Please note that this Annual Report is a translation of the Dutch Annual Report. As such, in case of any misunderstanding, the Dutch Annual Report prevails this report.
Evides Waterbedrijf – Annual report 2018 – Summary 1
Contents
Annual Report
Letter from the Executive Board ...... 3
Introduction to Evides ...... 5 Supply area ...... 5 Key figures ...... 6
Our work in 2018 ...... 7 Importance of the source in a changing climate ...... 7 Circular thinking with industrial partners...... 9 More convenience for customers ...... 10 Smart data use...... 11 Working in a versatile company ...... 13 Sustainability in the local area ...... 14
Our organisation and strategy ...... 16
Financial results ...... 30
Outlook 2019 ...... 35
About the Supervisory Board ...... 38
Annual Account 2018
Consolidated balance sheet as at 31 December 2018 ...... 44
Consolidated profit and loss account for 2018 ...... 45
Consolidated cash flow statement for 2018 ...... 46
General explanatory information and accounting policies ...... 47
Notes to the consolidated balance sheet ...... 55
Notes to the consolidated income statement ...... 66
Company balance sheet as at 31 December 2018 ...... 72
Company income statement for 2018 ...... 73
Notes to the company balance sheet ...... 74
Notes to the company income statement ...... 80
Evides Waterbedrijf – Annual report 2018 – Summary 2
Letter from the Executive Board
2018 was a very dry year. River water runoff was historically low and groundwater levels fell even further than in previous summers. The effects of climate change are becoming increasingly visible and the impact of the dry summer again underlines how important water management and our freshwater supply are. The media talked a lot about the availability of drinking water and the related treatment process. Evides took a proactive approach to this and appeared regularly in the news. We had enough water for all our customers during the summer period, but we did ask them to be frugal with their water use.
It is partly thanks to the large resources in the Biesbosch that we had ample reserves for the drinking water supply of the southwest Netherlands. These reserves are very important, which is why we started preparing for the construction of a new water intake station along the Bergsche Maas a few years ago. This station will increase our intake capacity and as such our security of supply. All the permits required to build this station were awarded in 2018 and construction will start in 2019. In 2018, we also started improving the morphology of the Gijster resource, thereby increasing our net water reserves.
The agricultural water pipeline used, which stretches from resources in the Biesbosch to the Midden- Zeeland area, was at full capacity delivering water during the dry summer months. The commissioning of the Oranjezon pumping station in June ensured that, despite the large peak in water use during the tourist season, we could maintain good water pressure in Walcheren,.
Working together with partners is important to be able to safeguard the production and delivery of sustainable drinking water. In light of the Haringvliet Sluices Management Decision (Kierbesluit), we have been working closely with the Directorate-General for Public Works and Water Management (Rijkswaterstaat) and the Hollandse Delta Water Board to protect the Haringvliet as a source of drinking water and water for agricultural use. We are working together with environmental organisations on developing the nature on the Brabantse Wal and in Sint Jansteen, Ouddorp, Haamstede and Oranjezon. We continue to partner with the municipality of Rotterdam and electrical network operator Stedin on maintenance work, such as replacing underground pipelines. As part of various water supply chain partnerships, we put effort in to maintaining the quality of the river Meuse and other surface water. Together we can increase effectiveness and reduce vulnerability.
Through its Water Without Waste approach, Evides Industriewater plays an active role in reducing the water and CO2 footprint. Together with our customers, we are looking for opportunities to reuse water in industrial production processes where possible. To continue researching water reusage, the RINEW project will now continue under the international NEREUS partnership. NEREUS is a pilot plant for recovering valuable raw materials and energy from waste water.
We are also looking at our own operations in terms of climate change. Evides aims to be climate- and energy-neutral by 2025 and we want to achieve this through activities such as creating solar farms at our sites and water surfaces. We took a first step towards this in 2018, by opening a solar farm at our Braakman production site.
We also have a focus on our customer services. For instance, we are further developing online customer services, ensuring availability in a secure environment that protects data and ensures privacy. In 2018, our work delivered a result of EUR 22.7 million for our drinking water business. Our industrial water business, meanwhile, delivered the intended controlled growth and generated a result of EUR 19.7 million in 2018.
Evides Waterbedrijf – Annual report 2018 – Summary 3
These solid results were only possible because of the hard work and commitment of our staff. Thanks to their efforts and collaboration with our stakeholders, we are in an excellent starting position to achieve good results in 2019 again.
