during site visits. CFC menbers visit all entities at least once every two years and visit significant or high risk entities multiple times in a year. CFC also provides the group with accounting manuals and guidelines for internal control procedures, as well as a multiday global meeting with the local financial controllers.
< CONTENTS 27REPORT FROM THE SUPERVISORY BOARD As Brunel has no separate department for the internal audit function, the need to implement an internal audit function within Brunel has been considered again in 2017. Partly on the basis of the recommendation of the Audit Committee, evolving insights led to the conclusion that the Supervisory Board considered the establishment of an internal audit department not necessary, also in the light of the flat organisation of the company and the size of the CFC department. The reason for this decision was that adequate alternative measures are taken. Reliable financial information is ensured by (I) reliable administration and management information systems, monitored by regional financial controllers, (II) visits from central management, (III) uniform worldwide IT systems and (IV) extended scope for external audits using locally based native-speaking audit personnel. However, the Audit Committee recommended to further secure an independent reporting line for the CFC-group controller to the Audit Committee. This recommendation will be implemented early 2018.
During 2017 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 2017, an update on the IT strategy was discussed as well as developments on existing IT-infrastructure. Also the impact and risks of the implementation of the GDPR and the ability of our IT-infrastructure to support this implementation were discussed.
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.
< CONTENTS 28REPORT FROM THE SUPERVISORY BOARD The Audit Committee has discussed the annual accounts, annual report, Supervisory Board 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 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 stratetgy 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 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.
< CONTENTS 29REPORT FROM THE SUPERVISORY BOARD In 2017, no matters occurred involving conflicts of interest of Directors, Supervisory Board Members, shareholders and/or external auditor that are of material significance to the company and/or the respective directors, members, shareholders and/or external auditor. Information on related party transactions is included under note 22 to the annual accounts.
Amsterdam, 23 February 2018
D. van Doorn A. Schouwenaar J.J.B.M. Spee
Chairman Vice-Chairman Supervisory Board member
Brunel is a people-centric company. It specialises in flexible work for specialists with a professional or university education. Twelve thousand people work at local and international businesses for and on behalf of Brunel worldwide. Brunel is responsible for each of these people - to provide them good terms of employment, safety, security and to support them in their career development.
We believe Brunel should be ran with a long-term view. It must be consistently profitable, but not be solely concerned with making a profit. Only then do we have a sustainable business, able to attract and retain the capitals we need from our stakeholders (namely, financial capital, human capital, intellectual capital, social and relationship capital) to continue to operate.
For clients and projects, Brunel is a business partner getting the things done. We provide them 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.
< CONTENTS 31REPORT FROM THE BOARD OF DIRECTORS For employees and candidates, Brunel is a growth facilitator. Specialists and professionals constantly look for opportunities in their areas of expertise in order to realise their career potential. We accommodate them with challenging assignments, competitive employee benefits and professional networks. At the same time, we take care of all related administrative and operational processes so they can focus on advancing the skills make them standout. We want all our people to enjoy their work in a safe environment and to feel like they are part of a team. Mutual respect and trust are crucial for us to increase employee engagement, employability and productivity of our people.
We promote Corporate Social Responsibility ('CSR'). This responsibility starts from respecting fundamental human rights in the employment market and safeguarding ethical behaviour, it extends to cultivating future generation and giving back to society.
Our approach to sustainability takes into account the views of Brunel stakeholders and our own understanding of the company's impact on wider society. Therefore, sustainability means to us being in business for the long term. In particular, to achieve a sustainable financial performance and profitable growth so that we can continue to rewarding shareholders and employees, to facilitate the long-term employability of specialists and professionals, to build long-lasting relationships with customers and suppliers, to pay taxes and duties in the countries that we operate and to invest in communities for further growth.
Profitability & growth Value for shareholders
THE WHOLE IS GREATER THAN THE SUM OF ITS PARTS Value for society as a whole
Brunel's corporate culture starts with an entrepreneurial spirit and a winning attitude. To retain a leading position in today's ever-changing environment, our people are eager to take responsibility and commit to high standards of integrity. We act in line with laws and applicable professional standards to enhance the culture of compliance. Protecting the privacy and confidentiality of our people is part of Brunel's standard procedures. It is an essential cultural element for Brunel to be a reliable business partner and earn the confidence of our people.
Headquartered in The Netherlands, Brunel is an international organisation. We embrace many different cultures: our 12,000 employees comprise nearly 100 different nationalities. This diversity makes Brunel more open, multi-skilled and flexible. Most importantly, it further sharpens Brunel's competitive advantages: a global brand, financial strength, a leading position as a specialist, an excellent infrastructure of technology and deep local expertise.
< CONTENTS 36REPORT FROM THE BOARD OF DIRECTORS No long-term value creation without a strong culture. We are already proud of our culture and we are committed to doing even more. Looking forward we aspire to have a leading people culture everywhere in the world. This means recruiting and retaining outstanding people, engaging them to feel enthused by their work and colleagues, accommodating them with flexibility to achieve their professional and personal aspirations, offering training and coaching all our people need to enrich their career development and deliver the best results and services. This culture is reflected well in our code of conduct. The Board of Directors monitors the effectiveness and compliance with code of conduct, both on the part of leading by examples and of the employees.
< CONTENTS 37REPORT FROM THE BOARD OF DIRECTORS Brunel's culture is a cornerstone of our organisation and leads directly to the attraction and treatment of specialists. By developing close-working relationships in the spirit of collaborating, Brunel is able to fully understand and appreciate clients' and specialists' needs throughout the full project life cycle. We provide and create value for our customers by means of the tailor-made solutions and short lines of communication, which enable us to respond quickly and accurately to their needs, wherever in the world.
How Brunel is organised
10,000 specialists placements every year 1,500 new candidates attraction every week 1,000 permanent recruitment on an annual basis 1 centralised global database
Clients & projects
40 years of working experience with clients from more than 35 areas of specialisms
1 flat networked organisation of 1,500 indirect employees 106 branch offices in 37 countries across 6 continents connected with 1 global IT network
6 regional hubs – Amsterdam, Bremen, Doha, Houston, Rotterdam, Singapore to facilitate 2 operation divisions – Brunel Global Business and Brunel Europe
Brunel culture
1 shared unique, strong and effective Brunel culture. In everything we do, we follow our firmly rooted cultural values of entrepreneurship, a result-driven approach and operational excellence
Manufacturing
Oil & gas
We operate our business in a world of constant changes which requires us to keep monitoring a set of business environment indicators. The ongoing digitalisation influences Brunel's way of doing business. It transforms the industries we are operating in, disrupts the current market, and marks behavioural changes of clients and talents. We embrace digital disruption and work with the trend rather than against it.
We have further assessed each business environment indicator in the materiality determination process and presented the results in the "Materiality matrix" (page 46) and response plans in "Risks, risk management and control systems" (page 69).
| Macroeconomics & industry cycles | Talent market | Client trends | |||
|---|---|---|---|---|---|
| WHAT ARE THE TRENDS? | |||||
| ○ | A further economy recovery with a modest growth rate in Europe |
○ | Greater flexibility and mobility | ○ | Add flexibility to workforce and cost base |
| ○ | A sign of oil & gas industry recovery while investment |
○ ○ |
Broader skills gap Candidate market in Europe, shortage of specialists |
○ | Outsource HR functions and labour-intensive activities |
| ○ | caution remains The mass adoption of digital |
○ | Technology transforms talents behaviour in job markets – rise of |
○ | Total offering of services with fewer suppliers |
| technology has proven to accelerate economic growth and |
the open talent marketplaces and | ○ | Strict compliance | ||
| facilitate job creation | gig economy | ○ | Technology is adopted by clients with significant impact on their business practices; increases clients' need of understanding employment-related data analysis |
||
| WHAT ARE THE RISKS? | |||||
| ○ | Large dependence on economy upturn |
○ | Uncertain of changing (immigration) regulation and other |
○ | Increasing requirement on service speed and quality |
| ○ | Energy industry downturn leads pressure on our margins and ability to gain profitable businesses |
○ | regulatory environment in local markets War for highly-skilled talents and specialists |
○ | Stricter tender process and power in contract negotiation process |
| ○ | Challenges of existing business models in meeting the demand for new products and services |
○ | Margin pressure and liabilities | ||
| WHAT ARE THE OPPORTUNITIES? | |||||
| ○ | Further build our contractor business in the emergence of specialist recruitment structural growth market |
○ | Advance Brunel's global network to offer integrated global mobility service solutions |
○ | Open up strategic dialogues with existing clients to help them manage skilled flexible workforce and provide a total talent solution |
| ○ | Drive growth above the economic cycle |
○ | Actively adopting technology to improve productivity |
○ | Brunel's market position gives a competitive advantage when win |
| ○ | Leverage existing global business infrastructure into new markets |
○ | Access to additional demographic groups to meet demand for new niche specialisms |
new clients who are adopting the new trend |
|
| and sectors | ○ | Compliance as a service | |||
| WHAT DO WE DO? | |||||
| ○ ○ |
"Directions for growth" page 50 "Risks, risk management and |
○ | "Driver for growth – quality of our people & management" page 55 |
○ | "Directions for growth – by adding new services" page 50 |
| control system – Unfavourable macroeconomic conditions" page 78 |
○ | "Risks, risk management and control system –attraction, development and retention talents" page 81 |
○ | "Risks, risk management and control system – contract negotiation and management" page 84 |
| Competition | New technology | Evolving regulatory landscape | ||
|---|---|---|---|---|
| WHAT ARE THE TRENDS? | ||||
| ○ ○ ○ ○ |
Generic manpower companies working towards specialisation Global niche players expand global coverage Industry consolidation Technology lowers the boundary to offer staffing services especially in immature markets |
Agility is the new norm ○ ○ Focusing more on data quality ○ Apply Artificial Intelligence to enhance decision making, e.g. in staffing industry Companies are integrating their ○ core business functionalities with their parties and their platforms to create new digital ecosystems |
○ ○ ○ |
Adverse regulatory environment in local labour market regarding to flexible labour and immigration policy CSR is moving from voluntary initiative to a required component for businesses in many countries Technology triggers the regulators to shape the new rules of the game – e.g. to enhance |
| ○ | Fast growing human cloud platform modules |
individuals' privacy related rights and raise a higher standard of international companies' business practices |
||
| WHAT ARE THE RISKS? | ||||
| ○ ○ |
Margin pressure Service delivery |
○ Shortage of human intelligence to apply technology properly |
○ | Direct impact on the costs of our clients |
| ○ | Attract and retain skilled people | Digital disruption ○ |
○ | Higher compliance risks and costs |
| ○ | Reputation | ○ | Reputation damage | |
| WHAT ARE THE OPPORTUNITIES? | ||||
| ○ | Increase penetration rate of recruitment service in markets |
○ Service solution innovation ○ Unleash the benefits of Brunel's |
○ | Enhance the culture of compliance |
| where Brunel has strong presence |
IT infrastructure | ○ | Offer compliance as a service | |
| ○ | Innovation and client centric services |
Brunel's expertise, ○ comprehensive market knowledge and human intelligence drives better results when apply technology for clients and candidates |
○ | Participate in constructive social dialogue to find the appropriate balance of regulations on our industry services |
| WHAT DO WE DO? | ||||
| ○ | "Risks, risk management and | "Drivers for growth – IT ○ |
○ | "Risks, risk management and |
| control system – Competition" page 79 |
infrastructure" page 55 ○ "Risks, risk management and control system – Information Technology risks" page 80 |
control system – Non-compliance with laws, regulations, local standards and codes" page 82 |
Following the Integrated Reporting Framework (IIRC), 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, the significance of various aspects of social, economic and governance performance on Brunel's s ability to create long-term value.
Material matters are those matters we believe have, or will have, a significant long-term impact on our profitability, people, culture and operations.
We only report information if is defined as material or if mandatory to be disclosed following legal requirements. This reporting scope covers main participations of Brunel International N.V. (see the list of participations on page 115). We engage stakeholders who have a direct impact – either positive or negative – on Brunel's business, including employees, clients, shareholders and investors, candidates, communities, government and regulators and peers.
| Stakeholder group |
Why we engage |
How we engage | Areas of interest | What we do |
|---|---|---|---|---|
| Employees (specialists & profes sionals) |
These | Employee surveys, Formal or informal social events and meetings, Work Council, Intranet, B-app, Receiving feedback |
Access to information; Attention and recognition, Training & education opportunities, Ethics & Culture, Job security, Career advancement, Salaries & benefits |
Management communication, Performance reviews, Investing in our culture and brand, training, education and develop programmes, Business integrity, Respect human rights, Top Benefits packages |
| Clients | stakeholders make up the company, providing human capital, financial capital, intellectual capital and |
Client events, surveys and meetings, Site visits, Tenders, contracts and service agreements, Client research and ratings, Media scanning |
Price and performance, Liability, Full service offering, On time delivery and quality of services, (Tax) compliance. |
Manage client relations, Encourage innovation, Provide in-house consultation, Offer added value, Cross-sell of services, Client on-boarding programme and service assessment meetings |
| Shareholders & investors |
demand our services to make Brunel's business possible. |
Investors roadshows, General Meeting of Shareholders, Teleconferences and analysts' meetings, |
Growth in the share price, Brunel's reputation, Strategic direction, Management succession, Corporate governance and ethics, CSR |
Annual review of strategy and risk assessment, Remuneration committee assessment and review policy, Disclosure of reliable financials, Provide consistent financial growth, Enhance business ethics |
| Candidates | Candidates' events, Social media and marketing campaigns, Workshops, Receiving feedback |
Job opportunities, Job market information, Privacy and data protection |
Mentoring programmes for students, Apprenticeship, Talent scouting |
|
| Government & regulators |
This stakeholder impacts the operational and regulatory environment in which we deliver services |
Governments' and regulatory bodies' publications, consultations and workshops, Media scanning |
Governance, compliance and remuneration practices, Contribution to economy and job creation, On time payment tax duties, Professionalism, impact on community |
Comply with laws and regulations, Tax compliance, Embed compliancy in our culture, Provide employment of over 12,000 people annually |
| Community | This stakeholder is impacted by our services and has the ability to affect our reputation |
Active participation in community, Media Scanning |
Local employment, economic, environmental and social contribution |
Brunel Foundation, Sponsorships and donations, active participation in engineering sectors, Partnership with universities to develop younger generation |
| Peers | This stakeholder impacts the sector reputation, practices and environment in which we operate |
Industry focus meetings and publications, Media Scanning |
Industry benchmark, competitiveness of Brunel |
Competitive intelligence |
Collecting relevant matters via multiple channels throughout the year is the starting point for the identification of material issues this year. The Board of Directors, senior management of business divisions and support units are the key personnel involved in this process of gathering. This process includes considering external business environment indicators, internal capabilities, variables' impacts on Brunel's strategy execution and value creation, and Brunel's performance in the current and forecasted business reporting cycles.
Collecting relevant matters provides Brunel a good understanding of stakeholder groups' interests. To help determine materiality, we assess at a number of factors in particular, including current and forecasted business environment trends, possible developments of financial performance, brand, reputation, strategy and people.
< CONTENTS 45REPORT FROM THE BOARD OF DIRECTORS We assess the importance of matters that have occurred historically and currently exist based on their magnitude of effect in short, medium and long-term. These matters generally cover human, financial and intellectual capitals to stimulate growth and execute strategy. For matters that may occur in the future or have potential future effects, we assess both the magnitude of the effects and the likelihood of occurrence for these matters, such as, risk of non-compliance with upcoming regulations and laws.
The prioritising process is part of senior management meetings of Brunel Netherlands, Brunel Germany and Global Business. On the company level, the Board prioritises the material matters based on the results of assessment and prioritisation from different divisions.
Those matters with the greatest 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 the most important. They cover both internal and external factors 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 Q4 2017 (page 69) and discussed the matters with the Supervisory Board and Audit Committee during the annual strategy review.
The material matters tables on page 46 represent the current year's material issues.
The process for determining materiality is ongoing and evolves each year. The reported material matters which reflect Brunel's strategy execution and which have impact on our financial performance stay relevant and applicable to Brunel in the short-term as minimum. Therefore, senior management, the Board of Directors, the Supervisory Board, the Audit Committee and the external auditor periodically discuss and review these matters as well as relevant management plans and outcome (refer to "Report from the Supervisory Board").
As per 31 December 2016 and 24 March 2017, the Disclosure of Diversity Policy Decree ("Bekendmaking diversiteitsbeleid"), and the Disclosure of Non-Financial Information Decree ("Bekendmaking niet-financiële informatie") respectively, are effective in The Netherlands. To comply with both decrees, this year's report provides consolidated non-financial statements containing necessary information to understand Brunel's policies, development, and performance relating to environmental matters, social matters, employee matters, antibribery and corruption and respect for human rights.
Although we addressed these topics voluntarily in previous annual reports, we have performed a detailed assessment on current compliance per EU requirement in this year's reporting cycle. In order to bridge the identified reporting gaps, we disclose additional information such as description of the policies pursued by Brunel in relation to those matters; the outcome of those policies, the principle risks related to those matters and relevant nonfinancial key performance indicators whichever is available.
Some topics are not material to Brunel but reported in this report following legal requirements.
| Categories | Material matters | Content in this report | |
|---|---|---|---|
| Client behaviour and trends | "Business environment" page 39 | ||
| Talent market trends | |||
| from our business | External material matters | Macroeconomics and industry cycles | |
| environment | New Technology and data privacy | ||
| Evolving regulatory landscape | |||
| Competition | |||
| Profitability and growth |
Profitable growth | "Strategic objective: concentrating on profitable growth" page 50 |
|
| Dependency on key clients | "Risk, risk management and control system" | ||
| Dependency on industry | page 69 | ||
| Strategic acquisitions | "Strategic objective: concentrating on profitable growth" page 50 |
||
| Create employment and be a major force in the economy |
"Make a positive impact on society" page 53 | ||
| Tax governance and strategy | |||
| People and | Training and education | "Employee matters" page 58 | |
| culture | Management quality and retention | ||
| Health and safety | "Health and safety at work" page 61 | ||
| Brand and reputation | "Culture and distinctive resources" page 35 | ||
| Internal | "Strategic objective: building a solid reputation of having good quality resources and being an industry shaper" page 55 |
||
| material matters relevant to |
Provide employees optimal and appropriate working conditions |
"Human rights" page 62 | |
| our growth strategy |
Contribute to the economic and social development in local community |
"Make a positive impact on society" page 53 | |
| Operational excellence |
Ensure efficient internal processes for operational excellence |
"Strategic objective: achieving operational excellence" page 65 |
|
| Processes and productivity | |||
| Services solutions and offerings | |||
| Innovation | "Strategic objective: concentrating on | ||
| Encourage win-win relationships with clients, suppliers and other partners |
profitable growth" page 50 "Strategic objective: achieving operational excellence" page 65 |
||
| Risk management and control environment |
"Risks, risk management and control system" page 69 |
||
| Governance | Corporate governance and | "Report from Supervisory Board" page 16 | |
| compliance | "Corporate governance" page 86 | ||
| Culture of business integrity | "Risks, risk management and control system" page 69 |
||
| Environmental policy | "Environmental matters" page 67 | ||
| Non-material issues, no | CO2 neutral | ||
| reporting unless legally required |
Climate change | ||
| Transport, energy consumption |
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:
Achieving a profitable growth is a prerequisite for Brunel to share responsibility in society and community. Brunel defines sustainability as managing our financial, social and environmental risks, obligations and opportunities continuously and strategically, with the aim of
In broader terms, Brunel's CSR agenda covers the topics of labour and employment practices, combating bribery and corruption, social matters and community development, environmental matters, respect for human rights and good tax governance.
< CONTENTS 48REPORT FROM THE BOARD OF DIRECTORS We believe we are socially responsible by following the law and integrating these topics into our business operations and core strategy in close collaboration with our diverse stakeholders. Depending on the nature of our operations and different maturity levels of our business divisions, our CSR process is primarily decentralised and driven by local business' initiatives. Moreover, the process is also likely to remain informal and intuitive in some small-sized entities.
Sustainability is embedded in our strategy execution and has an overarching impact on our strategic pillars. It includes the topics of: - Labour and employment practices - Combating bribery and corruption - Social matters and community development - Environmental matters - Respect for human rights - Good tax governance
< CONTENTS 50REPORT FROM THE BOARD OF DIRECTORS In the past 40 years, Brunel has developed a global infrastructure connecting all continents. All our offices are connected and supported via regional hubs by sharing financial and commercial resources. In today's challenging operating environment, this global infrastructure benefits the regions where Brunel has been established to focus on maximising economies of scale. It also provides the agility to adjust our organisation quickly 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 has a balanced business combination of Brunel Global Business and Brunel Europe which can provide strong financial and operation results in different market conditions.
For Brunel Global Business, the significant capital expenditure pullback of our energy clients and cancellation of projects keep giving us performance pressure as the year before. An increased amount of competitors offer very low rates to gain market share in this competitive environment as a response to this one of the most aggressive down-cycles in recent history. Brunel Global Business has seen revenue decreased and profits slided. Since 2016, all regions have focused on right sizing their cost base to match the more depressed operating environment.
Brunel has shifted away from reactive filling vacancies and servicing nominees for our oil & gas clients. It focuses more on project partnership and help clients realise their strategic goals. In 2017, we have successfully extended global master service agreements with a few key clients as their strategic suppliers for periods of another four or five years.
Brunel has a solid performance record of providing global mobility care, ranging from immigration, logistics, payroll and taxation to health 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. In 2017, Brunel announced the acquisition of Celsium, which is an employee relocation services provider based in the UK. Celsium provides international relocation solutions and domestic and inbound UK relocation services to organisations relocating employees globally. This strategic acquisition aims to strengthen Brunel's global mobility service offering and achieve customers' relocation goals faster, safer and more efficient.
In 2017, Brunel founded Brunel Industrial Services ('BIS') in Houston. BIS is a turnkey solutions group committed to safely executing best in class turnaround, maintenance, and capital expenditure projects in the chemical, petroleum and power industries. BIS provides clients a consolidated solution via three service entities:
With the extensive knowledge and expertise, BIS provides quality services within budget and on time. The setup of BIS further enhances Brunel's market position as an industry service specialist.
< CONTENTS 52REPORT FROM THE BOARD OF DIRECTORS In the second half of 2017, Brunel acquired SES Labour Solutions Pty Ltd, a contingent workforce provider specialising in mining, oil & gas and construction sectors throughout Australia. SES is a team of industry professionals from HR, mining and construction sectors. Since established in 2011, SES has accumulated the industry knowledge, personnel and facilities to be able to directly screen, assess, test and train talent for clients. This acquisition supports Brunel's strategic direction to be the leader in specific segments of the international labour market.
Brunel is continuously exploring interesting viable business operations in "new" countries and adding new verticals via acquisition or partnership to achieve business diversification ("Risks, risk management and control system" page 78).
< CONTENTS 53REPORT FROM THE BOARD OF DIRECTORS Brunel Europe has made good progress to deliver profitability by leveraging our technologybased service offering and market leading positions. We are continuously focusing on increasing our content knowledge and competitive intelligence. The proactive approach further specialises 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 specialism. Deepening these verticals brings us in niches where such advantages put us ahead of the competition and brings in higher margins.
Pretty Good Knowledge ('PGK') is an innovative spin-off of Brunel founded in early 2017. PGK specialises in massive data analytics capabilities using methods, which are highly secure and respect privacy.
Being responsible not only means creating sustainable financial returns for shareholders. It also requires providing sustainable value for other stakeholder groups as a knowledge partner, a resource provider, a growth facilitator and in general contributing to society as a major force of employment creation in the economy.
In some of our operating markets, 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 Kazakhstan, Papua New Guinea and Thailand are good examples of maximising local employment opportunities to build local economic growth. For example, there are currently 360 local contract engineers under employment with Brunel Thailand.
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 or initiatives.
The Brunel Foundation focuses on three pillars: education, innovation and contribution to or increasing awareness of social themes. In 2017, The Brunel Foundation has organised activities such as programming and cybersecurity workshops for children, and made a donation to ill children during the Make-A-Wish business challenge. For more information on Brunel Foundation, please visit www.brunel.nl/nl-nl/brunel-foundation.
In Singapore, Indonesia, Philippines and Brazil, we donate to local charities and organise volunteer activities to support local children to participate in programmes of health and safety, education and sports.
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, and does not use tax havens for tax avoidance. 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 in, even more so in the developing countries. We do not only pay a substantial amount of corporate income tax. We also pay 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.
< CONTENTS 54REPORT FROM THE BOARD OF DIRECTORS Since tax compliance is an important part of our service delivery, it is our policy to manage effectively 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 employ qualified and experience tax personnel; have appropriate tax policies and procedures in place; assess tax risks regularly in risk assessment process; subject tax risk management to the same policies, procedures and controls that govern financial reporting risk management; engage reputable tax advisors at local and group level to provide advisory and compliance services. We strive to establish an open and transparent relationship with the tax authorities in all countries we operate in to provide certainty with respect to tax matters and to ensure our compliance with tax regulations. To achieve consistency, CFO monitors all significant dealings with tax authorities.
Transactions conducted between group and companies located in different countries are in line with the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and other local transfer pricing regulations.
During 2017, we reviewed the current tax policy, amongst others for compliance with the OECD BEPS (Base Erosion and Profit Shifting) developments and submitted the country-by country report for 2016. Additionally we have finalised the master file and set up appropriate procedures to comply with local file obligations. Considering our tax policy and structure, we believe the impact of the OECD BEPS developments for Brunel will be limited.
< CONTENTS 55REPORT FROM THE BOARD OF DIRECTORS Country-by-country reporting will probably result in more discussions with tax authorities. We understand external country-by-country reporting and local transfer pricing files will provide more insight for local tax contributions. The disclosures in the annual accounts on our corporate income tax rate, as well as the actual paid corporate income tax reflect our tax policy execution.
In 2017, Brunel published its tax strategy policy on www.brunelinternational.net.
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 us apart as a specialist and a credible provider of high quality services. Such profile makes us both attractive and better positioned in the on-going battle for clients and talents.
We continuously keep our main IT systems upgraded to optimise efficiency and ensure standardisation around the globe. This IT infrastructure covers business development, account management, recruitment, finance and pay rolling, financial reporting and consolidation. Such functional IT infrastructure helps to minimise the business disruption during Brunel global business' restructuring process.
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 work force challenge. This challenge affects the global oil & gas and engineering industries, in particular the secondment sectors. In the long term, the sectors are working with educational institutions to attract and develop young talents. Meanwhile, we are actively applying technology to optimise the use of the knowledge sources that are already accessible. This includes speedy selection and global full life-cycle mobility arrangement. Also some specialists lack the voice or skills to advertise themselves properly. Hence, they often do not succeed in utilising the full range of possibilities of their career.
Brunel helps its specialists in developing and marketing themselves to the fullest extent of their abilities ("Attraction and retention of key personnel and talent" page 81).
We are also applying technology and data analytics in recruitment processes and improving the added value to our business. Smart recruitment is the key to attracting and keeping the right talent needed to meet business objectives, and hiring them at the right price.
Brunel Netherlands wins the Computable Awards as the best ICT secondment provider 2017. The award goes annually to companies, projects and individuals who, according to the jury and Computable readers, have explicitly distinguished themselves in the past year in the area of ICT secondment. The jury praised the proactive intelligence and data-driven selection in Brunel's recruitment process.
< CONTENTS 56REPORT FROM THE BOARD OF DIRECTORS The Brunel organisation is flat with few management layers. Developing excellent people demands our management to be alert and strong on coaching and leading by examples. 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.
Create a corporate profile of a specialist and the authoritative thermometer in the field
Develop the global network of extensive knowledge resources
Effective IT infrastructure to optimal utilising the knowledge sources
Keep improving service quality and build strategic partnership
Have high quality and interesting projects for specialists to work on
Putting our clients & specialists first Drivers for growth
Passionately committed Brunel people and management
Attraction, development and retention of the specialists
Brunel culture of excellence
Clear direction and position
Developing our people and future talents is an important way for Brunel to promote sustainability. For us, people development is all about attracting talent to ensure growth, providing people opportunities to their career advancement and company leadership, retaining talents with high performance and promoting communication, knowledge sharing and inter-relation between divisions and offices.
The 'Fit 4 Brunel' sales performance is a coaching programme designed for Brunel Germany's account managers. Based on the strong knowledge and experience background of our sales trainers, the account managers get feedback and training to boost their sales potential and improve their performance. Moreover, employees are encouraged to take other e-learning programmes such as business English.
< CONTENTS 58REPORT FROM THE BOARD OF DIRECTORS Brunel Netherlands has a policy to address the importance of personal and professional development of all employees. Continuous training programmes have been set up for this purpose and adjusted annually where necessary. All training programmes are organised according to the 100% learning philosophy. This 100% learning is a 70/20/10 learning principle: the "10" relates to live or online training, the "20" relates to coaching, feedback and support from manager or more experienced colleague and the "70" relates to being able to practice by yourself. This principle stipulates achieving 100% learning experience by connecting a number of different elements. More information regarding the policy, annual plan and outcome is available in the annual CSR report (www.brunel.nl/nl-nl/mvo).
Different regions of Brunel Global business take initiatives to develop training policies and programmes. These programmes named below are currently available in most of Brunel's offices worldwide. To show a diverse range of countries we have covered, we use the following countries as examples:
o management development programmes and employees coaching, e.g. in Middle East
o industry updates, labour law, HR partnership, taxes, compliance, commercial awareness, quality assurance and audit related training and workshops, e.g. Russia, Canada, Singapore, Qatar, Kuwait, Australia
| Total | 44.3 |
|---|---|
| By category | |
| Commercial employees** | 60.0 |
| Non-commercial employees*** | 16.0 |
* The training hours reported in 2017 only apply to 1,497 indirect employees (average).
** Commercial employees refer to employees who involve in the business development, recruitment or sales processes.
***Non-commercial employees refer to employees who do not involve in the business development, recruitment or sales processes, but in the processes of operations, finance etc.
< CONTENTS 59REPORT FROM THE BOARD OF DIRECTORS To further support the career advancement of our engineers and raise the profile of their engineering profession, Brunel Netherlands formed a 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 recognised internationally. This allows the engineer to prove 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. In 2017, two employees started the process to become Chartered Engineers and three employees are following the track of Incorporated Engineers.
In 2017, Brunel Engineering has started the project management IPMA D training course to offer employees sustainable professional growth opportunities. Upon successful completion, employees receive an internationally respected IPMA D diploma. At this moment, a number
of Brunel Engineering consultants are following this training to increase their knowledge in this field. Brunel also offers a building integration modelling traineeship that takes six months. Six trainees finished this programme in April 2017. Another group of seven trainees started the traineeship in September 2017 and will complete it early 2018.
To tackle the shortage of talents, the Brunel Engineering recruitment center started in 2017 offering a jump-start for technical talents with a university degree in mechanical engineering, electrical engineering, industrial engineering and civil engineering. The talent programme contains Brunel's work experience gained from clients and offers comprehensive guidance and networking opportunities to the technical talents.
Brunel Netherlands has formed a partnership with TU Delft and the YES! Delft Students startup programme to encourage (technical) innovation, entrepreneurship and promoting excellence among students. We also take part in the innovative educational project Youth and Technology Network Nederland, 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 the insurance and banking sector. This traineeship offers training in various required skills, combined with the opportunity to gain experience with various clients.
Brunel Germany collaborates with different German engineering organisations, for instance, VDI, the Association of German Engineers. It supports the association with lectures on technology and science, valuable soft skills workshops and job application training, courses and network meetings. Since 2009, at nearly every university, we offer important training (e.g. project management) and career advice to prepare students for their professional career take-off. For exceptional engineering students, we also provide them a company mentor as part of the two-year programme and an internship opportunity lasting at least three months, or alternatively write their final thesis at the partner company.
< CONTENTS 60REPORT FROM THE BOARD OF DIRECTORS Since 2006, Brunel Germany has been sponsoring the Formula Student Germany event where ten racing teams design and build a single seat formula race car. The team with the best overall package of construction, performance, 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 centres of Brunel Car Synergies GmbH and visit our offices.
TEAM BRUNEL re-joins the Volvo Ocean Race for the fourth time. The 2017-18 edition of the Volvo Ocean Race has a strong sustainable message with the theme of "Turn the Tide on Plastic". The theme of Team Brunel is "Engineers create future" focusing on technique and innovation. By connecting technical experience and knowledge, organisations and people, we create new challenges and sustainable possibilities. The aim of Brunel's marketing campaign is to contact and recruit highly skilled technicians worldwide that can support projects all around the globe. Brunel founder Jan Brand is also personally contributing with some of his other business activities in the 2017-18 Volvo Ocean Race.
Brunel's safety vision is that 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.
Brunel Netherlands has a policy on workplace health and safety. It identifies shared responsibility of Brunel and the individual employees for occupational health and safety, emergency response, accident reporting and registration, as well as preventive measures. For entities in The Netherlands, Brunel has a policy reflecting the Dutch law for sick employees setting out the rights and obligations of Brunel.
Brunel Germany has a manual to give its employees general explanation on how to deal with hazards at the workplace. It identifies work-related accidents and emergency response plans and is part of the onboarding programme for new employees. Other policies and procedures regarding health and safety e.g. workplace inspection are available on our intranet. Brunel Germany also implements an annual refresher health and safety training. The safety manager monitors and helps employees to complete the mandatory refresher.
< CONTENTS 61REPORT FROM THE BOARD OF DIRECTORS Brunel Global Business has introduced a global health, safety and environment (HSE) System for both contractors and employees in 2015. It was an expansion and upgrade of our local HSE infrastructure, which was at different maturity levels. By the end of 2017, we have implemented the policies and procedures of emergency response, incident management, medical fitness and injury management in the countries where our Global Business operates in. The standards of health and safety may differ from country to country, sector to sector, and even in job to job. Therefore, besides implementing Brunel's own HSE system, we actively engage our clients at an early stage to clarify HSE laws and requirements to implement client or sector specific standards.
| Security issues and conflict zones are HSE topics relevant for certain Brunel regions, such as Africa and Asia. High-risk areas are present in those regions, with (frequent) conflicts taking place. Related policies and procedures are in the emergency responses or incident management to safeguard the security of our employees. |
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|---|---|---|---|---|
| our European business divisions. | Brunel business divisions take initiatives to implement health and safety related policies and monitor relevant KPIs. Considering the different stakeholder requirements, companies' activities and the outcome of these policies, the health and safety implementation in Europe is relatively comparable. In this annual report, we disclose two KPIs of absenteeism rates of |
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| Brunel Germany | Brunel Netherlands | Europe other (Belgium, Austria, Czech Republic, Switzerland) |
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| Absenteeism rate of directs Absenteeism rate of indirects |
4.19% 3.81% |
3.49% | 3.33% | |
| 4.01% | 2.47% | |||
| We are finalising the implementation of the HSE system for Global Business. The outcome of this policy and relevant KPIs are likely to be available in the second half of 2018. Human rights People are the core of our business. This means that human rights are not just important to our business because respecting them is the right thing to do; it is because respecting the rights of our people is a success factor for our business. |
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| At the group level, we take into account the rights covering the eight fundamental human rights as International Labour Organization (ILO) identified and elaborated in the ILO conventions. Brunel endorses all eight fundamental ILO conventions. Instead of managing human rights as a stand-alone issue, Brunel makes specific reference to compliance with them in various Brunel policies, such as code of conduct, equal opportunity policy, HSE policy, fitness for work and privacy policy. These policies are available on our intranet and in our employee handbook. |
| Topics | Content in this report |
|---|---|
| Freedom of association and right to collective bargaining | page 63 |
| Forced labour / modern slavery (including bonded labour) | page 64 |
| The elimination of discrimination in respect of | |
| employment and occupation | page 64 |
| Effective abolition of child labour | page 64 |
| Just work: living wage and social security | page 64 |
| Health and safety, security issues and conflict zones | page 61 |
| Privacy and data protection | page 73 |
| Freedom of association and right to collective bargaining countries' legal requirements. |
Brunel respects the right of its workers and employees to form and join organisations of their choice as we consider this an integral part of a free and open society. We also comply with |
| pluralism are maintained. | Brunel's operations vary in size, culture and industry. We have experienced different types of labour or industry union relationships. This means in some countries or industries, unions are more active than in others. Therefore, we do not have a group policy but rather a general positive attitude towards trade union relationships. Based on mutual respect, Brunel is open to labour union activities, acknowledges the global rights of workers to form labour unions and join the labour union of their choice, and agrees to ensure that union independence and |
| To improve the quality of the working relationship and minimise conflicts, we respect employees' collective bargaining right and promote regular communication. Brunel Germany entered into a collective labour agreement with ver.di, a German trade union, effective as of January 2004 onwards. This agreement applies to the employment relationships with Brunel |
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| employees through their employment contracts. On 1 April 2017, the Equal Pay Act came into advantage in the German markets. |
force in Germany. We have finalised our union trade agreement renewal by the end of July 2017 to comply with the law. This renewed agreement provides us a strong competitive |
Within the company, applicable labour standards must be observed. Brunel and its business partners will not, under any circumstances, make use of forced labour, child labour, or any labour in violation of the ILO conventions. Brunel has addressed this topic in its code of conduct. Brunel is determined to keep developing its approach towards preventing forced labour. The modern slavery statement will be available on Brunel's website.
Brunel does not tolerate improper conduct such as discrimination, harassment and workplace bullying. Brunel naturally complies with non-discrimination regulations, for example, the Equal Payment Act in Germany mentioned earlier. Additionally, all employees are required to comply with policies, procedures, and systems of work including Brunel's equal opportunity, anti-discrimination, bullying and harassment standard.
< CONTENTS 64REPORT FROM THE BOARD OF DIRECTORS We endorse the ILO principle of the effective abolition of child labour. This principle means ensuring that every girl and boy has the opportunity to develop physically and mentally to her or his full potential. Its aim is to stop all work by children that jeopardises their education and development. Considering the business model of Brunel focuses on working with technical graduates and experienced employees, the risk of violating this principle in Brunel's business is very insignificant.
As an employer, Brunel provides employment benefits like medical insurances, which cover the medical expenses, paid sick leave, annual leave and end of service benefits as required by applicable local laws. We also provide additional benefits, not prescribed by law, such as return tickets to employees' base countries. In the Middle East, the majority of our employees are expats and they are entitled to such additional benefits. We offer life insurance to employees and accidental death and dismemberment insurance depending on specific assignments.
Brunel's business targets highly educated or skilled workforce. Therefore, we offer competitive salaries in every country where we operate in, including India and countries in Africa and South East Asia. This contributes to offering our employees a high standard of living.
Non-compliance with labour laws, regulations and legal standards of the countries we operate in, is a top compliance risk for Brunel (refer to the section of "Risk, risk management and control system" page 82). Besides addressing the concerning topics of labour rights in our corporate policies, our local operations take the initiative to monitor, review, report and adapt to relevant changes in rules and regulations. In case of non-compliance and misconduct, the issues are discussed in management meetings and reported through regular internal reporting procedures.
Brunel defines operational excellence as 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 rely on an effective management system implemented company-wide and a cutting-edge IT infrastructure.
< CONTENTS 65REPORT FROM THE BOARD OF DIRECTORS Brunel is primarily a sales-driven 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 maximising client services without losing 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 unification of IT systems has taken place in the back offices, which retrieves the sales organisation from operational and administrational tasks.
The regional hubs such as Amsterdam, Bremen, Doha, Houston, Rotterdam and Singapore are connected via one globally unified IT environment which made processes standardisation possible in local offices worldwide. Overall, this processes streamlining 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 function-driven regional hubs. It helps to oversee and manage the potential pitfalls of a bold sales organisation such as risk management and internal control.
Streamlining process to improve productivity, efficiency and regulatory compliance
More flexible, transparent, collaborative and manageable
Culture of entrepreneurship and world class operational discipline
A mind-set-shift process and smart management about how to apply technology
For Brunel, the scope of the "customer" extends from clients to candidates. In Brunel Germany, managing customer relations is an aspect of the quality assurance specifically focusing on customer retention and ultimately driving sales growth. Related policies and procedures are in place covering topics such as customer expectation, customer experience and customer satisfaction. In 2017, sales departments across all branch offices have implemented a new process of "candidate experience".