Annette Ottolini Chief Executive Officer Evides Waterbedrijf
Evides Waterbedrijf – Annual report 2018 – Summary 4
Introduction to Evides
Evides is a sustainable and innovative water company, closely connected to the environment in which it operates. Together with 732.9 employees (converted to FTE), we ensure that our customers can depend on us for a reliable supply of drinking and industrial water, and waste water treatment, now and in the future.
We provide reliable, tasty, and healthy drinking water, 24 hours a day, 365 days a year, to 2.5 million consumers and businesses in three Dutch provinces: Zeeland, the south-western part of South Holland and the south-western part of North Brabant.
Evides Industriewater also provides products and services to large industrial companies in the Netherlands, Belgium and Germany. The quality of the industrial water is customised to the specific requirements and preferences of each customer.
In addition, Evides is active in treating waste water including the reusage of treated waste water for industrial purposes. Evides is focused on continuously improving processes and techniques for sourcing, treating, distributing and – wherever possible – reusing water. We also constantly look at the opportunities to reuse products that can be recovered from waste water treatment, such as nutrients, energy, residuals, and water. In this way, we want to contribute to the best use of the water supply chain in the Netherlands and beyond.
In 2018, Evides provided a total of 158.8 million cubic metres of drinking water and 95.1 million cubic metres of industrial water through our 14,811 kilometres pipeline network. In addition, we processed 1,491,000 million pollution equivalents through our water treatment activities.
Evides is a Dutch limited liability company (N.V.), of which 50% is owned by B.V. Gemeenschappelijk Bezit Evides (the municipalities of the Southern part of the province of South Holland) and the other 50% by PZEM (which is owned by the provinces of Zeeland (13 municipalities), South Holland (1 municipality) and North Brabant (2 municipalities).
Supply area Evides Waterbedrijf supplies drinking water in the following municipalities:
Albrandswaard, Barendrecht, Bergen op Zoom (specifically: Halsteren and Lepelstraat), Borsele, Brielle, Capelle aan den IJssel, Delft, The Hague (specifically: Wateringse Veld), Dordrecht, Goeree-Overflakkee, Goes, Hellevoetsluis, Hoeksche Waard, Hulst, Kapelle, Maassluis, Middelburg, Midden-Delfland, Nissewaard, Noord-Beveland, Reimerswaal, Rotterdam, Schiedam, Schouwen-Duiveland, Sluis, Terneuzen, Tholen, Veere, Vlaardingen, Vlissingen, Westland, Westvoorne, Woensdrecht and Zwijndrecht (specifically: Heerjansdam) .
Evides Industriewater is active for clients in the Netherlands, Belgium and Germany.
Evides Waterbedrijf – Annual report 2018 – Summary 5
Key figures
Unit 2018 2017 2016 2015 Financial 1. Liquidity ratio % 42.5 43.2 42.0 46.7 2. Solvency ratio % 43.6 43.6 43.1 43.4 3. Average credit term receivables days 29.9 29.4 26.6 22.8 4. Net working capital EUR -93.3 -89.8 -106.3 -88.9 millions 5. Return on equity % 3.8 4.1 4.4 5.9 6. Cash flow EUR 119.3 119.5 117.9 130.1 millions 7. Cash flow ratio % 18.2 18.7 18.2 20.2 8. Internal financing ratio x 1 0.8 0.8 0.8 0.7 9. Purchase of drinking water million m³ 11.3 10.5 10.4 10.4 10. Sales of drinking water million m³ 158.8 154.8 156.7 153.7 11. Sales of industrial water million m³ 95.1 96.9 95.4 93.4 12. Treatment of waste water p.e.¹ x 1,491.0 1,457.0 1,412.8 1,361.9 1,000 13. Revenue EUR 299.0 297.2 292.0 289.7 millions Operating assets 14. Number of consumer addresses x 1 1,045,400 1,041,332 1,032,276 1,030,613 15. Number of water meters x 1 1.002,384 997,966 991,131 983,794 16. Length of transport and distribution km 13,846 13,082 13,763 13,208 pipes 17. Length of demineralised water pipes km 73 71 71 68 18. Length of source/raw/industrial km 892 873 883 869 water pipes 19. Number of disruptions x 1 14,294 11,721 10,200 8,580 20. Complaints about water quality2 x 1 621 673 377 241 Personnel 21. Number of employees (as of year- x 1 FTE 732.9 739.2 722.3 694.8 end) 22. Average wage costs per employee x EUR 81.7 78.3 77.2 77.7 1,000 23. Sickness absence % 4.35 4.56 4.05 3.90
1 p.e. = pollution equivalents 2 The increase in the number of disruptions and complaints is partly administrative. Since 2016, every complaint has been counted individually, whereas in earlier years, complaints were grouped. Moreover, the one-off increase in the number of complaints in 2017 is due to incidents around the draining off of GenX and the presence of the E. coli bacteria in the Vlaardingen water pipeline network. The number of complaints decreased in 2018.