Every year, Brunel Netherlands engages clients in stakeholder dialogue to collect their opinions, share knowledge and discuss challenges. Since 2016, Brunel has been developing a series of "meet & inspire" meetings, which are knowledge related customer events with the aim of highlighting a specific topic or theme that Brunel's service contributes to or offers solution for. This initiative helps Brunel to improve its customer relations by bringing
customers together and promoting transparent communication. Candidates' opinions on Brunel are also an important reflection of Brunel's service. Usually after the first intake meeting Brunel invites candidates to share their intake feedback. More information will be available in Brunel Netherlands' CSR report 2017.
Due to the nature of Brunel's operations, Brunel's business services are among the 'clean' sectors with an emphasis on human capital related aspects. Our impact on the environment is small compared to many other industries whose operations rely on manufactured capitals and natural resources. Our approach to environmental matters is to manage and reduce the environmental impact of Brunel's people. In practice, we have developed two principles to manage our environmental footprint:
This principle mainly applies to our direct employees (87% of our total workforce) who work in clients' offices and project sites. Brunel's clients are active in different industries, each of which has different environmental standards. The vast majority of Brunel clients has developed their own environmental policies and procedures. Brunel's people commit to respect and follow clients' policies and procedures to operate sustainability.
< CONTENTS 67REPORT FROM THE BOARD OF DIRECTORS This principle covers paper use, commuting, energy consumption (incl. for the IT infrastructure), waste and use of cleaning agents. Brunel's environmental policies primarily relate to operational impact caused by indirect employees. Around 60% of our indirect employees are located in The Netherlands and Germany. The remaining 40% are scattered over 35 different countries where it is not practical to implement a centralised policy. We encourage the offices in these countries to take initiatives to make a positive impact on their local environment. For example, over the past a few years, we have contributed to the building of a photovoltaic installation in Zimbabwe and to the implementation of sustainable waste disposal in Bali.
We have not identified any material risks on environmental policy, as environmental issues are in general not material to the Brunel group. Brunel Netherlands and Brunel Germany have developed and implemented environmental policies to manage their indirect employees' operational impact on environment.
| Brunel Netherlands travelling in general. |
Environmental matters or planet policy is one of the CSR themes for Brunel Netherlands. The management team of Brunel Netherlands is responsible to create, manage and implement the planet policy. The purpose of this policy is to minimise environmental impacts – by reducing CO2 emissions, preventing pollution and promoting the recycling of materials. We do so by conserving energy, by using sustainable energy sources, by reducing paper consumption, by encouraging the use of public transport and environmentally friendly lease cars. Moreover, we promote meetings at a distance via video conference system to lower the |
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| The policy has been integrated into our daily business operation. Twice a year, the management team reviews and evaluates the plans and performance. Under the framework of Global Reporting Initiative, we monitor the following environmental KPIs: |
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| Energy and emissions | Raw materials | |||
| Total CO2 Footprint in tonnes (Verified) | Consumption paper in # sheets per year per FTE | |||
| Scope 1 Direct Energy | % Purchase durable office supplies | |||
| o Natural gas in m3 o Heat supply in GJ o Average consumption per lease in liter o Average consumption per rental car in liters Scope 2 Indirect energy |
o Paper o Office equipment |
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| o Consumption electricity green in kWh o Consumption electricity gray in kWh |
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| In 2017, Brunel Netherlands achieved "MVO Prestatieladder", level 3. This is a certificate on CSR policy and continuous improvement on people, planet and profit & prosperity. The detailed planet policy, plan and outcome are available in Brunel Netherlands MVO annual reports www.brunel.nl/nl-nl/mvo. The 2017 results will be available in Q2 2018. |
The environmental policy of Brunel Germany focuses on the careful use of resources (materials, air, water and energy) to limit emissions. The management team is responsible to implement the policy and create action plans. It is also committed to the continuous improvement of the environmental management system. Brunel Germany's environmental management system is certified under DIN EN ISO 14001. This is a certificate on operating an environmental management system and a responsible handling of all resources, including the KPIs on energy (electricity, gas), water, waste, CO2 emissions of the vehicles and paper printout.
Brunel's risk management aims at long-term sustainable management of its business activities. The Board of Directors considers the ability to control strategic, operational, compliance, commercial, financial reporting and financial risks crucial for achieving set targets and the continuity of the company. Therefore, Brunel has developed a risk appetite that guides our strategy to mitigate related risks and monitoring the risk exposure remains within tolerable boundaries. Brunel has embedded the COSO ERM 2017 framework as the foundation of its risk management framework and will further strengthen and monitor relevant activities in 2018.
< CONTENTS 69REPORT FROM THE BOARD OF DIRECTORS 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 levels and functions within Brunel. On an annual basis, the Board of Directors discusses Brunel's risk management framework and company risks with the Audit Committee, the Supervisory Board and the external auditor. In Q4 2017, the internal control framework has been enhanced further and finalised based on the COSO ERM framework approach. For instance, the Board of Directors has recognised an increasing risk of fraud attempts including phishing emails, impersonating, hacking and diversion theft. As lessons learned from an impersonating incidence, the Board of Directors has set up and communicated a fraud attempts and incidents reporting procedure and discussed this topic in depth during the annual controller meeting. Besides further enhancing Brunel's IT security measures, two e-learning courses about preventing phishing and identify theft have been implemented worldwide to raise the awareness among all levels and functions of employees within Brunel. The results of risk management related activities led to the conclusion that Brunel did not encounter failings in the effectiveness of the internal risk management and control systems. The Board of Directors has not identified any material risk and uncertainties that are relevant to the expectation of Brunel's continuity for the period of twelve months after the preparation of this report.
| Risk appetite | |
|---|---|
| The Board of Directors defines the risk appetite of Brunel i.e. the level of risk that Brunel is 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: | |
| Risk category | Risk description Risk appetite |
| Strategic risks (S) | Risks which affect or are created by Brunel's business Low - moderate strategy and could affect Brunel's long-term positioning and performance |
| Operational risks (O) | Risks which affect Brunel's ability to execute its Low - moderate strategic plan |
| Compliance risks (C) | Risks of non-compliance with laws, regulations, local Zero tolerance standards, codes of conduct, internal policies and procedures |
| Financial and reporting risks (F) |
Risks include areas such as financial reporting, Low valuation, currency, liquidity and impairment risks |
| Objective setting | Risk management framework Brunel's internal risk management and control measures adopt the COSO ERM framework and distinguish between eight components: Internal environment |
| Event identification Risk assessment |
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| Risk response | |
| Control activities | |
| Information and communication | |
| 1. 2. 3. 4. 5. 6. 7. 8. Monitoring |
appetite. Periodically the Board of Directors – together with a senior officer from CFC if required – visits the operating companies to facilitate complex decision-making, to control financial progress and to monitor realisation of the business objectives.
< CONTENTS 71REPORT FROM THE BOARD OF DIRECTORS Another important aspect of the internal environment is the code of conduct, which includes a whistleblower policy. The code is available on the corporate website. Brunel has adopted the "SpeakUp Line" which is developed and managed by an independent third party to protect the whistleblower's anonymity. This SpeakUp line went live in Q2 2017. We have launched an e-learning course during the integrity annual refresher training to help employees understand what whistleblowing actually means, how to report a misconduct concern and clarify what protection is offered (global completion rate is 70%). By the end of 2017 the registered SpeakUp cases were none.
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 internal and external events are identified that could affect the achievement of the objectives which have been set. For this purpose, risk assessments are conducted on a regular basis.
Our risk assessment helps us effectively assess and prioritise the risks we face, based on the potential impact and occurrence likelihood of those risks on the company. The risk assessment enables Brunel to further improve its risk management, internal control and provide additional confidence to achieve corporate objectives. The risks listed in this section are our main, material and company-specific risks.
Our approach to risk management is not only improving the controls in place to manage these risks and 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 aligns with our risk appetite.
All Brunel divisions are subject to general policy, rules and procedures aimed at controlling our risks. In 2017, we formalised our existing controls in the Brunel internal control framework. The implementation of our global IT-systems enables us to replace manual controls by automated controls.
| Risk management | |
|---|---|
| Strategic risk | Strategy updates Annual business reviews |
| Operational risk | Uniform IT systems Contracting procedures Weekly KPI reporting Monthly management reporting Quarterly business reviews Site visits Insurances |
| Compliance risk | Reporting & disclosures Legal counselling Anti-bribery & corruption Training Contract approval policy and procedure Internal control via business control |
| Financial risk | Uniform IT systems Accounting & control manual Internal control via business control Corporate finance & control department Monthly reporting Quarterly reviews Treasury Audit |
| The Board of Directors reviews Brunel's strategy periodically, at least every three years or when developments require a review of the strategy. In 2017, the Board of Directors and senior management reviewed and updated the Brunel strategy through a series of workshops. |
|
| Annual business reviews | |
| Brunel reviews all businesses at least annually during the budget cycle. The budgets are prepared by all entities and supported by the CFC department. The Board of Directors |
|
| discuss with local management about their business strategy, budget planning and the main | |
| opportunities and threats for achieving the budget. After approval by the Supervisory Board, | |
| the budgets are used to set targets for local management. The Board of Directors maintains a | |
| Brunel's strategy. | list of key performance indicators that need to be achieved in order to successfully execute |
| Uniform IT-systems | In 2011, Brunel has started its 'One Brunel, one IT programme'. The goal of this programme |
There is a distinction between IT-infrastructure and applications. The IT-infrastructure provides all Brunel employees access to the Brunel workplace. 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.
Most of our entities are using the same applications for key business 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. This set up enabled us to replace manual controls by automated controls. The IT programme has been further improved in the last two years including standardised CRM processes throughout our business divisions. To cope with the digital disruption and work with the trend rather than against it, we launched several business initiatives on applying big data analytics and human cloud solutions ("competition" page 79).
< CONTENTS 73REPORT FROM THE BOARD OF DIRECTORS Privacy is a fundamental human right we respect. It is also an essential cultural element for Brunel to be a reliable business partner and earn the confidence of our people. Data and personal data is very relevant to Brunel's core business especially in the global trends of digital transformation and data-driven innovation. Brunel commits to the GDPR data protection standard as our guiding principles of data protection. In 2017, we further enhanced user management by implementing policies and procedures to reduce human errors and active monitoring data center environment and maintain it up-to-date. Moreover, we keep raising the awareness of privacy risks among our employees when handle personal data in different business processes. We aim to achieve a full global data privacy and security upgrade by the end of 2018 ("IT related risks" page 80).
For each region within Global Business 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 global commercial team (which includes corporate legal) and has to be approved by the global commercial director. The global commercial director reports to the Board of Directors on significant and high risk contracts at least on a monthly basis.
Brunel has the following reports in place to maintain full insight in performance and strategy execution:
< CONTENTS 74REPORT FROM THE BOARD OF DIRECTORS The Board of Directors review all reports regularly. At least each quarter the Board of Directors, supported by the CFC department discusses these management reports with local managements.
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:
Brunel operates worldwide including in countries with tougher business environment, for example, with medium to high bribery and corruption risks. It is our policy to conduct all of our business in an honest and ethical manner. We take a zero tolerance approach to bribery and corruption and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships and implementing and enforcing effective systems to counter bribery. Brunel has been a full member of TRACE International since 2013 and complying with global anti-corruption laws.
In Brunel's anti-bribery and corruption policy, we have identified the following particular risks for our business: facilitation payments, gifts, hospitality, agents and enhanced commission. To address these particular risks we have drafted and put in place procedures to mitigate identified risk, such as training on the anti-bribery and corruption policy for new starters and annual refresher training. The Board of Directors communicates Brunel's culture of integrity to all individuals working at all levels regularly, for example in the CEO blog.
Individuals working at Brunel are encouraged to raise concerns about any issue or suspicion of malpractice at the earliest possible stage by following the whistleblowing procedure.
< CONTENTS 75REPORT FROM THE BOARD OF DIRECTORS To further facilitate open communication and protect whistleblowers, Brunel has launched a new misconduct reporting system in 2017. It is available worldwide, 24 hours a day, 365 days a year. Individuals can share their concerns anonymously and the information can be submitted in multiple languages. Brunel is committed to protecting the privacy of everyone involved in the SpeakUp process. Any personal data obtained as part of the procedure is processed in line with the Brunel privacy policies and used for the purposes explained in the whistleblower policy or to comply with the law.
80% of total number of new starters worldwide completed integrity training on the policies and procedures during their induction programme.
73% of total number of Brunel employees worldwide completed Integrity Annual Refresher training.
No incidents of corruption have been identified during 2017.
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, whistleblower procedure, internal training courses for new employees, refresher courses for existing employees and training-on-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. Various types of business deliberations are carried out. Every year Brunel's financial community holds an international meeting, attended by the CFO, CFC team and all regional financial controllers, to discuss best practices and the latest developments in financial management and internal controls, and subsequently to implement and document 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 CFC department and local financial management. These discussions are partly based on the weekly operational and monthly financial reports.
< CONTENTS 76REPORT FROM THE BOARD OF DIRECTORS Brunel does not have an internal audit department. However, CFC also includes controllers with an auditing background and performs many internal audit activities. CFC is an independent department that reports directly to the Board of Directors. Starting 2018, CFC will also have a direct reporting line to the Audit Committee to discuss planning, visits and findings. The activities of CFC include, amongst others, reviewing monthly reports of all entities, monitoring tax compliance and frequently visiting our operating entities. During these visits various relevant subjects such as accuracy of monthly reporting and compliance with policies and procedures is verified.
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 2017, Brunel has set up a renewed and more comprehensive internal control framework. This will add value when it is used to spot opportunities to standardise procedures, to identify efficiencies and when it creates a basis for an internal audit department to test the operating effectives of controls. This set up has been discussed during the annual financial controllers meeting.
The external auditor is responsible for auditing the annual financial statements. The auditor reports findings in the form of management letters at group level or individual operating companies and reports directly to the Audit Committee. The external auditor attends the meetings of the Supervisory Board at which the annual accounts are adopted. He 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 2017 and our risk response plan. The risks listed and the response plans are not exhaustive and may be adjusted from time to time.
| Risk with high likelihood & impact | Key aspects |
|---|---|
| Unfavourable macro-economic conditions / geo political situation (S) | I. Dependency on countries – Brunel is dependent on the economic cycle and |
| Unfavourable macro-economic conditions and inability to deal with these conditions affecting the business resulting in pressure on growth and margins. Adverse and instable local economic, political and social |
the geo-political situation of the countries where it is active. |
| conditions may result in lost sales, lost opportunities, increased costs and increased risk of non-compliance. |
II. Dependency on industries – Still a large share of Brunel's business is generated in the oil & gas business and depends on developments in this industry. |
| Mitigating measures Implementation in 2017 |
Outlook |
| Risk with high likelihood & impact | Key aspects | ||
|---|---|---|---|
| Unfavourable macro-economic conditions / geo political situation (S) Unfavourable macro-economic conditions and inability to deal with these conditions affecting the business resulting in pressure on growth and margins. Adverse and instable local economic, political and social conditions may result in lost sales, lost opportunities, increased costs |
I. Dependency on countries – Brunel is dependent on the economic cycle and the geo-political situation of the countries where it is active. |
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| and increased risk of non-compliance. | II. Dependency on industries – Still a large share of Brunel's business is generated in the oil & gas business and depends on developments in this industry. |
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| Mitigating measures | Implementation in 2017 | Outlook | |
| Expand / monitor client base |
TARGET CONTROL CONTINUED The whole sales organisation focuses on expanding our customer base and wining new clients via "Target Control". |
In 2018, 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. |
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| New ventures | STRATEGIC ACQUISITIONS & NEW VERTICALS New acquisition of SES Labour Solutions in order to enter the mining market. |
For Brunel global business, we do not expect aggressive performance return |
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| New acquisition of Celsium to strengthen global mobility services. |
since it depends on how conformable the positions our clients are in to take larger investment decision in a similar operating environment as in 2017. Our business |
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| New business venture in the USA in construction and maintenance business. |
development in new verticals and locations require further development to pay off with profitable returns. |
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| Review locations | NEW LOCATIONS The Board of Directors and regional management is continuously exploring interesting viable business operations in "new" countries. We are currently exploring opportunities to start new businesses in Vietnam, Mozambique, Mexico and Turkmenistan. |
We are constantly exploring new opportunities. |
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| Maintain flexibility in cost structure |
EMPLOYEES VERSUS CONTRACTORS 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 closely monitored via our monthly KPI reporting. |
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| FLEXIBLE CONTRACTS All starters with Brunel are hired on a temporary contract. They are offered a longer term contract depending on their performance. |
| Competition (S) I. Margin pressure – intense competition puts pressure on our margins. Actions of existing international and local competitors or new types of competitors (e.g. existing clients), on segments of Brunel could impair II. Service delivery – Competition will try the organisation's competitive advantage and could negatively affect to match and beat our service quality. the financial performance. III.Reputation – Reputational damage for Brunel will drive our clients to the competition. IV. Internal communication – developments within our competition (amongst others), unknown within our organisation, might influence our business. Mitigating measures Implementation in 2017 Outlook ADDED VALUE In 2018, further efficiency improvement Innovation on technology applications, innovative Expansion of recruited contracting. For new clients we are recruiting more candidates service solution will be continued. already. However, our focus is to add value to our long-standing relationships with our clients and improve our services with recruitment activities. TALENT ACQUISITION CENTER (TAC) Refer to pro-active approach of future candidates. Quality and efficiency IT INFRASTRUCTURE Upgrade IT - systems to further optimise the sales, operations, financial, reporting and monitoring processes. STRENGTHEN COMMERCIAL PROPOSITION Knowledge sharing MULTIPLE CHANNELS |
|---|
| Encourage information flow by adopting multiple media channels, online news portal, offline theme meetings and discussions. |
| Risk with high likelihood & impact | Key aspects | ||
|---|---|---|---|
| IT related risks (O) Information technology risks are abundant and increasing risk of cyber attacks, phishing and other related fraudulent attempts, data fraud or theft, information mismanagement privacy and data protection are continuously increasing. The impact of these risks can have severe reputational, financial and operational impact. |
I. External cyber attacks: criminals constantly attempt to attack the companies. II. Internal: continuity – heavy reliance on IT makes continuity a core process. III.Internal: data security – both from compliance and competitive perspective data needs to be fully protected. IV. Privacy – respect and protect our people's privacy rights. |
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| Mitigating measures | Implementation in 2017 | Outlook | |
| One Brunel – One IT | This one IT infrastructure covers business development, account management, recruitment, finance & payrolling, financial reporting and consolidation. This year, key IT systems and system interface have been further rolled out, which increased the automation of work process & control. |
Brunel is committed to ensuring that the protection and right to privacy of personal information is maintained at all times. It is our responsibility to safeguard the data of our clients, employees, staff and candidates. In 2018, Brunel will continue standardise |
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| Continuity | Active monitoring and alerting of the entire Brunel platform. |
applications, increase our people's data security and privacy awareness, minimise the use of private cloud solutions by employees and dependency on local |
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| Data security | Under the guiding principles of "Confidentiality", "Integrity", "Availability" and "Accessibility", further enhance user management by implementing policies and procedures to reduce human errors. |
hardware. | |
| Active monitoring data centre environment and maintain it up-to-date. |
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| Privacy | CREATE A PRIVACY RISK-AWARE CULTURE The GDPR will take effect in May 2018. To this end, Brunel has initiated a global privacy implementation programme that includes an updated privacy policy and will further raise the level of privacy protection within the company. |