Explanation of key figures 1. Liquidity ratio = (current assets : current liabilities) x 100% 2. Solvency ratio = (equity : total assets) x 100% 3. Average credit term receivables = (receivables : turnover invoiced) x 365 days 4. Net working capital = current assets - current liabilities
Evides Waterbedrijf – Annual report 2018 – Summary 6
5. Return on assets = (net profit after taxes + interest) : total equity x 100% 6. Cash flow = net profit after taxes + depreciation and other changes in fixed assets 7. Cash flow ratio = (cash flow: liabilities) x 100% 8 Internal financing ratio = investments in fixed assets: cash flow
Our work in 2018
Importance of the source in a changing climate A good drinking water supply starts at the source. The cleaner the water is we extract from the river, dunes, and soil, the better it is for the quality of our drinking water. Therefore, we closely collaborate with a large number of partners to protect the sources of our tap water. This is necessary, because we are seeing more and more pollutants in our environment, such as pharmaceutical residues, industrial waste and herbicides. The effects of climate change are becoming increasingly visible. That is why we constantly monitor the quality of our water sources. Together we can effectively protect the environment and therefore the sources of drinking water.
Green light for construction of water intake pumping station Bergsche Maas The dry summer of 2018 underlined the importance of the availability of fresh water. The Netherlands was confronted with declining river and groundwater levels. Nature, shipping industry, as well as farmers, were hit hard. Thanks in part to the large water stocks in the Biesbosch reservoirs, Evides had sufficient drinking and industrial water available throughout this period. The agricultural water pipelines to the central part of Zeeland were also delivering water at full capacity. It is very important that we maintain our water stocks in the Biesbosch reservoirs. Therefore, we want to be able to quickly take in water from the river Meuse when its quality meets our requirements. A new intake pumping station with a higher intake capacity is needed to be able to continue to guarantee this effectively in the future. In 2018, we received all the necessary permits for the construction of this powerful intake pumping station on the Bergsche Maas. The construction work can start in 2019. In addition, in 2018 we started to improve the morphology of the De Gijster reservoir. In this way, we facilitate the purifying effect of the reservoir and we can keep more water in stock.
Haringvliet Locks Management Decree has come into effect In November 2018, Cora van Nieuwenhuizen, the Minster of Infrastructure and Water Management, officially put the Haringvliet Locks Management Decree (Kierbesluit) into effect. This means that, under the right circumstances, the Haringvliet locks will be put ajar during rising tide, provided the conditions are right. This will enable migratory fish like salmon and sea trout to swim into the Haringvliet and the river area behind it to spawn there. This is beneficial to international fish migration. It will also improve the biodiversity of the Haringvliet and create new opportunities for biological development. To guarantee the supply of fresh water from the Haringvliet for agriculture and the production of drinking water, measures have been implemented over the past four years to compensate for the effects of the Haringvliet Locks Management Decree. Rijkswaterstaat, the Hollandse Delta Water Board, and Evides have worked closely together on this project. The Haringvliet Locks Management Decree is based on the principle that this Decree should not impede the operation of the fresh water intake points east of the Middelharnis-Spui line. Accordingly, Evides has built a new intake pumping station near Stad aan ’t Haringvliet and laid 14 kilometres of new water pipelines.
New Oranjezon pumping station To be able to supply the inhabitants of Walcheren and Noord-Beveland with sufficient drinking water during the busy tourist season, Evides opened a new pumping station in the Oranjezon nature area in June 2018. This guarantees a stable tap water pressure, even in summer, when, on average, an
Evides Waterbedrijf – Annual report 2018 – Summary 7 additional 3,000 cubic metres of drinking water is consumed per day on average. The new pumping station has been designed in a way that minimises its impact on this unique nature area. As most of the new pumping station is covered by a dune hollow and vegetation, it seamlessly fits into the landscape.