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| This programme will entail working towards GDPR compliance. This year, Brunel performed a global privacy assessment that identified GDPR compliance gaps, This analysis offered us a strong starting point for compliance in 2018. |
| Attraction and retention of key personnel and talent (O) I. Indirect employees: retain experienced key personnel and This risk indicates people is Brunel's most important asset. Its meaning develop its future leaders. is twofold, the potential for inadequate succession of key personnel in Brunel's management function could limit our further growth and war II. Direct employees: ability to hire for talent increases likelihood in reshape Brunel's strategy of achieving qualified candidates and retain them performance in the candidates' markets. within Brunel. Mitigating measures Implementation in 2017 Outlook Further optimisation of the training Training programme Brunel has training programmes for the various levels within the organisation. See programme within Europe, including 'Training and Education" chapter. global induction programme. B-Smart online training platform to be Retention plans BONUS AND OPTION PLAN rolled out as global platform. Brunel has a bonus plan for its indirect staff, where different programmes exist for both KPI monitoring on training. commercial and non-commercial staff. For key employees, Brunel also has a SAR scheme. EXCHANGE PROGRAMME Various employees are given the opportunity to relocate to one of Brunel's foreign entities. Pro-active approach of TALENT ACQUISITION CENTRE TAC proactively approaches potential future candidates candidates in the Dutch market based on several core job profiles in order to feed the recruiters in the business lines. Furthermore, TAC focusses on the Brunel employer branding to create preference amongst students and starters to create a constant influx of potential candidates in the recruitment process. |
|---|
| Career perspective– The scarcity of qualified employees has increased impact on Brunel's Europe division. qualified candidate In 2017, this risk is the top risk of Brunel Europe business divisions. |
| This year, Brunel Netherlands has amended its strategy to emphasis on achieving performance in the candidates' markets and strengthening Brunel's employership. |
| Risk with high likelihood & impact | Key aspects | ||
|---|---|---|---|
| Compliance (C) | I. Labour laws (HR). |
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| Non-compliance with laws, regulations, and local standards due to potential insufficient knowledge on the provisions of specific jurisdictions or due to provisions being open for interpretations resulting in penalties and / or reputational damage. |
II. Legal. | ||
| III.Health & Safety. | |||
| IV. Anti bribery and corruption. | |||
| Mitigating measures | Implementation in 2017 | Outlook | |
| Increasing knowledge | Attract and retain key personnel to monitor, review, report and adapt to relevant changes in rules and regulations. |
Brunel has always and will always maintain a strong corporate compliance culture, especially preventing illegal |
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| practices such as bribery and collusion in | |||
| Monitoring of risks / internal control |
Internal control framework and control activities, see chapter "Risk management framework". |
our industries and operation locations. The HR, tax and legal compliance requirements need to be assigned to |
|
| functions and employees. We need to | |||
| Increase communication of business integrity |
Annual knowledge sharing meetings for commercial staff and financial controllers. |
monitor changes in these employees and establish knowledge management to make sure the knowledge stays with the company if compliance officers leave. Increasing compliance related training |
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| CEO kicked off the global privacy awareness programme and privacy e-learning for Brunel employees worldwide. |
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| Enhance culture of business integrity. | and monitoring of these trainings on a regular basis for compliance personnel. |
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| Implement anonymous internal misconduct reporting tool and maintain a global whistleblower procedure ("Anti-bribery and corruption" page 75). |
To formalise and strengthen third party due diligence process and include non financial KPIs in the formal management reporting packages. |
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| Risk-based review of operations by HSE professionals |
Continue implementing global HSE system ("Health and safety at work" page 61). |
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| Risk with medium likelihood & impact Dependency on key clients (S) The ability to grow is highly dependent on key clients and their willingness to continue to do business with Brunel. |
Key aspects I. Damage by losing one of the key clients. II. Complacency attitude of having business "given" by key clients. |
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|---|---|---|---|---|---|---|
| Mitigating measures | Implementation in 2017 | Outlook | ||||
| Expand and diversify client base |
DEVELOP LOCAL DIVERSIFICATION INITIATIVES This ranges from mining, marine and infrastructure in Australia to healthcare, pharmaceuticals and shipyard activities in North America. Brunel Industrial Solutions is founded in the USA to provide project work in the field of construction and maintenance business. |
Based on a decentralised approach, Brunel's local business divisions continuously develop new service concepts and explore opportunities for further diversification. |
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| Strengthen sales organisation |
Target control, acquisition boot camp. | |||||
| Improve quality and efficiency |
COMPLIANCE AS A SERVICE When excellent quality and efficiency is delivered to our clients and contractors, we will have a better proposition to other potential clients as well. |
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| Monitoring closely | The share of largest clients is included in our quarterly reporting. We monitor on an ad hoc basis the share of our key clients as a percentage of total revenue. |
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| Risk with medium likelihood & impact | Key aspects | ||
|---|---|---|---|
| Contract negotiation and management (C) The potential of entering into burdensome, unenforceable or unfavourable contract terms or contracts that lack clear definition of business arrangements resulting in non-compliance with contract terms and increased costs. Due to the focus on further growth and our expanding client base the |
I. Margin – Burdensome and unfavourable contracts might cause margin pressure. II. Liabilities. |
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| risk of entering in these contract has increased. | |||
| Mitigating measures Commercial team |
Implementation in 2017 Global commercial team is fully in place. This team screens high risk contracts to ensure all potential upward and downward risks are known and carefully assessed before engagement. |
Outlook In the coming year, we aim to increase the awareness on creation of client contracts in sales, operations and finance departments; encourage communications among different regions regarding global |
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| Internal control | Setting up minimum commercial, financial and legal requirements which our contracts should comply with. Performing go/no go client and project selection through thorough review of contract conditions, client's credit check and risk assessment. |
contracts; utilising the updated IT systems to further facilitate the use of standard contracts whilst simultaneously monitoring activities with client specific contracts (e.g. fulfilment, expirations, renewals, key events tracking). |
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| Awareness | During internal training sessions for commercial employees, specific attention is given to create awareness for contract issues. |
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| Brunel commercial and financial training has been developed in 2016 and rolled out in 2017 to create awareness among sales organisation on profitability and risks in contracting. |
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| Risk with medium likelihood & impact | Key aspects | |
|---|---|---|
| Tax (C) | I. Additional cost. |
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| one of the major business risks within Brunel. | Brunel operates worldwide which exposes the group to various jurisdictions and complex tax systems. Considering the type of business, taxation is a large part of our costs. As compliance is one of the most important parts of our service, tax compliance is therefore Depending on jurisdictions, tax rules as well as interpretations can be subject to changes, which can expose Brunel to additional tax costs. |
II. Reputation damage. |
| Mitigating measures | Implementation in 2017 | Outlook |
| Formal procedures and monitoring systems around tax compliance |
Updated procedures are distributed to all local offices. Depending on the sort of taxation, monitoring takes place by the commercial team, the payroll team and regional finance departments. CFC reviews all tax positions on a monthly basis and handles all tax regulation with a worldwide coverage. |
In the coming year we expect the attitude towards tax compliance to be more and more strict. Especially the new available information from the country-by-country reporting, local files on transfer pricing and changing regulation to prevent tax avoidance is expected to trigger tax authorities to increase their effort to challenge local tax returns. |
| All new tax matters are directly reported to the CFO. |
This can result in unexpected tax claims, an increased amount of tax audits and tax authorities that are not open to resolving disputes without going to court. |
|
| Engage reputable tax advisors |
We have seen changes in tax laws and interpretations in especially developing countries we operate. 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 resolving disputes without going to court. To minimise these tax risks, we have engaged reputable tax advisors to ensure compliance. |
To minimise these tax risks, we will continue to engage reputable tax advisors to ensure compliance. Brunel has not structured the organisation to achieve tax advantages. The group has a very basic structure of transfer pricing services. These services are limited to management, legal and administrative support and IT support. All of these services are part of the normal business functionalities within a global |
| Training | Encourage relevant employees to take tax compliance trainings and seminars to keep Brunel's local knowledge up-to-date. |
entity and are recharged based on usage. In some developing countries, we might occasionally accept an incorrect tax claim, because the actual claim is lower the expected costs for the appeal. |
The main measure to control the quality of the financial reporting, and prevent unintentional or intentional errors is internal control. Brunel continuously standardise and uniforms processes and procedures. As a result, more group wide controls has been implemented, as well as sharing of best practices. We are also monitoring the market trends to be able to quickly respond to changes in the control environment. We have implemented a new financial consolidation application in 2016 that enables us to interface data directly from 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 boosts favourable liquidity positions and bank facilities that accommodate the day-to-day management of the working capital. Our strong balance sheet has been proved by both clients and employees to be an advantage during the industry downturn.
Brunel is considered as 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. However, the risk of a material erosion of operating profit is very small.
Brunel does incur currency risks. The 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 help 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.
Further information is included in on pages 127 to 129 of the annual accounts.
< CONTENTS 86REPORT FROM THE BOARD OF DIRECTORS 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 Code contains principles and best practices on the governance of listed companies and their accountability to their shareholders on this topic. On 8 December 2016, the Dutch Corporate Governance Code Monitoring Committee published the revised Code, which took effect on 1 January 2017. The full text of the Code is available on www.mccg.nl.
This chapter describes the principal aspects of Brunel's corporate governance structure and how the Code is applied. If applicable, explanations for deviating from the Code's best practice stipulations are provided.
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.
In order to meet the revised Code's requirements Brunel amended the rules governing the Supervisory Board and the Board of Directors. The Supervisory Board and Board of Directors' regulations are published on the company's website. 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 for discussion on a separate agenda item.
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.
Brunel's view and strategy on the newly introduced central feature of long-term value creation and the realisation thereof, are explained in the of the report Board of Directors. The Board of Directors' report also describes the company's risk appetite and the integration of risk management and internal control systems into the work processes.
< CONTENTS 87REPORT FROM THE BOARD OF DIRECTORS Currently all seats in the Supervisory Board and the Board of Directors are held by men. Brunel aims for a balanced distribution of seats in the Supervisory Board and the Board of Directors, with at least 30% of the seats occupied by women and at least 30% by men. The Supervisory Board is of the opinion that gender is only one element of diversity, and that experience, background, knowledge, skills and insight are equally important and relevant criteria in selecting new members. At the same time, the Supervisory Board believes that also the team dynamics and the specific structure of Brunel should be taken into consideration. Brunel considers diversity in age and nationality inappropriate for the formulation of a specific objective. However, Brunel acknowledges that experience and wisdom come with the years and that young people have the most potential when it comes to being open to new developments.
Against this background, the main priority is always to recommend, nominate and appoint the most suitable candidate for the position. With this in mind, Brunel strives gradually for a mixed composition of the Supervisory Board and the Board of Directors on the aspects of diversity that are relevant to the company.
Tasked with the management of the company, the Board of Directors is responsible for setting Brunel's mission, vision, strategy and focus on long-term value creation; execution of its implementation; taking responsibility for Brunel's overall results, and addressing
< CONTENTS 88REPORT FROM THE BOARD OF DIRECTORS 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 Supervisory Board regulations 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. On 31 December 2017 the number of outstanding shares was 50,429,624.
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.
< CONTENTS 89REPORT FROM THE BOARD OF DIRECTORS 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 annual accounts 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.
On 11 May 2017 the Annual General Meeting of Shareholders charged the external auditor with the task of auditing Brunel International N.V.'s annual accounts.
On 11 May 2017 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 14 May 2018.
< CONTENTS 90REPORT FROM THE BOARD OF DIRECTORS On 11 May 2017 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 14 May 2018.
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 corporate governance statement can be found on the company's website www.brunelinternational.net.
Contrary to the provisions of best practice provision II.1.1, Mr Van Barneveld has been appointed for an indefinite period. He was appointed before the Code was implemented and the company wishes to respect his existing contract, which will terminate on 28 February 2018.
After having reached the maximum term of appointment to the Supervisory Board, Mr Schouwenaar was reappointed for an extra term in 2013 and 2015. In order to secure continuity and effective succession within the Supervisory Board the Annual General Meeting reappointed Mr Schouwenaar at 11 May 2017 for an additional term of two years.
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.
< CONTENTS 91REPORT FROM THE BOARD OF DIRECTORS In 2005, the General Meeting of Shareholders decided to discontinue the adoption of the rules applicable to the full two-tier board structure ("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 4.3.3. 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.
< CONTENTS 92REPORT FROM THE BOARD OF DIRECTORS The first half year of 2017 was challenging. All the efforts in 2016 and 2017 have resulted in growth in all segments in the second half of the year. The strong economic situation supported the 2017 performance in our European markets, resulting in record headcounts and revenues in Q4. The Netherlands was able to exceed 2016's headcount in May, and ended the year with a 10% higher headcount than 2016. Germany was affected by the new equal pay law. Although Global Business was still impacted by the downturn in the oil & gas sector, we have reached the bottom of the trough sooner than expected mid-2017. All the initiatives resulting from the diversification strategy, combined with the first signs of improvement in oil & gas led to consecutive growth in almost all regions in the world. The acquisition of SES labor Solutions in Australia supports the diversification strategy. Total revenue decreased by -11% as a result of these developments.
The gross margin increased from 21.1% to 23.1% mainly because of the mix between Europe and Global Business and to a lesser extent because of the increased gross margin in Global Business.
Overhead expenses increased following the investments in the European organisation initiated in 2016. The restructuring of our Global Business entities led to a reduction of overhead expenses. The combined impact was an increase of overhead expenses of 2.5%.
The effective tax rate for 2017 ended at 44.7%. The adjustment in the deferred tax assets was the main background.
The net result significantly reduced because of these developments.
The direct headcount increased from 8,925 at 31 December 2016 to 10,573 at 31 December 2017, whereas the indirect headcount increased from 1,446 to 1,550. The diversification strategy in Global Business led to a significant increase in headcount especially in the Middle East and furthermore the Russian market almost doubled its headcount. On top of this the European markets increased their headcount. For 2018 we expect a continued growth in both the Europe and Global Business markets.
Working capital decreased by 11%, due to the acquisition of SES and a lower level of activities. The average days outstanding decreased by -6%. Goodwill and acquisition related intangibles increased by EUR 4.4 million as a result of the acquisition of SES Labour Solutions.
In 2018 we will start building a new facility for Car Synergies in Dortmund that is planned to be finalised in 2019, Other investments will be at a similar level as in 2017.
Revenue and EBIT development (x EUR million)
Decrease Increase Total
950,000
EBIT (x EUR 1,000)
Brunel Netherlands showed improving results recovering from the impact of the proposed legislation for freelancers. Headcount had a consistent strong growth in 2017 and the market ended the year at an all-time high. The economic climate creates scarcity in the market, where especially the engineering and IT domain profited. The engineering business line grew its revenue by 11%, IT business line increased its revenue by 5% and also the legal business line showed growth. The Insurance and Banking division was under pressure due to ongoing reorganisations at its customers. As a direct result of our digitisation efforts the start-up "Pretty Good Knowledge" was founded, an initiative to support organisations to achieve control and confidence about the knowledge and insights they extract from the ever-growing sources of data. JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
The gross margin improved as an effect of the reduction in freelancers. The operating expenses increased following the investments in the sales force initiated in 2016. The increase of direct staff throughout 2017 is the result of this investment. The organisation continues to invest in new technologies to improve its operational efficiency.
We expect that the 2017 headcount growth will continue throughout 2018. The improvements in operational efficiency of our sales force will result in an improved profitability in 2018. EBIT
Germany achieved moderate growth throughout the year, resulting in a 5% growth in headcount, an all-time high headcount. Revenue increased by 4% and was also impacted by three less working days compared to 2016. Adjusted for working days, revenue increased by 5%. The activities were impacted by the legislation that came into effect on 1 April 2017. Main elements of this legislation are equal pay, limitations on contract periods with one single client and the fact that union trade agreements supersede this legislation. This legislation caused uncertainty, amongst others, with some of our clients and required us to renew our union trade agreement. Some of our customers had suspended us as supplier until we had our new union trade agreement in place, what caused a temporary hiccup in the growth. We finalised the renewal at the end of July. This renewed agreement offers us a competitive advantage. EBIT
The gross margin decreased, mainly as a result of 3 less working days compared to 2016. Adjusted for working days, the gross margin is 35.3% (2016: 35.7%). Operating expenses increased due to further investment in sales account management. Operating profit decreased compared to 2016 because of these developments.
The equal pay legislation still creates some uncertainty in the market, nevertheless we do expect to continue the growth in the German market. Further investments in our competence centers will increase the capacity and potential for growth.
In the rest of Europe a revenue growth of 4% was achieved. Switzerland and Austria grew, where Czech Republic remained on the same level and Belgium showed a decrease. Investments in the sales management caused higher operating expenses.
We expect continued growth in Austria and Switzerland, and return to growth in the Belgium and Czech entities.
In 2017, Global Business started to see the results of new initiatives. From the end of the second quarter onwards, revenue from new initiatives and projects started exceeding revenue from ending projects from the previous oil & gas upturn. Global Business achieved consecutive growth in almost regions from the second half year onwards, helped by the first signs of recovery in the oil & gas market towards the end of the year.
Headcount Global Business
We acquired SES Labour Solutions in August 2017. SES is a contingent workforce provider specialised in the mining and construction sectors in East Australia. The acquisition strengthens Brunel's position in the mining industry. SES contributed EUR 11 million revenue in 2017.
Furthermore, we acquired Celsium, an employee relocation services company providing global mobility solutions to organisations relocating employees anywhere in the world to expand the product portfolio for our international customers. In the USA we founded a turnaround and maintenance company for the civil, chemical, petroleum and power industries.
The year-on-year decrease in Global Business revenue was 24% (organic decrease of 28%), but started at a decrease of 36% in Q1 and ending at a decrease of 8% in Q4.
Main drivers for the 31% headcount growth were our blue-collar activities in the Philippines and Kuwait and the acquisition of SES in Australia. The impact of exchange rate movements on our performance was limited.
We expect the upward trend to continue, and accelerate in 2018 resulting in growth of headcount and revenues and a return to profitability in 2018.
The Board of Directors is responsible for Brunel's risk management and control systems, and for reviewing its effectiveness. The internal risk management and control systems, as described earlier, are designed to manage the key risks that may prevent us from achieving our business objectives. However, the risk management and control systems cannot provide full assurance that all control gaps, material misstatements, cases of fraud, or violations of laws and regulations will be prevented.
< CONTENTS 100REPORT FROM THE BOARD OF DIRECTORS In 2017, the Board of Directors reviewed and analysed the strategic, operational, financial & reporting and compliance risks to which the group was exposed, and it regularly reviewed the design and operational effectiveness of Brunel's risk management and control systems. The outcome of these reviews was shared with the Audit Committee and the Supervisory Board, and was discussed with our external auditor. Brunel's risk management and control systems should ensure consistent and reliable financial reporting, both internally and externally.
In accordance with the Dutch Corporate Governance Code, we have assessed the design and operational effectiveness of our internal risk management and control systems. Based on the activities performed during 2017, and in accordance with best practice provision 1.4.3, the Board of Directors considers that:
Following section 5:25c, paragraph 2, under c of the Dutch Act on Financial Supervision (Wet op Financieel Toezicht) the members of the Board of Directors confirm that to the best of their knowledge:
These 2017 annual accounts give 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 is in accordance with IFRS as endorsed by the EU.
< CONTENTS 101 REPORT FROM THE BOARD OF DIRECTORS 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 2017, 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, 23 February 2018
CEO CFO
J.T. Andringa P.A. de Laat J.A. van Barneveld
Brunel International N.V. is a public limited liability company. Its authorised capital is EUR 6.0 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 2017 is 50,429,624, giving a market capitalisation of EUR 767 million at that time. The number of shares outstanding at year-end 2016 was 50,413,624. The increase in the number of shares outstanding is due to the fact that we have exercised stock option rights.
< CONTENTS 103THE BRUNEL SHARE 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 0.15 per share to the General Meeting of Shareholders.
| 4 May 2018 | Trading update for the first quarter 2018 |
|---|---|
| 14 May 2018 | Annual General Meeting of Shareholders |
| 16 May 2018 | Ex-dividend listing |
| 7 June 2018 | Dividend available for payment |
| 10 August 2018 | Half-year results 2018 |
| 2 November 2018 | Trading update for the third quarter 2018 |
| Consolidated balance sheet | 110 |
|---|---|
| Consolidated profit and loss account | 111 |
| Consolidated statement of comprehensiVe income | 112 |
| Consolidated cash flow statement | 113 |
| Consolidated statement of changes in equity | 114 |
| Notes to the consolidated financial statements | 117 |
| Company balance sheet | 167 |
|---|---|
| Company profit and loss account | 168 |
| Notes to the company balance sheet and | |
| profit and loss account | 169 |
x EUR 1,000, before profit appropriation
| 31 December 2017 | 31 December 2016 | |||
|---|---|---|---|---|
| Non-current assets | ||||
| Goodwill (2) | 8,716 | 4,265 | ||
| Other intangible assets (3) | 12,956 | 13,905 | ||
| Property, plant and equipment (4) | 7,805 | 7,301 | ||
| Financial fixed assets (5) | - | - | ||
| Deferred income tax assets (17) | 11,763 | 10,563 | ||
| Total non-current assets | 41,240 | 36,034 | ||
| Current assets | ||||
| Trade and other receivables (6) | 204,759 | 204,506 | ||
| Income tax receivables (17) | 7,252 | 9,922 | ||
| Cash and cash equivalents (7) | 125,668 | 149,233 | ||
| Total current assets | 337,679 | 363,661 | ||
| Total assets | 378,919 | 399,695 | ||
| Non-current liabilities | ||||
| Provisions (8) | 1,670 | 603 | ||
| Deferred income tax liabilities (17) | 1,024 | 553 | ||
| Long-term liabilities (9) | 2,078 | 922 | ||
| Total non-current liabilities | 4,772 | 2,078 | ||
| Current liabilities | ||||
| Current liabilities (10) | 104,425 | 100,785 | ||
| Income tax payables (17) | 754 | 3,146 | ||
| Total current liabilities | 105,179 | 103,931 | ||
| Total liabilities | 109,951 | 106,009 | ||
| Net assets | 268,968 | 293,686 | ||
| Group equity (11) | ||||
| Share capital | 1,513 | 1,512 | ||
| Share premium | 83,787 | 83,548 | ||
| Reserves | 175,887 | 198,042 | ||
| Unappropriated result | 7,645 | 10,050 | ||
| Non-controlling interest | 136 | 534 | ||
| Total equity | 268,968 | 293,686 |
x EUR 1,000
| 2017 | 2016 | |||
|---|---|---|---|---|
| Revenue Direct personnel expenses (14) Gross profit |
790,090 -607,397 182,693 |
884,911 -697,815 187,096 |
||
| Indirect personnel expenses (14) Depreciation and amortisation (15) Other expenses (16) Total operating costs |
-103,439 -7,994 -53,346 |
-164,779 | -100,584 -8,288 -51,398 |
-160,270 |
| Operating profit | 17,914 | 26,826 | ||
| Exchange differences Interest income Interest expenses Financial income and expense |
-2,123 680 -144 |
-1,587 | -1,488 796 -96 |
-788 |
| Share of result of investments accounted for using the equity method (5) |
-1,744 | -1,807 | ||
| Group result before tax | 14,583 | 24,231 | ||
| Tax (17) Group result after tax |
-6,739 7,844 |
-13,629 10,602 |
||
| Net income attributable to equity holders of the parent (ordinary shares) Net income attributable to |
7,645 | 10,050 | ||
| non-controlling interest Net income for the year |
199 7,844 |
552 10,602 |
||
| BASIC EARNINGS PER SHARE IN EURO (18) DILUTED EARNINGS PER SHARE IN EURO (18) |
0.15 0.15 |
0.20 0.20 |
x EUR 1,000
| 2017 | 2016 | |
|---|---|---|
| Net income | 7,844 | 10,602 |
| Other comprehensive income | ||
| ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS | ||
| Exchange differences arising on translation of foreign operations | -12,812 | 2,886 |
| Income tax relating to components of other comprehensive income | 557 | 643 |
| Total other comprehensive income (net of tax) | -12,255 | 3,529 |
| Total comprehensive income | -4,411 | 14,131 |
| Attributable to: | ||
| Ordinary shareholders | -4,545 | 13,552 |
| Minority interests | 134 | 579 |
| Total comprehensive income | -4,411 | 14,131 |
x EUR 1,000
| 2017 | 2016 | |
|---|---|---|
| Cash flow from operating activities | ||
| Result before tax | 14,583 | 24,231 |
| Adjustments for: | ||
| Depreciation and amortisation (15) | 7,994 | 8,288 |
| Interest income | -680 | -796 |
| Interest expense | 144 | 96 |
| Share of loss/(profit) from associates (5) | 1,744 | 1,807 |
| Other non-cash expenses (21) | 909 | 1,831 |
| Share based payments (12) | 151 | 497 |
| Changes in: | ||
| Receivables (19) | -3,482 | 46,632 |
| Provisions (8) | 1,067 | -109 |
| Long-term liabilities (9) | 1,156 | -152 |
| Current liabilities (20) | -134 | -24,511 |
| -1,393 | 21,860 | |
| Income tax paid (17) | -7,936 | -16,991 |
| Interest paid | -57 | 79 |
| Interest received | 503 | 790 |
| Cash flow from operating activities | 15,962 | 41,692 |
| Cash flow from investing activities | ||
| Additions to property, plant and equipment (4) | -2,944 | -1,399 |
| Additions to intangible fixed assets (3) | -2,887 | -4,404 |
| Disposals of property, plant and equipment (4) | 16 | 31 |
| Acquisition of subsidiaries (1) | -6,053 | - |
| -11,868 | -5,772 | |
| Cash flow from financing activities | ||
| Issue of new shares | 240 | 6,796 |
| Dividend non-controlling interest | -532 | -501 |
| Dividend ordinary shareholders | -20,172 | -75,500 |
| -20,464 | -69,205 | |
| Total cash flow | -16,370 | -33,285 |
| Cash position at 1 January | 149,233 | 180,037 |
| Exchange rate fluctuations | -7,195 | 2,481 |
| Cash position at 31 December | 125,668 | 149,233 |
ANNUAL ACCOUNTS 2017
x EUR 1,000
| RESERVES | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share Capital |
Share Premium |
Trans- lation reserve |
Share based payments |
Retained earnings |
result | Attributable to ordinary holders |
Non share- controlling interest |
Total | |
| Balance at 1 January 2016 | 1,499 | 76,765 | 12,504 | 3,607 | 215,774 | 37,122 | 347,271 | 456 | 347,727 |
| Net income | 10,050 | 10,050 | 552 | 10,602 | |||||
| Exchange differences arising on | |||||||||
| translation of foreign operations | 2,859 | 2,859 | 27 | 2,886 | |||||
| Income tax relating to components | |||||||||
| of other comprehensive income | 643 | 643 | 643 | ||||||
| Total comprehensive income | 3,502 | 10,050 | 13,552 | 579 | 14,131 | ||||
| Cash dividend (11) | -75,500 | -75,500 | -501 | -76,001 | |||||
| Appropriation of result | 37,122 | -37,122 | |||||||
| Share based payments (12) | 899 | 134 | 1,033 | 1,033 | |||||
| Option rights exercised (12) | 13 | 6,783 | -1,649 | 1,649 | 6,796 | 6,796 | |||
| Balance at 31 December 2016 | 1,512 | 83,548 | 16,006 | 2,857 | 179,179 | 10,050 | 293,152 | 534 | 293,686 |
| Net income | 7,645 | 7,645 | 199 | 7,844 | |||||
| Exchange differences arising on | |||||||||
| translation of foreign operations | -12,747 | -12,747 | -65 | -12,812 | |||||
| Income tax relating to components | |||||||||
| of other comprehensive income | 557 | 557 | 557 | ||||||
| Total comprehensive income | -12,190 | 7,645 | -4,545 | 134 | -4,411 | ||||
| Cash dividend (11) | -20,172 | -20,172 | -532 | -20,704 | |||||
| Appropriation of result | 10,050 | -10,050 | |||||||
| Share based payments (12) | 157 | 157 | 157 | ||||||
| Option rights exercised (12) | 1 | 239 | -342 | 342 | 240 | 240 | |||
| Balance at 31 December 2017 | 1,513 | 83,787 | 3,816 | 2,672 | 169,399 | 7,645 | 268,832 | 136 | 268,968 |
Brunel International N.V.'s main participations are listed below. These are included in the consolidated annual accounts 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 nonmaterial participations are not included in the list.
Brunel Corporate B.V., Amsterdam, The Netherlands Brunel Energy Europe Staff B.V., Amsterdam, The Netherlands Pack B.V., Amsterdam, The Netherlands Pretty Good Knowledge B.V. (75%), Amsterdam, The Netherlands Brunel CR B.V., Amsterdam, The Netherlands Brunel Nederland B.V., Rotterdam, The Netherlands Brunel Energy Holding B.V., Rotterdam, The Netherlands Brunel Energy Europe B.V., Rotterdam, The Netherlands Brunel Energy Nederland B.V., Rotterdam, The Netherlands Brunel Engineering Consultants N.V., Mechelen, Belgium Brunel International UK Ltd, Glasgow, United Kingdom Celsium Ltd, Birmingham, 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 CZ s.r.o., Prague, Czech Republic Brunel Romania Srl, Bucharest, Romania Brunel Denmark ApS, Copenhagen, Denmark Brunel Rus LLC, Moscow, Russia Brunel Private Employment Agency Ltd, Moscow, Russia Brunel Recruitment Kazakhstan Atyrau LLP, Atyrau, Kazakhstan Brunel Energy Nigeria Ltd, Lagos, Nigeria Brunel Mozambique Lda, Maputo, Mozambique
Brunel Energy LLC, Dubai, United Arab Emirates Brunel DMCC, Dubai, United Ara,b 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 Vietnam Company Ltd, Ho Chi Minh City, Vietnam Brunel Myanmar Co. Ltd, Yangon, Myanmar Brunel Energy Pty Ltd, Perth, Australia Brunel Technical Services Pty Ltd, Perth, Australia Brunel Construction & Maintenance Services Pty Ltd, Perth, Australia SES Labour Solutions Pty Ltd, Brisbane, Australia SESLS Pty Ltd, Brisbane, Australia SES Industrial Pty Ltd, Brisbane, Australia SES Resources Pty Ltd, Brisbane, Australia
Brunel Energy Inc, Houston, United States of America Brunel Resources Inc, Houston, United States of America Brunel Industry Solutions LLC (75%), Houston, United States of America Brunel Industry & Pipeline Services LLC (75%), Houston, United States of America Wrap Insulation & Scaffolding Services LLC (75%), Houston, United States of America Surge Electrical & Implementation Services LLC (75%), Houston, United States of America Brunel Energy Canada Inc, Calgary, Canada Brunel Canada Ltd, Toronto, Canada Brunel Energy Servicos Ltda Brasil, Rio de Janeiro, Brazil Brunel Mexico S.A. de C.V., Mexico City, Mexico
Brunel International N.V., registered at the chamber of commerce under number 24261450, is a public limited liability company domiciled in Amsterdam, 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 Netherlands
The consolidated annual accounts of Brunel include the company and its subsidiaries (together referred to as 'Brunel'). A summary of the main subsidiaries is included on page 115 and 116 of this report.
The annual accounts were signed and authorised for issue by the Board of Directors and released for publication on 23 February 2018. The annual accounts and the dividend proposal are subject to adoption by the General Meeting of Shareholders on 14 May 2018.
Unless stated otherwise all the information in these annual accounts 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 annual accounts 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 annual accounts have been prepared under the historical cost convention, and financial assets and financial liabilities at fair value through profit and loss.
IFRS 16, 'Leases' 2
Amendment to IFRS 2, Classification and measurement of share-based payment transactions 1
The Board of Directors has concluded that the new IFRS 9, IFRS 15, IAS 28, IAS 40, IFRIC 22 and IFRIC 23 standards and amendments will not have a significant effect on amounts reported in the consolidated annual accounts. Application of the new standards and amendments may result in more extensive disclosures in the annual accounts.
The company has a significant number of lease contracts for land, buildings and cars that are currently accounted for under IAS 17 as operating leases. The following changes are expected upon transition to IFRS 16:
slightly and investing and financing cash flow are expected to decrease as the lease payments will no longer be considered as operational.
IFRS 16 will be implemented per 2019. The company will continue to analyse the impacts and practical consequences of these standard's future application.
1 Effective for annual periods beginning on or after 1 January 2018 2 Effective for annual periods beginning on or after 1 January 2019 3 Effective for annual periods beginning on or after a date to be determined
The consolidated annual accounts 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 115 and 116. 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 share therein. Noncontrolling interests consist of the net equity value of those interests at the date of the original business combination and the noncontrolling 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 noncontrolling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
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 shares 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 non-controlling interest in the acquiree on an acquisition-by-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.
All considerations transferred to acquiree are recorded at fair value as at the acquisition date; subsequent changes to the fair value of the contingent considerations classified as debt are recognised as expense or income.
All acquisition related costs are expensed and included in other expenses.
Goodwill is allocated to groups of cashgenerating 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.
Goodwill at acquisition date is measured as:
When this difference is negative ('negative goodwill'), this amount is recognised directly in the other expenses.
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 cash-generating 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 depreciation and amortisation on a straightline 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 3 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 programmes are recognised as an expense when incurred. Amortisation of software applications is charged to depreciation and amortization on a straightline 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. This equity method includes the carrying amount of the investment together with all other long-term interests.
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.
Trade receivable and other receivables are initially stated at fair value. Subsequent measurement is at amortised costs less provision for impairment.
Cash and cash equivalents include cash in hand and deposits held at call with banks.
Provisions 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. 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.
Monetary 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 exchange differences.
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 annual accounts, 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 indirect personnel expenses 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 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 indirect personnel expenses 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 and construction contracts. The revenue recognised from construction contracts is insignificant in 2017.
Under rendering of services the following types of revenue are recognised;
When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by a reference to the stage of completion of the contract activity at the end of the reporting period, measured based on
the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as an amount due from customers for contract work. For contracts where progress billings exceed contact costs incurred to date plus recognised profits less recognised losses, the amount is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated balance sheet under trade and other receivables.
Direct personnel expenses relate to costs attributed directly to the services provided.
Gross profit is defined as revenue minus direct personnel expenses.
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 exchange differences.
Foreign exchange differences relating to bank balances are recorded in the financial income and expense, other foreign exchange differences are recorded in the operating 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 tax liabilities 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 annual accounts 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.
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 including paid or received interest, 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 annual accounts, 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.
In 2017, Brunel made several acquisitions for which the purchase price allocation has been finalised during the year. Significant judgement from management is required to determine the fair value of the consideration transferred as well as the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill, refer to note 1.
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, value-in-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 2.
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 6.
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 8.
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 carryforward. There are many uncertain factors that influence the amount of the tax losses carryforward. 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. 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 instead 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 foreign currency exchange rates and interest rates. Brunel's overall risk management programme focuses to minimise potential adverse effects on the financial performance of Brunel. This programme 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.
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:
| Assets 31 december |
Liabilities 31 december |
|||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| US Dollar | 52,601 | 91,413 | 5,936 | 14,497 |
| Australian Dollar | 29,274 | 30,699 | 10,267 | 8,998 |
| 81,875 | 122,112 | 16,203 | 23,495 |
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.
| US dollar Impact |
Australian dollar Impact |
|||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Profit or loss | -372 | -583 | -29 | 167 |
| Other equity | 4,516 | 5,695 | 2,543 | 2,134 |
| Total equity | 4,144 | 5,112 | 2,514 | 2,301 |
| Revenue | 12,382 | 17,228 | 9,004 | 11,249 |
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 6. 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 2017 the largest receivable against a single counterparty amounted EUR 6.3 million (31 December 2016: EUR 11.2 million). For 2017, largest revenue from transactions with a single external customer amounted to EUR 40.5 million (2016: EUR 63.6 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
During 2017, the following companies were acquired:
| Company | Acquired % of Shares | Acquired # of Shares | Acquisition date |
|---|---|---|---|
| 2017: SES Labour Solutions Pty Ltd |
100% | 100 | 31 August |
| Celsium Ltd | 100% | 40 | 2 November |
The acquisitions are fully financed from the existing cash position.
SES Labour Solutions Pty Ltd is a specialist recruitment group supplying staffing solutions to the mining, oil & gas and construction sectors throughout Australia.
SES Labour Solutions Pty Ltd is the head of the group that includes three wholly owned subsidiaries:
Celsium Ltd, located in the UK, is a specialist in the field of global mobility. The acquisition amount is deemed insignificant.
The acquisitions supports Brunel's strategic direction to be the leader in specific segments of the international labour market. The goodwill is attributable to the workforce and the high profitability of SES Labour Solutions Pty Ltd.
The fair value of the assets and liabilities arising from the above-mentioned acquisition of SES Labour Solutions Pty Ltd, based on the purchase price allocation, can be summarised as follows:
| Property, plant, equipment and software | 50 |
|---|---|
| Acquisition-related intangible assets | 1,910 |
| Total non-current assets | 1,960 |
| Working capital assets/-liabilities | 1,568 |
| Non-current borrowings | |
| Other liabilities | -35 |
| Total non-current liabilities | -35 |
| Net assets acquired | 3,493 |
| Goodwill | 4,714 |
| Total consideration | 8,207 |
| Net cash acquired included in working capital | -528 |
| Non-current borrowings acquired | 1,289 |
| Net debt/-cash acquired | 761 |
| Consideration, adjusted for net debt/-cash acquired | 8,968 |
| Deferred compensation on acquisitions | -2,915 |
| Statement of cash flows, acquisition of subsidiaries | 6,053 |
No acquisition-related costs are included in the total amount of goodwill. The amount of acquisition-related expenses charged to the other expenses is EUR 62k.
In 2017, the newly acquired companies contributed approximately EUR 11 million to the group's revenue and approximately EUR 0.6 million to the group's operating profit. If these acquisitions had occurred on January 1, 2017,
the contribution to the group's revenue and operating profit would have been higher by approximately EUR 33 million and EUR 1.2 million respectively.
Movements during the year:
| 2017 | 2016 | ||
|---|---|---|---|
| At cost at 1 January | 4,254 | 6,634 | |
| Accumulated impairment and exchange rate movements | 11 | -2,416 | |
| Balance at 1 January | 4,265 | 4,218 | |
| Changes in carrying amount: | |||
| Additions | 4,714 | - | |
| Exchange rate movements | -263 | 47 | |
| Balance at 31 December | 8,716 | 4,265 | |
| At cost at 31 December * | 8,968 | 4,254 | |
| Accumulated impairment and exchange rate movements | -252 | 11 | |
| Balance at 31 December | 8,716 | 4,265 |
* 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:
| 2017 | 2016 | |
|---|---|---|
| Brunel Germany | 2,844 | 2,844 |
| Brunel Global Business | 5,872 | 1,421 |
| Balance at 31 December | 8,716 | 4,265 |
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 units 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 2018.
The value in use of the main cash-generating unit resulted in no impairment compared to the carrying amount as at 31 December 2017.
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 2018-2022 used in calculation of the value in use for the significant cash generating unit Brunel Germany are:
| 2017 | 2016 | |
|---|---|---|
| Revenue growth | 5% | 5% |
| Budgeted gross margin | 33.4% | 36.1% |
| Overhead costs increase | 2% | 2% |
| Terminal growth rate | 0% | 0% |
| Pre tax discount factor | 14% | 13% |
| Depreciations and investments plans | Depreciations are used for new or replacing investments |
Depreciations are used for new or replacing investments |
Key assumptions for 2018-2022 used in calculation of the value in use for the significant cash generating unit Global Business are on the next page:
| 2017 | 2016 | |
|---|---|---|
| Revenue growth | 11% | 4% |
| Budgeted gross margin | 12.0% | 11.0% |
| Overhead costs increase | 2% | 2% |
| Terminal growth rate | 1.5% | 1.5% |
| Pre tax discount factor | 14% | 14% |
| Depreciations and investments plans | Depreciations are | Depreciations are |
| used for new or | used for new or | |
| replacing investments | replacing investments |
All cash generating units have substantial headroom available to cover variations in assumptions.
The other intangible assets consist of the following:
| 2017 | 2016 | |
|---|---|---|
| Software | 11,301 | 13,905 |
| Trade names | 138 | - |
| Customer databases | 1,517 | - |
| Balance at 31 December | 12,956 | 13,905 |
The amortisation rates are as follows:
Residual values are considered to be zero.
Movements during the year:
| At cost at 1 January | 25,928 |
|---|---|
| Accumulated amortisation | -13,045 |
| Balance at 1 January 2016 | 12,883 |
| Changes in carrying amount: | |
| Additions | 4,404 |
| Disposals Transfer from PP&E |
-2 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 |
| Changes in carrying amount: | |
| Additions | 2,887 |
| Through business combinations | 12 |
| Disposals | - |
| Amortisation | -5,483 |
| Exchange rate | -20 |
| Total changes 2017 | -2,604 |
| At cost at 31 December | 33,709 |
| Accumulated amortisation | -22,408 |
| Balance at 31 December 2017 | 11,301 |
Software mainly includes financial and business supporting software acquired. The average remaining amortisation period is three years.
| 2017 | 2016 | |
|---|---|---|
| At cost at 1 January | 965 | 965 |
| Accumulated amortisation and impairment | -965 | -805 |
| Balance at 1 january | - | 160 |
| Changes in carrying amount: | ||
| Additions | 161 | - |
| Amortisation | -18 | -160 |
| Exchange rate | -5 | - |
| Balance at 31 December | 138 | - |
| At cost at 31 December | 155 | 965 |
| Accumulated amortisation and impairment | -17 | -965 |
| Balance at 31 December | 138 | - |
In 2017 the Trade name for For All Finance that was fully impaired has been written off from both the at cost value and the accumulated impairment. The addition in 2017 relates to the acquisition of SES Labour Solutions.
| 2017 | 2016 | |
|---|---|---|
| At cost at 1 January | 3,937 | 3,937 |
| Accumulated amortisation and impairment | -3,937 | -3,937 |
| Balance at 1 january | - | - |
| Changes in carrying amount: | ||
| Additions | 1,774 | - |
| Amortisation | -197 | - |
| Exchange rate | -60 | - |
| Balance at 31 December | 1,517 | - |
| At cost at 31 December | 1,707 | 3,937 |
| Accumulated amortisation and impairment | -190 | -3,937 |
| Balance at 31 December | 1,517 | - |
In 2017 the Trade name for For All Finance that was fully impaired has been written off from both the at cost value and the accumulated impairment. The addition in 2017 relates to the acquisition of SES Labour Solutions.
Movements during the year:
| Office equipment | Computer systems | Total | |
|---|---|---|---|
| At cost at 1 January | 25,756 | 4,043 | 29,799 |
| Accumulated depreciation | -15,615 | -3,455 | -19,070 |
| Balance at 1 January 2016 | 10,141 | 588 | 10,729 |
| 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 |
| Changes in carrying amount: | |||
| Additions | 2,429 | 515 | 2,944 |
| Through business combinations | 39 | - | 39 |
| Disposals | -58 | -6 | -64 |
| Depreciation | -1,943 | -353 | -2,296 |
| Exchange rate | -100 | -20 | -120 |
| Total changes 2017 | 367 | 136 | 504 |
| At cost at 31 December | 20,497 | 4,398 | 24,895 |
| Accumulated depreciation | -13,707 | -3,383 | -17,090 |
| Balance at 31 December 2017 | 6,790 | 1,015 | 7,805 |
| 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.
| 2017 | 2016 | |
|---|---|---|
| -1,169 | -1,807 | |
| -575 | ||
| - | - | |
| -2,514 357 -3,326 3,901 |
-753 46 -2,514 2,514 |
Set out below is the associates of the group as at 31 December 2017 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 | Country of incorporation |
% of ownership interest |
Nature of relationship |
Measurement method |
Carrying amount |
||
|---|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | ||||
| 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 below provide summarised financial information for the associate that is material to the group. The information disclosed reflects the amounts presented in the annual accounts 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.
| 2017 | 2016 | |
|---|---|---|
| Current assets | 2,835 | 4,184 |
| Current liabilities | -4,675 | -5,012 |
| Long-term liabilities | -1,486 | -1,686 |
| Net assets at 31 December | -3,326 | -2,514 |
| 2017 | 2016 | |
| Opening net assets 1 January | -2,514 | -753 |
| Profit / (loss) for the period | -1,169 | -1,807 |
| Foreign exchange | 357 | 46 |
| Closing net assets at 31 December | -3,326 | -2,514 |
| 2017 | 2016 | |
|---|---|---|
| Revenue | 643 | 5,137 |
| Profit / (loss) for the period | -1,169 | -1,807 |
The net asset value has been fully provided for and the result has been included in the share of profit of investments accounted for using the equity method. The share of result of
investments accounted for using the equity method includes the impairment of the funding of EUR 575.
| 2017 | 2016 | |
|---|---|---|
| Trade accounts receivables | 139,805 | 140,436 |
| Receivable from associates | - | 805 |
| Prepayments | 7,588 | 4,684 |
| Accrued income | 51,245 | 48,167 |
| Other receivables | 6,121 | 10,414 |
| Balance at 31 December | 204,759 | 204,506 |
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 1,277 (2016: EUR 1,606) for which EUR 1,277 (2016: EUR 1,606) 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:
| 2017 | 2016 | ||
|---|---|---|---|
| Balance at 1 January | 7,834 | 7,301 | |
| Fully provided receivables which are written off | -6,966 | -1,289 | |
| Change in allowance recognised in result | 909 | 1,688 | |
| Exchange rate movements | 661 | 134 | |
| Balance at 31 December | 2,438 | 7,834 |
Ageing of past due and not impaired trade accounts receivables is as follows:
| 2017 | 2016 | |
|---|---|---|
| 60-90 days - past due, not impaired | 3,603 | 4,216 |
| 90-120 days - past due, not impaired | 2,216 | 2,781 |
| 120+ days - past due, not impaired | 4,695 | 5,087 |
| Balance at 31 December | 10,514 | 12,084 |
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
This item consists mainly of bank balances, part of which EUR 18.7 million (2016: EUR 10.4 million) is not freely disposable on grounds of issued bank guarantees.
| Onerous contracts | Legal claims | Illness | Total | |
|---|---|---|---|---|
| Balance at 1 January | 100 | 26 | 477 | 603 |
| Additions | - | 196 | 897 | 1,093 |
| Withdrawals | - | - | - | - |
| Release | - | -26 | - | -26 |
| Balance at 31 December | 100 | 196 | 1,374 | 1,670 |
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.
| 2017 | 2016 | |
|---|---|---|
| Liability for office rent-free period | 749 | 922 |
| Contingent consideration business combinations | 1,329 | - |
| Balance at 31 December | 2,078 | 922 |
The liability for office rent-free period relates to our offices in Netherlands. These amounts will expire within one to five years.
The contingent consideration for business combinations relates to the acquisition of SES Labour Solutions. The carrying amount of these liabilities equals the fair value.
| 2017 | 2016 |
|---|---|
| 18,938 | 14,799 |
| 34,168 | 33,151 |
| 1,579 | |
| 41,714 | |
| - | |
| 5,473 | |
| 4,069 | |
| 104,425 | 100,785 |
| 1,427 39,010 1,513 4,112 5,257 |
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 50,429,624
ordinary shares (2016: 50,413,624) with a value of EUR 1,512,889.
The movement in the number of issued shares is:
| 2017 | 2016 | |
|---|---|---|
| Issued at 1 January | 50,413,624 | 49,967,624 |
| Issue of Shares | 16,000 | 446,000 |
| Issued at 31 December | 50,429,624 | 50,413,624 |
Except for the translation reserve, all reserves are freely distributable. In 2016 the cash dividend per share was EUR 0.20 per share and an additional dividend of EUR 0.20 per share. The proposed dividend for 2017 will be EUR 0.15 per share. Further information is provided in the consolidated statement of changes in group equity on page 114 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..
The movement in non-controlling interest is as follows:
| 2017 | 2016 | |
|---|---|---|
| Balance at 1 January | 534 | 456 |
| Result for the year | 199 | 552 |
| Dividend | -532 | -501 |
| Exchange rate movements | -65 | 27 |
| Issued at 31 December | 136 | 534 |
Outstanding options:
| Year granted | 2012 | 2013 | 2014 | Total |
|---|---|---|---|---|
| Outstanding at 1 January 2017 | 16,000 | 276,000 | 441,000 | 733,000 |
| Exercised | -16,000 | - | - | -16,000 |
| Forfeited | - | -30,000 | -40,000 | -70,000 |
| Outstanding at 31 December 2017 | - | 246,000 | 401,000 | 647,000 |
| Weighted average exercise prices in EUR | 15.00 | 16.29 | 22.92 | |
| Range of exercise prices in EUR | 15.00 | 16.29 | 22.92 | |
| Expiry date | 2 March 2017 | 1 March - | 1 March 2019 | |
| 15 March 2018 |
| Year granted | 2012 | 2013 | 2014 | Total |
|---|---|---|---|---|
| 1 January 2017 | - | - | 100,000 | 100,000 |
| Exercised | - | - | - | - |
| Forfeited | - | - | - | - |
| 31 December 2017 | - | - | 100,000 | 100,000 |
| Exercise prices in EUR | - | - | 22.92 |
| 2017 | 2016 | |||
|---|---|---|---|---|
| Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|
| Balance at 1 January | 733,000 | 20.25 | 1,206,000 | 18.44 |
| Performance adjustment during the year | - | - | 12,000 | 16.29 |
| Exercised during the year | -16,000 | 15.00 | -446,000 | 15.23 |
| Forfeited during the year | -70,000 | 20.08 | -39,000 | 20.41 |
| Balance at 31 December | 647,000 | 20.40 | 733,000 | 20.25 |
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 former CEO.
The weighted average share price at the date of exercise of options exercised in 2017 amounts to EUR 15.00 (2016: EUR 15.23). None of the members of the Board of Directors did exercise options in 2017. The costs for the equity settled option scheme for 2017 are EUR 157k. The issue of shares related to the exercise of option rights led to an increase of the share capital of EUR 1k (2016: EUR 13k) and increase of the share premium of EUR 239k (2016: EUR 6.8 million). The corresponding release of the share based payments reserve to the retained earnings amounted to EUR 342k (2016: EUR 1.6 million).
The reference dates are the date of granting, and precisely three years later. As per 31 December 2017 only the 2013 and the 2014 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.
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 former 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-tomarket 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 (30.18% - 34.50%), 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 in the range of -0.468% and -0.78%. The risk free
interest is based on the yield of AAA rated EU government bonds with a maturity commensurate to the expected life of the respective award. The weighted average fair value of SAR's granted in 2017 amounts to EUR 2.10. During 2017 704,500 SAR's have been granted conditionally, 205,000 SAR's have been exercised and 572,500 SAR's were forfeited. At 31 December 2017 a total of 281,000 SAR's can be exercised. The total costs of the SAR scheme in 2017 recognised in the P&L amount to EUR -/-6k. Per year end the total liability for the SAR scheme amounts to EUR 630k. Costs are spread over the period in which employees provide services.
Brunel has entered into long-term noncancellable 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.
| 2017 | 2016 | |
|---|---|---|
| Expire in year 1 | 15,162 | 13,878 |
| Expire in years 2-5 | 27,868 | 26,220 |
| Expire in years 6 and later | 8,759 | 8,470 |
| Balance at 31 December | 51,789 | 48,568 |
x EUR 1,000, unless stated otherwise
The profit and loss account includes the following amounts:
| 2017 | 2016 | ||||
|---|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | ||
| Salaries | 446,378 | 72,394 | 500,526 | 69,822 | |
| Social charges | 39,843 | 11,094 | 36,323 | 10,137 | |
| Pension charges | 15,420 | 1,816 | 14,877 | 1,369 | |
| Other | 105,756 | 18,135 | 146,089 | 19,256 | |
| Total | 607,397 | 103,439 | 697,815 | 100,584 |
The relative share social charges has increased in 2017 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 2017 (2016) are set out below:
| Salary | Bonus | Pension | Other* | Termination benefit** |
Share based payments |
Total | |
|---|---|---|---|---|---|---|---|
| Board of Directors: | |||||||
| J.T. Andringa, CEO (as | |||||||
| of 7 December 2017) | 48 (-) | - (-) | 1 (-) | 187 (-) | - | 2 (-) | 238 (-) |
| J.A. van Barneveld, | |||||||
| former CEO | 600 (600) | 225 (158) | 6 (34) | 32 (157) | - | -122 (-195) | 741 (754) |
| P.A. de Laat, CFO | 350 (300) | 88 (53) | 7 (7) | 10 (10) | - | 46 (52) | 501 (422) |
| J.A. de Vries, COO | |||||||
| Energy (stepped down | |||||||
| per 19 August 2016) | - (200) | - (23) | - (8) | - (13) | - (418) | - (-197) | - (465) |
| Supervisory Board: | |||||||
| D. van Doorn | 70 (64) | - | - | - | - | - | 70 (64) |
| A. Schouwenaar | 64 (56) | - | - | - | - | - | 64 (56) |
| J. Spee (as of 12 May 2017) | 34 (-) | - | - | - | - | - | 34 (-) |
| J. Bout (stepped down per | |||||||
| 15 March 2017) | 13 (56) | - | - | - | - | - | 13 (56) |
| 1,179 (1,276) | 313 (234) | 14 (49) | 229 (180) | - (418) | -74 (-340) | 1,661 (1,817) |
* Other benefits for Mr Andringa represents the transitional arrangement. Other benefits for Mr Van Barneveld and Mr De Laat concern the compensation for the cap of the maximum amount of "pensionable income" at EUR 100k 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 in 2016 of EUR 313k and EUR 105k salary for notice period, both including the compensation for "pensionable income" cap
o No loans and/or guarantees have been issued to members of the Board of Directors or Supervisory Board.
| Year granted | 2013 | 2014 | 2015 | 2016 | 2017 | Total |
|---|---|---|---|---|---|---|
| J.T. Andringa, CEO (as | ||||||
| of 7 December 2017) | - | - | - | - | 50,000 | 50,000 |
| J.A. van Barneveld, | ||||||
| former CEO | 75,000 | - | 70,000 | 70,000 | - | 215,000 |
| P.A. de Laat, CFO | 10,000 | 20,000 | 50,000 | 50,000 | 30,000 | 160,000 |
| Range of exercise | ||||||
| prices in EUR | 16.29 - 17.21 | 22.92 | 17.68 | 17.26 | 14.77-15.00 |
SAR rights of directors
The pay ratio of CEO compensation
compared to the average employee compensation during 2017:
| 2017 | 2016 | |
|---|---|---|
| J.T. Andringa, CEO (as of 7 December 2017) | 9.0 | - |
| J.A. van Barneveld (up to 7 December 2017) | 10.9 | 11.3 |
For Mr Van Barneveld, this ratio is calculated using the total direct compensation during 2017 of EUR 741k, compared to the average compensation of all indirect employees.
For Mr Andringa, this ratio is calculated using the normalised annualised compensation for 2017 of EUR 611k, compared to the average compensation of all indirect employees.
The average compensation of all indirect employees was calculated from the numbers as reported in Note 14 Direct and indirect personnel expenses and Note 23 Segment
reporting, resulting in an average compensation of EUR 68k for 2017.
The costs for depreciation and amortisation in the profit and loss account consist of:
| 2017 | 2016 | |
|---|---|---|
| Other intangible assets (3) | 5,698 | 5,904 |
| Property, plant and equipment (4) | 2,296 | 2,384 |
| Total | 7,994 | 8,288 |
The 2017 other expenses amount to EUR 53.3 million (2016: EUR 51.4 million) and include EUR 13.9 million (2016: EUR 13.1 million) rental costs and leasing costs. Furthermore, the other expenses comprise marketing expenses, IT expenses, office and other overhead costs.
| Pricewaterhouse Coopers Accountants N.V. |
Member firms/ affiliates |
Total 2017 |
Pricewaterhouse Coopers Accountants N.V. |
Member firms / affiliates |
Total 2016 |
|
|---|---|---|---|---|---|---|
| Audit fees | 612 | 545 | 1,157 | 455 | 683 | 1,138 |
| Tax services | - | 143 | 143 | 16 | 152 | 168 |
| Other non-audit fees | - | - | - | 27 | 20 | 47 |
| Total | 612 | 688 | 1,300 | 498 | 855 | 1,353 |
The fees listed above relate to the procedures applied to the company and its consolidated group entities by accounting firms and external auditors as referred to in Section 1, subsection 1 of the Audit Firms Supervision Act ('Wet toezicht accountantsorganisaties - Wta') as well as by Dutch and foreign-based accounting firms, including their tax services and advisory groups.
The audit fees relate to the audit of the 2017 annual accounts, regardless of whether the work was performed during the financial year. Our auditor, PwC NL, has rendered, for the period to which our statutory audit relates, in addition to the audit of the statutory annual accounts the following services to the company and its controlled entities:
Other audit services required by law or regulatory requirements
• Statutory audits of controlled entities
Other audit services
• Audits of financial information for the purpose of tenders
Tax Services
• Tax compliance services
| 2017 | 2016 | |
|---|---|---|
| Current tax (Income) / expense | 8,289 | 12,255 |
| Deferred tax (Income) / expense | -1,550 | 1,374 |
| Tax (Income) / expense | 6,739 | 13,629 |
In 2017, the effective tax rate on the result before tax is 46.2% (2016: 56.2%).
The reconciliation between the actual tax expense and the tax expense based on the Dutch corporate income tax rate (2017 and 2016: 25%) is as follows:
| The reconciliation between the actual tax |
|---|
| expense and the tax expense based on the |
Dutch corporate income tax rate (2017 and 2016: 25%) is as follows:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Income tax at Dutch corporate income tax rate Permanent differences: |
3,646 | 25.0% | 6,058 | 25.0% |
| Difference with foreign tax rates | 1,751 | 12.0% | 2,992 | 12.3% |
| Weighted average applicable tax rate | 5,397 | 37.0% | 9,050 | 37.3% |
| Adjustment previous years | -537 | -3.7% | 70 | 0.3% |
| Non-taxable items | -791 | -5.4% | -938 | -3.9% |
| Tax losses not recognised as deferred tax asset | 934 | 6.4% | 1,975 | 8.2% |
| Derecognition of deferred tax assets | 1,458 | 10.0% | 3,773 | 15.6% |
| Rate adjustment deferred tax asset | 466 | 3.2% | - | 0.0% |
| Other taxes | -188 | -1.3% | -301 | -1.2% |
| Effective tax charge | 6,739 | 46.2% | 13,629 | 56.2% |
The effective tax rate is strongly effected by impairment of deferred tax assets 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 impact of corporate income tax rate adjustments in the USA on the valuation of deferred tax assets in the respective countries is included in the schedule above.
| 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 | ||
| Movements during the year | ||||
| Paid / received | 7,936 | - | 7,936 | |
| Through profit and loss | -8,289 | 1,550 | -6,739 | |
| Through business combinations | -132 | -560 | -692 | |
| Through other comprehensive income | 557 | - | 557 | |
| Transfer from prepayments | -55 | - | -55 | |
| Exchange rate adjustment | -295 | -261 | -556 | |
| -278 | 729 | 451 | ||
| Balance at 31 December 2017 | ||||
| Tax assets | 7,252 | 11,763 | 19,015 | |
| Tax liability | -754 | -1,024 | -1,778 | |
| 6,498 | 10,739 | 17,237 |
During the financial year an amount of EUR 557k was debited directly to other comprehensive income (2016: EUR 643k) for tax relating to foreign exchange results recorded in the other comprehensive income.
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 on retained earnings in foreign subsidiaries which will be subject to Dutch corporate income tax once distributed to the relevant parent company and temporary differences in the valuation of intangible assets that were a result of business combinations.
| Opening balance |
Business Combinations |
Recognised in P&L |
Exchange rate adjusted |
Closing balance |
|
|---|---|---|---|---|---|
| Movement of deferred tax positions in 2016: | |||||
| 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 |
| Movement of deferred tax positions in 2017: | |||||
| Deferred tax assets | |||||
| Deferred tax assets in relation to: | |||||
| Temporary differences in allowance | |||||
| for doubtful debt | 402 | - | -136 | -12 | 254 |
| Temporary differences valuation other | |||||
| intangible assets | 3,657 | - | 1,493 | - | 5,150 |
| Temporary differences in accruals | |||||
| employee expenses | 1,099 | 20 | 81 | -72 | 1,128 |
| 5,158 | 20 | 1,438 | -84 | 6,532 | |
| Recognised tax losses | 5,405 | - | 24 | -198 | 5,231 |
| Total deferred tax assets | 10,563 | 20 | 1,462 | -282 | 11,763 |
| Deferred tax liabilities | |||||
| Deferred tax assets in relation to: | |||||
| Temporary differences valuation other | |||||
| intangible assets | - | -580 | 64 | 19 | -497 |
| Temporary differences in accruals | |||||
| employee expenses | -117 | - | 24 | 2 | -91 |
| Retained earnings from subsidiaries | -436 | - | - | - | -436 |
| Total deferred tax liabilities | -553 | -580 | 88 | 21 | -1,024 |
| Total deferred tax assets and liabilities | 10,010 | -560 | 1,550 | -261 | 10,739 |
Deferred tax assets amounting to EUR 5,231k (2016: EUR 5,405k) 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 222k. Unused tax losses for which no deferred tax assets have
been recognised amount to EUR 43,279k (2016: EUR 38,858k). All tax losses, either recognised or unrecognised can be offset with future profits. Dependant on the country EUR 5,073k of the unrecognised losses will expire within 5 years, the remainder can either be offset within 15 years or indefinitely.
| 2017 | 2016 | |
|---|---|---|
| Weighted average number of ordinary shares for the purpose of basic earnings per share |
50,421,624 | 50,190,624 |
| Effect of dilutive potential ordinary shares from share based payments |
647,000 | 392,000 |
| Weighted average number of ordinary shares for the purpose of diluted earnings per share |
51,068,624 | 50,582,624 |
| Net income for ordinary shareholders in EUR | 7,644,703 | 10,050,198 |
| Basic earnings per share in EUR Diluted earnings per share in EUR |
0.15 0.15 |
0.20 0.20 |
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.
| 2017 | 2016 | |
|---|---|---|
| Balance at 1 January | 204,506 | 253,627 |
| Change in allowance for bad debt | -909 | -1,688 |
| Change in receivables | 3,482 | -46,632 |
| Reclass negative participations to receivable associates | -1,744 | -1,807 |
| Exchange rate movements | -577 | 1,006 |
| Balance at 31 December | 204,758 | 204,506 |
| 2017 | 2016 | |
|---|---|---|
| Balance at 1 January | 100,785 | 124,932 |
| Change in current liabilities | -134 | -24,511 |
| Change in SAR liability | 130 | -1,267 |
| Exchange rate movements | 3,644 | 1,631 |
| Balance at 31 December | 104,425 | 100,785 |
The other non-cash expenses include the change in allowance for bad debts recognised in the result (Note 6) 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 14. 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 (2016: 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 43 (2016: EUR 123) 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.
Reportable segments
The Global Business division (formerly named: Energy division) supplies engineers, project management and consultancy services to oil and gas companies and related industries. As the Global Business 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 | |||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2017 | profit 2016 |
|
| Global Business * | 338,014 | 447,108 | 41,217 | 49,220 | -5,463 | -1,614 |
| Europe | ||||||
| Germany | 219,493 | 210,509 | 75,941 | 75,199 | 22,002 | 24,689 |
| Netherlands | 195,259 | 191,373 | 57,265 | 54,495 | 11,343 | 12,943 |
| Other regions | 37,324 | 35,921 | 8,270 | 8,182 | -142 | 206 |
| Total Europe | 452,076 | 437,803 | 141,476 | 137,876 | 33,203 | 37,838 |
| Unallocated | - | - | - | - | -9,826 | -9,398 |
| 790,090 | 884,911 | 182,693 | 187,096 | 17,914 | 26,826 |
*In the segment Global Business a revenue of EUR 12.4 million (2016: EUR 13.9 million) is generated in Netherlands.
| Balance sheet total |
Non-current assets |
Investment in IA & PPE |
||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |
| Global Business | 180,464 | 213,103 | 11,683 | 7,330 | 710 | 434 |
| Europe | ||||||
| Germany | 75,601 | 64,800 | 8,999 | 7,464 | 1,084 | 822 |
| Netherlands | 63,168 | 59,469 | 4,732 | 3,697 | 2,497 | 470 |
| Other regions | 59,686 | 62,323 | 15,826 | 17,543 | 1,540 | 4,077 |
| Total Europe | 198,455 | 186,592 | 29,557 | 28,704 | 5,121 | 5,369 |
| 378,919 | 399,695 | 41,240 | 36,034 | 5,831 | 5,803 |
| Tax expense | Current & Long-term liabilities |
Depreciation and Amortisation |
||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |
| Global Business | 2,872 | 6,083 | 47,386 | 51,981 | 859 | 1,119 |
| Europe | ||||||
| Germany | 2,965 | 5,658 | 18,719 | 16,699 | 1,032 | 1,083 |
| Netherlands | 2,916 | 3,233 | 33,689 | 30,819 | 1,348 | 1,292 |
| Other regions | 257 | 425 | 10,157 | 6,510 | 283 | 301 |
| Total Europe | 6,138 | 9,316 | 62,565 | 54,028 | 2,663 | 2,676 |
| Unallocated | -2,271 | -1,770 | - | - | 4,472 | 4,493 |
| 6,739 | 13,629 | 109,951 | 106,009 | 7,994 | 8,288 |
The total number of direct and indirect employees with the group companies is set out below:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Global Business | 4,728 | 520 | 4,596 | 571 |
| Europe | ||||
| Germany | 2,311 | 418 | 2,209 | 402 |
| Netherlands | 2,220 | 435 | 2,178 | 395 |
| Other countries | 330 | 72 | 332 | 71 |
| Total Europe | 4,861 | 925 | 4,719 | 868 |
| Unallocated | - | 52 | - | 42 |
| Total | 9,589 | 1,497 | 9,315 | 1,481 |
| Total workforce | 11,086 | 10,796 | ||
| 2017 | 2016 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Global Business | 5,417 | 539 | 4,134 | 500 |
| Europe | ||||
| Germany | 2,390 | 432 | 2,267 | 397 |
| Netherlands | 2,411 | 430 | 2,197 | 427 |
| Other countries | 355 | 78 | 327 | 74 |
| Total Europe | 5,156 | 940 | 4,791 | 898 |
| Unallocated | - | 52 | - | 48 |
| Total | 10,573 | 1,531 | 8,925 | 1,446 |
| Total workforce | 12,104 | 10,371 |
Other segment information provides an overview of the activities with regard to professional specialisation.
| Revenue | Operating profit | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Engineering | 327,161 | 308,546 | 27,750 | 29,661 |
| Global Business | 338,014 | 447,108 | -5,463 | -1,614 |
| IT | 71,004 | 67,585 | 5,466 | 4,915 |
| Unallocated | 53,911 | 61,672 | -9,839 | -6,136 |
| 790,090 | 884,911 | 17,914 | 26,826 |
The total number of direct and indirect employees with the group companies is set out below:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Engineering | 3,415 | 602 | 3,228 | 574 |
| Global Business | 4,728 | 520 | 4,596 | 571 |
| IT | 793 | 115 | 776 | 115 |
| Unallocated | 653 | 260 | 715 | 221 |
| 9,589 | 1,497 | 9,315 | 1,481 | |
| Total workforce | 11,086 | 10,796 |
| 2017 | 2016 | |||
|---|---|---|---|---|
| Direct | Indirect | Direct | Indirect | |
| Engineering | 3,611 | 615 | 3,337 | 582 |
| Global Business | 5,417 | 539 | 4,134 | 500 |
| IT | 849 | 114 | 781 | 119 |
| Unallocated | 696 | 263 | 673 | 245 |
| 10,573 | 1,531 | 8,925 | 1,446 | |
| Total workforce | 12,104 | 10,371 |
x EUR 1,000, before profit appropriation
| 31 December 2017 | 31 December 2016 | |||
|---|---|---|---|---|
| Non-current assets | ||||
| Other intangible assets (24) | 8,560 | 11,576 | ||
| Property, plant & equipment (25) | 161 | - | ||
| Financial assets (26) | 253,728 | 276,841 | ||
| Deferred tax income assets | 5,338 | 3,930 | ||
| Total non-current assets | 267,787 | 292,347 | ||
| Current assets | ||||
| Trade and other receivables (27) | 14,694 | 42,148 | ||
| Income tax receivables | 2,924 | 2,940 | ||
| Cash and cash equivalents | 21,965 | 25,001 | ||
| Total current assets | 39,583 | 70,089 | ||
| Total assets | 307,370 | 362,436 | ||
| Non-current liabilities | ||||
| Deferred income tax liabilities | 436 | 436 | ||
| Total non-current liabilities | 436 | 436 | ||
| Current liabilities | ||||
| Current liabilities (28) | 38,103 | 68,848 | ||
| Total current liabilities | 38,103 | 68,848 | ||
| Total liabilities | 38,539 | 69,284 | ||
| Net assets | 268,832 | 293,152 | ||
| Shareholders' equity (29) | ||||
| Share capital | 1,513 | 1,512 | ||
| Share premium | 83,787 | 83,548 | ||
| General reserve | 172,071 | 182,036 | ||
| Translation reserve | 3,816 | 16,006 | ||
| Unappropriated result | 7,645 | 10,050 | ||
| Total shareholders' equity | 268,832 | 293,152 |
x EUR 1,000
| 2016 | ||
|---|---|---|
| 13,171 | 11,262 | |
| - | - | |
| 13,171 | 11,262 | |
| -7,061 | -8,700 | |
| -4,471 | -4,493 | |
| -11,466 | -7,467 | |
| -22,998 | -20,660 | |
| -9,827 | -9,398 | |
| -32 | -10 | |
| 162 | 232 | |
| -3 | -9 | |
| 127 | 213 | |
| Share of profit of investments accounted | ||
| 15,074 | 17,465 | |
| 5,374 | 8,280 | |
| 1,770 | ||
| 7,645 | 10,050 | |
| 2017 2,271 |
x EUR 1,000, unless stated otherwise
The annual accounts 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 annual accounts.
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 117 until 125.
Subsidiaries of Brunel International N.V. are presented using the equity method.
This concerns software. Movements during the year:
| 2017 | 2016 | ||
|---|---|---|---|
| At cost at 1 January | 26,247 | 22,361 | |
| Accumulated amortisation | -14,671 | -10,508 | |
| Balance at 1 January | 11,576 | 11,853 | |
| Changes in carrying amount | |||
| Additions | 1,407 | 3,886 | |
| Amortisation | -4,423 | -4,163 | |
| Balance at 31 December | 8,560 | 11,576 | |
| At cost at 31 December | 27,096 | 26,247 | |
| Accumulated amortisation | -18,536 | -14,671 | |
| Balance at 31 December | 8,560 | 11,576 | |
In 2017 a part of the software with an at cost value of EUR 558 that was fully impaired has
been written off from both the at cost value and the accumulated impairment.
Movements during the year:
| At cost at 1 January | 381 | 430 | |
|---|---|---|---|
| Accumulated amortisation | -381 | -271 | |
| Balance at 1 January | - | 159 | |
| Changes in carrying amount | |||
| Additions | 106 | - | |
| Transfer from/(to) group companies | 103 | -97 | |
| Depreciation | -48 | -62 | |
| Balance at 31 December | 161 | - | |
| At cost at 31 December | 468 | 381 | |
| Accumulated depreciation | -307 | -381 | |
| Balance at 31 December | 161 | - | |
The financial assets consist of the following:
| 2017 | 2016 | ||
|---|---|---|---|
| Subsidiaries | 251,580 | 275,222 | |
| Funding of group companies | 2,148 | 1,619 | |
| Balance at 31 December | 253,728 | 276,841 |
Movements during the year:
| 2017 | 2016 | |
|---|---|---|
| Balance at 1 January | 275,222 | 267,291 |
| Capital contributions | 2,009 | 6,507 |
| Profit for the year | 15,074 | 17,465 |
| Dividend payment | -28,380 | -15,000 |
| Reclass negative participations to funding | ||
| of group companies | 138 | -4,273 |
| Exchange rate movements | -12,483 | 3,232 |
| Balance at 31 December | 251,580 | 275,222 |
Movements during the year:
| 2017 | 2016 | ||
|---|---|---|---|
| Balance at 1 January | 1,619 | 3,466 | |
| Reclass negative participations to funding of | |||
| group companies | -138 | 4,274 | |
| Repayments | -2,009 | -7,209 | |
| Additions | 2,695 | 1,129 | |
| Exchange rate movements | -19 | -41 | |
| Balance at 31 December | 2,148 | 1,619 |
| 2017 | 2016 | ||
|---|---|---|---|
| Group companies | 10,206 | 40,754 | |
| Other receivables | 4,488 | 1,394 | |
| Balance at 31 December | 14,694 | 42,148 |
| 2017 | 2016 | ||
|---|---|---|---|
| Group companies | 31,373 | 66,241 | |
| Other liabilities | 6,730 | 2,607 | |
| Balance at 31 December | 38,103 | 68,848 |
| Share capital |
Share premium |
General reserve |
Translation reserve (legal reserve) |
Unapro priated result |
Total 2017 |
Total 2016 |
|
|---|---|---|---|---|---|---|---|
| Balance at 1 january 2017 | 1,512 | 83,548 | 182,036 | 16,006 | 10,050 | 293,152 | 347,271 |
| Exchange differences result | -12,190 | -12,190 | 3,502 | ||||
| Result financial year | 7,645 | 7,645 | 10,050 | ||||
| Cash dividend (11) | -20,172 | -20,172 | -75,500 | ||||
| Appropriation of result | 10,050 | -10,050 | |||||
| Share based payments (12) | 157 | 157 | 1,033 | ||||
| Option rights exercised (12) | 1 | 239 | 240 | 6,796 | |||
| Balance at 31 December 2017 | 1,513 | 83,787 | 172,071 | 3,816 | 7,645 | 268,832 | 293,152 |
In the year under review the cash dividend per share was EUR 0.20 per share and an additional dividend of EUR 0.20 per share. The proposed dividend for 2017 will be EUR 0.15 per share. Information on outstanding options
30. Employees
Salaries, social securities charges and pension expenses amounted to EUR 4.0 million, EUR 0.5 million and EUR 0.2 million, respectively for 2017 (2016: expenses of EUR 3.5 million, EUR 0.4 million and EUR 0.2 million, respectively). At the end of 2017 Brunel International N.V. employed 18 people
is provided in the notes to the consolidated balance sheet. The details on the composition of and changes in the shareholder's equity of 2017 are disclosed in the consolidated statement of changes in group equity.
(2016: 17), 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 2017 a total of 35 people (2016: 31) have been allocated to Brunel International N.V. for its global IT department.
| 2017 | 2016 | |
|---|---|---|
| Profit group companies (22) | 15,074 | 17,465 |
Disclosures of director's remuneration and audit fees are included in note 14 and 16 to the consolidated annual accounts.
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 2017 this receivable amounts to EUR 2.7 million (2016: EUR 3.8 million). Brunel International N.V. has guaranteed towards N.V. Nationale Borg-Maatschappij EUR 1.1 million (2016: EUR 0.0 million). No other guarantees have
been provided (2016: EUR 0.0 million).
Brunel International N.V. is part of the Dutch fiscal unity 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.
No events of interest to the group as a whole took place after the balance sheet date.
Amsterdam, 23 February 2018
| The Board of Directors | The Supervisory Board |
|---|---|
| ------------------------ | ----------------------- |
J.T. Andringa D. van Doorn P.A. de Laat A. Schouwenaar
J.A. van Barneveld J.J.B.M. Spee
No events of interest to the group as a whole took place after the balance sheet date.
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 0.15 per share will be paid in cash.
< CONTENTS 177ADDITIONAL INFORMATION 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 2017 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of Brunel International N.V. in accordance with the European Regulation on specific requirements regarding statutory audit of public interest entities, the 'Wet toezicht accountantsorganisaties' (Wta, Audit firms supervision act), the 'Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten' (ViO – Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence requirements in Netherlands. Furthermore, we have complied with the 'Verordening gedrags- en beroepsregels accountants' (VGBA – Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct).
Brunel International N.V. provides temping, secondment-, project management-, recruitmentand consultancy services. The Group is comprised of components in several international regions and therefore we considered our group audit scope and approach as set out in the section 'The scope of our group audit'. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.
< CONTENTS 180INDEPENDENT AUDITOR'S REPORT As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made important 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, assumptions and judgement' of the financial statements the Company describes the areas of judgment in applying accounting policies and the key sources of estimation uncertainty. We identified the compliance with laws and regulation related to salaries of direct employees as a key audit matter considering its complexity and potential magnitude of a related misstatement. Given the significant level of judgement applied and the related inherent risk of material misstatement in the recoverability of deferred tax assets in the United States, we also considered this to be a key audit matter. Furthermore we consider accounting for the acquisition of SES Labour Solutions Pty Ltd in Australia as a key audit matter as significant judgement is applied by management in the determination of the purchase consideration and purchase price allocation. The key audit matters are further explained in the 'Key audit matters' section of this report.
Another area of focus, that is not considered to be a key audit matter, was management's impact assessment of the new EU-IFRS standards as disclosed in the paragraph 'New and revised IFRSs issued but not yet effective', as included in the notes to the financial statements. 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 management that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of an international company in the industry in which Brunel operates. We therefore included specialists in the areas of payroll, corporate tax, valuations and IT in our team.
The outline of our audit approach was as follows:
• Overall materiality: €845,000 (2016: €1,029,000).
| Materiality | 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'. Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. 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, both individually and in aggregate, on the financial statements as a whole and on our opinion. |
|---|---|
| Overall group materiality | €845,000 (2016: €1,029,000). |
| Basis for determining materiality | We used our professional judgment to determine overall materiality. As a basis for our judgment we used 4.5% of operating profit (equals to EBIT as reported by the Company). |
| Rationale for benchmark applied | We used operating profit as the primary 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 for the financial performance of the Company. The percentage has increased from 3.5% in 2016 year to 4.5% in 2017 based on our professional judgement considering the stabilising markets and the decreased dependency on the oil & gas industry as this leads to less exposure to the stakeholders. As an amount, 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 varies between €60,000 and €700,000. |
| 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 €40,000 (2016: €52,500) as well as misstatements below that amount | |
| that, in our view, warranted reporting for qualitative reasons. | |
| The scope of our group audit | |
| Brunel International N.V. is the parent company of a group of entities. The financial | |
| International N.V. | information of this group is included in the consolidated financial statements of Brunel |
| We tailored the scope of our audit to ensure that we performed sufficient work to be able |
management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at the component level by the Group engagement team and by each component auditor.
The Group audit primarily focussed on the significant components in Netherlands and Germany. We consider these components significant due to the size of the companies and their contribution to operating profit and revenue of the group.
Additionally, sixteen components were selected for audit procedures based on our risk assessment and discussions with management to achieve an appropriate coverage on revenue, total assets and operating profit (EBIT) in the consolidated financial statements. In total, in performing these procedures, we achieved the following coverage on the financial line items:
| Revenue | 82% |
|---|---|
| Total assets | 88% |
| EBIT | 87% |
None of the remaining components represented more than 2% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.
< CONTENTS 183INDEPENDENT AUDITOR'S REPORT The Group's accounting process is structured around regional shared service centres and national accounting offices. The regional shared service centres maintain the accounting records and controls for different group 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. For the components we used component auditors who are familiar with the local laws and regulations in each of the territories to perform audit work locally. Furthermore, the Group engagement team performed the audit work for the components in the Netherlands.
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.
The Group engagement team visits the component teams on a rotational and risk basis, taking into consideration significance and specific country risk. In the current year the Group audit team visited Australia, given the growing activities, the local acquisition of SES Labour
Solutions Pty Ltd and the transfer of shared services from Singapore to Australia. Furthermore, we visited Germany, because this is the largest component of the Group in terms of contribution to the consolidated operating profit and revenue. For all components in scope of our group audit, we held multiple conference calls throughout the audit to share knowledge, instructed the teams, discussed the audit approach, reviewed working papers and evaluated findings.
The Group consolidation, financial statement disclosures and a number of complex 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 been able to obtain sufficient and appropriate audit evidence on the Group's financial information, as a whole, to provide a basis for our opinion on the financial statements.
< CONTENTS 184INDEPENDENT AUDITOR'S REPORT 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. The key audit matters are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. In this section, 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 separate opinions on these matters or on specific elements of the financial statements. Any comments or observations we make on the results of our procedures should be read in this context.
Last year we reported the key audit matter 'Valuation of accounts receivables and accrued income in the Energy business', mainly as the Global Business segment was dependent on the Oil & Gas sector which was under pressure. The downturn in business activities in this sector increased counterparty risk and affected the collection risk of the Company's accounts receivables and accrued income. We did not identify any material findings last year in this respect. The business activities in this market stabilised in 2017 and also the write-offs during the year were limited. Therefore we do not consider this as a key audit matter anymore. Due to its magnitude and the significant judgement by management involved we considered the acquisition of SES Labour Solutions Pty Ltd to be a new key audit matter compared to previous year.
Brunel operates worldwide and has to comply with different laws and regulations in around 37 countries. Given the large number of territories and the regulatory environment in some of the countries in the Middle East, Asia and Africa, we observe higher complexity for the Group to comply with all the laws and regulations. Furthermore, due to the nature of the business, small errors in the 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 around payroll in these regions.
We evaluated controls on group level that were implemented to monitor compliance with laws and regulations. We combined testing on the effectiveness of local internal controls with substantive testing on the accuracy and completeness of gross versus net salary calculations, the accuracy of filings- and payments for wage tax and other payroll related charges to fiscal authorities.
We involved payroll specialists at our components to perform our audit procedures and to test whether applicable local taxes and other charges were contributed to the local tax authorities. We also obtained and read correspondence with local fiscal authorities and tested the reconciliation between the salary administration and the finance administration in the different territories. We have not noted any material differences.
Significant tax losses were incurred by Brunel US and significant impairments of the deferred tax asset have taken place in previous years. During 2017 the deferred tax assets position related to Brunel US decreased to €0.7 million (2016: €1.2 million) due to the change in the corporate income tax rate in the US from 35% to 21%, as well as the impact of currency developments. Furthermore, we noted that Brunel US did not meet their budget for 2017, which triggered a potential impairment risk.
Due to the inherent level of uncertainty in the assumptions applied, the significant management judgement involved and the performance of Brunel US in 2017, we considered the valuation of the deferred tax asset in the US as significant to our audit.
The main assumptions in determining the deferred tax asset are estimates on revenue growth and margin development, strongly related to the developments in the worldwide oil market. Other factors are the productivity of indirect employees and the local expiry period of fiscal losses.
< CONTENTS 185INDEPENDENT AUDITOR'S REPORT We performed procedures on the assumptions and methodology used. We tested the accuracy and completeness of the fiscal losses in detail and used corporate tax specialists to assist us. We have challenged the assumptions applied by group and local management and determined whether the assumptions are substantiated by corroborative evidence. This was done by, amongst others, assessing the development of revenues, margins and productivity during the year and onwards, the validation of client contracts won that will impact the performance of 2018 and assessment of the project pipeline. We evaluated cost saving measures taken, which will impact future taxable profit. We compared the assumptions with the historic performance of the subsidiary in the US, local economic developments and external market information such as public announcements by large clients on their future investments. In addition, we considered the local expiry periods together with any applicable restrictions in recovery for this jurisdiction. Furthermore we validated the extension of the fiscal unity with a new entity that is expected to contribute to the overall fiscal results. Overall we found the assumptions to be reasonable.
Finally we assessed the adequacy of the disclosures in note 17 of the financial statements. We noted no material findings.
| Key audit matter | How our audit addressed the matter |
|---|---|
| Accounting for acquisition of SES Labour Solutions Pty Ltd in Australia Refer to note 1 in the financial statements On 29 August 2017 the Company acquired SES Labour Solutions Pty Ltd in Australia. |
To validate the appropriateness of the acquisition accounting we assessed relevant contracts, internally prepared position papers, the valuation report and board minutes. |
| We consider this acquisition to be a key audit matter since the transaction is material for the Group and the accounting for this transaction, including the determination of the purchase consideration and the purchase price allocation, requires the exercise of significant judgement by management. Furthermore, this was the first acquisition in years for Brunel. The fair value determination and the purchase price allocation were conducted by management, with advice from a third party valuation expert, and included the valuation of the business going forward, the identification of previously unrecognised assets and liabilities as well as the fair value assessment of the existing assets and liabilities acquired. |
In testing the recognition and valuation of the assets and liabilities acquired, our procedures included testing the enterprise valuation model and the identification and valuation of assets and liabilities through performing the following procedures: - Assessing the methodology adopted by management for determining the purchase consideration as well as the identification, recognition and valuation of intangible assets. We also assessed the objectivity, competency and reputation of experts used by management to support them in performing the valuation. We inspected and tested the report prepared by the management expert. - Benchmarking key inputs to the valuation models like revenue, margin trends and productivity and discount rates with industry comparatives, external data and own accumulated industry knowledge. - Assessing the completeness of the identification of assets acquired and assessing the appropriateness of the assets' useful economic lives. - Validation that the date on which the entity was consolidated, was in line with the date at which control was obtained. - Testing the mathematical accuracy of the discounted cash flow model and agreeing data to business plans as included in the due diligence report. Throughout these procedures we were supported by valuation specialists and, in the context of the transaction in Australia, expertise relevant to the industry and local market. We also assessed the adequacy of the Companies' disclosures in note 1, business combinations, regarding the transaction. Our procedures did not identify material exceptions and we considered management's assumptions to be within a reasonable range of our own expectations. |
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 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.
Management is responsible for the preparation of the other information, including the directors' report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code.
< CONTENTS 187INDEPENDENT AUDITOR'S REPORT 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 5 years.
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of the European Regulation on specific requirements regarding statutory audit of public interest entities.
The non-audit services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to which our statutory audit relates, are disclosed in note 16 to the financial statements.
Responsibilities of the board of directors and the supervisory board for the financial statements
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 management 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.
< CONTENTS 188INDEPENDENT AUDITOR'S REPORT 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.
Amsterdam, 23 February 2018 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:
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.
< CONTENTS 190INDEPENDENT AUDITOR'S REPORT 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. In this respect we also issue an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report.
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.
| 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Profit | |||||||||||
| Net revenue | 790.1 | 884.9 | 1,228.9 1,386.6 1,283.4 | 1,236.5 | 972.4 | 720.9 | 738.4 | 714.2 | 579.9 | ||
| Gross profit | 182.7 | 187.1 | 230.0 | 249.0 | 230.7 | 223.4 | 189.5 | 152.0 | 151.8 | 167.0 | 136.3 |
| Operating profit | 17.9 | 26.8 | 56.1 | 74.7 | 72.3 | 70.0 | 60.9 | 37.3 | 45.1 | 62.1 | 51.2 |
| Result before tax | 14.6 | 24.2 | 56.7 | 75.4 | 72.5 | 69.4 | 61.7 | 38.4 | 44.7 | 62.5 | 51.3 |
| Group result after tax | 7.8 | 10.6 | 37.6 | 48.9 | 49.9 | 44.5 | 39.7 | 25.6 | 32.1 | 45.6 | 36.9 |
| Net income | 7.6 | 10.1 | 37.1 | 48.4 | 49.5 | 44.1 | 39.4 | 25.2 | 31.1 | 44.8 | 36.1 |
| Cash flow (net profit + | |||||||||||
| depreciations/impairment) | 15.6 | 18.4 | 45.5 | 56.7 | 55.9 | 48.9 | 43.4 | 29.2 | 35.5 | 48.0 | 39.2 |
| Depreciation and | |||||||||||
| amortisation | 8.0 | 8.3 | 8.4 | 7.8 | 6.0 | 4.5 | 3.7 | 3.6 | 3.4 | 3.2 | 3.1 |
| Additions to tangible | |||||||||||
| fixed assets | 2.9 | 1.4 | 4.1 | 3.1 | 2.6 | 2.8 | 2.7 | 2.3 | 5.3 | 4.0 | 4.3 |
| Workforce | |||||||||||
| Average over the year | 11,086 | 10,796 | 12,495 | 13,725 13,073 | 11,219 | 9,545 | 7,656 | 7,847 | 7,904 | 7,248 | |
| Balance sheet information | |||||||||||
| Non-current assets | 41.2 | 36.0 | 40.7 | 41.4 | 36.0 | 37.7 | 31.4 | 27.6 | 28.9 | 19.6 | 17.3 |
| Working capital | 232.5 | 259.7 | 310.4 | 290.8 | 246.1 | 228.1 | 202.8 | 175.0 | 152.5 | 144.6 | 118.6 |
| Group equity | 269.0 | 293.7 | 347.7 | 328.3 | 278.1 | 264.2 | 232.9 | 202.2 | 180.9 | 163.8 | 135.4 |
| Balance sheet total | 378.9 | 399.7 | 479.4 | 492.6 | 438.5 | 419.5 | 381.4 | 294.2 | 254.7 | 235.4 | 197.9 |
| Ratios | |||||||||||
| Change in revenue on | |||||||||||
| previous year | -10.7% | -28.0% | -11.4% | 8.0% | 3.8% | 27.2% | 34.9% | -2.4% | 3.4% | 23.2% | 16.2% |
| Gross profit / net revenue | 23.1% | 21.1% | 18.7% | 18.0% | 18.0% | 18.1% | 19.5% | 21.1% | 20.6% | 23.4% | 23.5% |
| Operating profit / | |||||||||||
| net revenue | 2.3% | 3.0% | 4.6% | 5.4% | 5.6% | 5.7% | 6.6% | 5.2% | 6.1% | 8.7% | 8.8% |
| Group result / net revenue | 1.0% | 1.2% | 3.1% | 3.5% | 3.9% | 3.6% | 4.4% | 3.6% | 4.3% | 6.4% | 6.3% |
| Group equity / total assets 71.0% | 73.5% | 72.5% | 66.5% | 63.4% | 62.9% | 61.0% | 68.7% | 71.0% | 69.6% | 68.5% | |
| Current assets / | |||||||||||
| current liabilities | 3.21 | 3.50 | 3.42 | 2.81 | 2.57 | 2.48 | 2.38 | 2.91 | 3.08 | 3.03 | 2.91 |
| Shares (in EUR) | |||||||||||
| Earnings per share | 0.15 | 0.20 | 0.75 | 0.99 | 1.02 | 0.93 | 0.85 | 0.55 | 0.68 | 0.98 | 0.80 |
| Shareholder's equity | |||||||||||
| per share | 5.33 | 5.81 | 6.96 | 6.64 | 5.71 | 5.45 | 4.95 | 4.35 | 3.91 | 3.58 | 2.97 |
| Dividend per share | 0.15 | 0.40 | 1.50 | 0.70 | 0.55 | 0.50 | 0.45 | 0.40 | 0.40 | 0.40 | 0.35 |
| Highest price | 16.87 | 19.69 | 20.65 | 26.00 | 23.25 | 19.57 | 17.48 | 14.82 | 11.92 | 9.28 | 13.33 |
| Lowest price | 10.85 | 13.45 | 12.95 | 12.73 | 15.50 | 11.61 | 10.00 | 9.73 | 3.51 | 4.05 | 7.43 |
| Closing price at | |||||||||||
| 31 December | 15.20 | 15.39 | 16.80 | 13.60 | 22.25 | 18.30 | 11.39 | 14.75 | 11.73 | 4.28 | 8.18 |
Nº36, R/C – Edifício
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T +43 662 83 00 01 10 [email protected]
T +43 1 997 2880 111 [email protected]
Serpa Pinto
Ingombotas Luanda
AUSTRIA
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Hafenpromenade 1-2 44263 Dortmund T +49 231 793 07 0 dortmund.de@ brunel.net
Tatzberg 47 01307 Dresden T +49 351 438 15 0 dresden.de@ brunel.net
Franz Rennefeld Weg 4 40472 Düsseldorf T +49 211 56 62 29 20 duesseldorf.de@ brunel.net
Schifferstraße 200 47059 Duisburg T +49 203 289 56 0 duisburg.de@ brunel.net
Konrad Zuse Straße 15 99099 Erfurt T +49 361 65 39 89 0 [email protected]
Altendorfer Straße 11 45127 Essen T +49 201 33 01 71 70 [email protected]
Solmsstraße 83 60486 Frankfurt T +49 69 153 93 01 0 frankfurt.de@ brunel.net
Ferdinandstraße 25-27 20095 Hamburg T +49 40 23 64 84 0 hamburg.de@ brunel.net
Mailänder Straße 2 30539 Hannover T +49 511 62 62 88 3 hannover.de@ brunel.net
Lise Meitner Straße 8 74074 Heilbronn T +49 7131 276 98 20 heilbronn.de@ brunel.net
Friedrichshofener Straße 20 85049 Ingolstadt T +49 841 491 05 0 ingolstadt.de@ brunel.net
< CONTENTS 197WORLDWIDE OFFICES Marktplatz 1 76337 Waldbronn bei Karlsruhe T +49 7243 342 09 10 karlsruhe.de@ brunel.net
Friedrichsplatz 8 34117 Kassel T +49 561 31 05 93 0 [email protected]
Gablenzstraße 9 24114 Kiel T +49 431 997 64 0 [email protected]
Konrad Adenauer Straße 25 50996 Köln T +49 221 179 68 0 [email protected]
Kreuzstraße 7 a 04103 Leipzig T +49 341 25 60 11 0 [email protected]
Von Behring Straße 6a 88131 Lindau T +49 8382 273 66 0 [email protected]
Augustaanlage 32 68165 Mannheim T +49 621 729 67 0 mannheim.de@ brunel.net
Mozartstraße 2 85622 Feldkirchen bei München T +49 89 35 88 23 0 muenchen.de@ brunel.net
Frankfurter Ring 81 80807 München T +49 89 124 76 65 60 muenchen2.de@ brunel.net
Lina Ammon Straße 9 90471 Nürnberg T +49 911 92 97 15 3 nuernberg.de@ brunel.net
Nikolaiort 1-2 49074 Osnabrück T +49 541 941 67 0 osnabrueck.de@ brunel.net
Blumenstraße 16 93055 Regensburg T +49 941 59 85 51 20 regensburg.de@ brunel.net
Am Strande 3a 18055 Rostock T +49 381 252 20 0 [email protected]
Heinrich Barth Straße 1a 66115 Saarbrücken T +49 681 93 58 50 10 saarbruecken.de@ brunel.net
Gottlieb Manz Straße 12 70794 Filderstadt-Bernhausen T +49 711 38 90 00 0 [email protected]
Einsteinstraße 55 89077 Ulm T +49 731 140 19 0 [email protected]
Otto von Guericke Ring 10 65205 Wiesbaden T +49 6122 927 72 20 wiesbaden.de@ brunel.net
Unterdürrbacher Straße 8 97080 Würzburg T +49 931 32 09 29-10 wuerzburg.de@ brunel.net
Lise Meitner Straße 11 42119 Wuppertal T +49 202 51 56 79 40 wuppertal.de@ brunel.net
Dinnendahlstraße 9 44809 Bochum T +49 234 41 71 0 carsynergies.de@ brunel.net
Daimlerring 9 31135 Hildesheim T +49 5121 1760 900 carsynergies.de@ brunel.net
Frankfurter Ring 81 80807 München T +49 89 124 76 65 67 carsynergies.de@ brunel.net
Gottlieb Manz Straße 12 70794 Filderstadt-Bernhausen T +49 711 38 90 00 15 carsynergies.de@ brunel.net
Mecklenburger Straße 7 38440 Wolfsburg T +49 711 38 90 00 20 carsynergies.de@ brunel.net
< CONTENTS 198WORLDWIDE OFFICES 001 Ground Floor; Ascot Centre Opposite Hotel ITC Grand Maratha Sahar Airport Road Andheri East Mumbai 400 099 T +91 226 7596 759 Energy-india@ brunel.net
Gedung BRI 7th Floor Jl. Jenderal Sudirman 37 Balikpapan 76112 Kalimantan Timur T +62 542 417 816 [email protected]
Dana Graha Building 5th floor Room 502 Jl. Imam Bonjol Nagoya Batam T +62 778 427 701 [email protected]
Graha Mampang 5th Floor Jl. Mampang Prapatan 100 Jakarta Selatan 12760 T +62 21 798 8833 [email protected]
Via Bernardino Telesio 25 20145 Milan T +31 10 266 6400 [email protected]
Building 6/2 Street 42 Block 213 Kendi-Al-Harthiya Baghdad T +971 4370 4060
Villa 109, Pank City Erbil T +964 7901 340 443
Dogenzaka Square 6F 5-18 Maruyamacho, Shibuya-ku Tokyo 150-0044 T +81 357 843 694
19 Satpayev Street BC Atyrau Plaza, office 304 Atyrau 060011 T +7 712 2307 745 kazakhstan@ brunel.net
Office #22, Waha Mall Dajeej Area, Farwaniya P.O.Box 18081 T +965 2433 7398, 2433 2496 energy-kuwait@ brunel.net
25.2, Level 25 Menara Standard Chartered 30 Jalan Sultan Ismail 50250 Kuala Lumpur T +60 321 443 451 [email protected]
Lot No. 2348 Jalan Datuk Edward Jeli Piasau Jaya 98000 Miri, Sarawak T +60 8565 5911 [email protected]
Prédio Torres Rani Avenida Marginal Talháo 141, Escritórios - 6º andar T +258 84 093 9511 mozambique@ brunel.net
Level 8A, Union Financial Centre (UFC) Corner of Mahabandoola road and Thein Phyu road, Botahtaung Township
Lagos
Mulliner Towers, 39 Alfred Rewane Road Ikoyi, Lagos T +234 1271 4024
T +47 5158 5984 [email protected]
< CONTENTS 199WORLDWIDE OFFICES Level 1, United Church Building Douglas Street P.O. Box 329 Port Moresby National Capital District T +675 321 9405 papuanewguinea@ brunel.net
LG-4th floor BCC House 5046 P Burgos Street Poblacion Makati City T +63 2897 8632 mailbox-btsp@ brunel.net
Building B1, Office No: 104 Al Waab City Commercial District, Salwa Road Doha T +974 40403434 admin-qatar@ brunel.net
5 Nizhniy Susalniy Pereulok Building 19, Business Centre Arma, Office 430 105064 Moscow T +7 495 783 6677 [email protected]
1 Svobody Street Liter A, office 410 353900 Novorossiysk T +7 861 760 1390 [email protected]
31B Kommunisticheskiy Prospect, 3rd floor Business Centre Green Palace 693020 Yuzhno-Sakhalinsk T +7 424 2497 707 [email protected]
77 Robinson Road #10-03 Singapore 068896 T +65 6532 2480 [email protected]
2F 198 Okpo-ro Geoje, Gyeongnam 53229 T +82 55 687 8966
Leutschenbachstrasse 95 8050 Zürich T +41 44 308 3690 [email protected]
Laem Chabang Port 49/63 Moo 5. T. Tungsukhla A. Sriracha Chonburi 20230 T +66 38 401 591-3 [email protected]
John M. Keynesplein 33 1066 EP Amsterdam T +31 20 312 5000 [email protected]
High Tech Campus 97 5656 AG Eindhoven T +31 20 312 5000 [email protected]
Hengelosestraat 500 7521 AG Enschede T +31 20 312 5000 [email protected]
Rozenburglaan 1 9727 DL Groningen T +31 20 312 5000 [email protected]
Rotterdam Airportbaan 19 3045 AN Rotterdam T +31 20 312 5000 [email protected]
Winthontlaan 6J 3526 KV Utrecht T +31 20 312 5000 [email protected]
Grote Voort 247 8041 BL Zwolle T +31 20 312 5000 [email protected]
Rotterdam Rotterdam Airportbaan 19 3045 AN Rotterdam T +31 10 266 6400 netherlands@ brunel.net
Cluster I, Gold Tower, 25th floor Jumeirah Lakes Tower T +971 4 315 3000 [email protected]
19 Spring Gardens Manchester M2 1FB T +44 161 885 2130 manchester@ brunel.net
Birmingham Cornwall Buildings 45 Newhall Street Birmingham B3 3QR
9811 Katy Freeway Suite 1000 Houston, TX 77024 T +1 713 333 1024
10808 S River Front Parkway, Suite 378 South Jordan, Utah 84095 T +1 801 987 5946 [email protected]
4460 Genoa Red Bluff Road Pasadena, TX 77505 T +1 281 668-9153
< CONTENTS 200WORLDWIDE OFFICES Ho Chi Minh City P, 1901, Tang 19, Saigon Trade Center 37 Ton Duc Thang, P. Ben Nghe, Q.1 Ho Chi Minh City T +84 822 202 344 [email protected]
< CONTENTS 202COLOPHON Integrated reporting - research and analysis Kaikai Jing, Brunel International N.V.
John Beckers
Hans de Kort
Printing Drukkerij Perka
Wim Bosboom, B-AD|D
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