Commitment to a clean Meuse water chain Under the motto ‘prevention is the best cure’, we have strengthened our collaboration with partners in the ‘Clean Meuse Water Chain’ project. We have set concrete goals to achieve a cleaner Meuse. In addition, together with RIWA and Vewin, two associations of river water companies, we are advocating complete transparency about discharges to surface water that is a usable source of drinking water. In doing so, we emphasise the importance of recognising the potential negative impact of substances on water quality when assessing permit applications and we want to have the measurements carried out by the parties discharging the wastewater. Understanding which substances are present in the river water helps us to prevent that these substances have a negative impact on the quality of drinking water. We advocate setting up an international public register of all substances that end up in the environment via industrial wastewater.
Evides Waterbedrijf – Annual report 2018 – Summary 8
Circular thinking with industrial partners In 2018, we took several initiatives to continue the controlled growth of Evides Industriewater in a sustainable manner. With our ‘Water Without Waste’ approach, we take an active role in reducing our water and carbon footprint. Besides supplying various types of process water and treating wastewater, with this approach, we are constantly looking for options for reusing water, energy, and the valuable raw materials we can recover from wastewater.
More wastewater treatment capacity for industry Thanks to the new Demineralised Water Plant (DWP) on the Maasvlakte, we can continue to supply customers in the Rotterdam port area with ultrapure demineralised water and we can guarantee a stable water supply with a high level of certainty. We already put part of the Maasvlakte DWP into use in late 2017. The full production capacity has been made available for supply in 2018. We have also taken important steps in the expansion of the wastewater treatment capacity in the Botlek area. In 2018, we received the necessary permits for the construction of the Central Wastewater Treatment Plant in the Botlek. In 2019, the construction of the plant will start. The project involves the construction of a new wastewater treatment plant and pressurised sewage mains. The capacity is sufficient to process the wastewater of a large number of companies in the area, to accommodate future growth, and our response to any peaks in the wastewater intake.
Replacing old mains In order to ensure a stable supply of demineralised water to our customers, we began replacing 18 kilometres of obsolete mains in 2018. This complex replacement programme will run until the end of 2020.
Raw materials and energy from wastewater The reusage of water is becoming increasingly important. Therefore, Evides Industriewater is constantly looking for innovative ways to enable reusage together with its customers. For example, by reusing wastewater or exchanging heat. In 2018, the NEREUS project, a pilot plant for the recovery of valuable raw materials and energy from wastewater, was launched to explore new options for reusage. In several steps and with the help of innovative technology, we are collecting wastewater and processing it into usable raw materials. This generates a number of products, including irrigation water, cellulose and nitrogen. NEREUS (New Energy and Resources from Urban Sanitation) is part of a European project with the same name. In this project, we are building on the RINEW project we previously carried out with the municipality of Rotterdam and Water Boards in the region.
Energy savings and reuse through granular sludge technology In 2018, a study was started into applying granular sludge technology for wastewater treatment at the Harnaschpolder plant. In a pilot installation, we are testing the feasibility of forming granular sludge in the wastewater treatment process with a continuous throughput of wastewater. This can lead to a significant reduction of the energy consumption in the treatment process, as well as the creation of a raw material that can be reused. This technique may offer good opportunities for improving existing wastewater treatment plants. The pilot installation has been made possible tanks to a partnership between the Delfland and Rijnland Water Boards, Delfluent Services, Delft University of Technology, Evides Industriewater and Royal HaskoningDHV.
Key figures for industrial water 2018 2017 Millions of cubic metres of water supplied 95.1 96.9 Pollution units of wastewater treated 1,491,000 1,457,000 Operating income (EUR) 107.9 million 106.4 million Profit (loss) for the year (EUR) 19.7 million 20.7 million
Evides Waterbedrijf – Annual report 2018 – Summary 9
More convenience for customers We are committed to customer excellence. Customers can rest assured that they will always get reliable drinking water from their taps and experience convenience and simplicity in our services. We seek continuous improvement by listening to our customers. For example, via the ‘My Evides’ user account, through which customers can quickly and easily arrange more and more things online. We can also be reached daily until 9:00 p.m. via chat, social media and WhatsApp. Of course, we can also be reached by phone. In case of malfunctions, customers can reach us 24 hours a day. Our aim is to always provide quick and competent answers to customer questions. In 2018, our customer satisfaction rating on a scale of 1 to 10 was 7.8 (2017: 7.9). This decrease is mainly due to a lower rating of our website. We are working on improvements to ensure that our customers can be helped quickly and effectively via the website as well.
Remote video assistance In 2018, we started a pilot project where, at the request of customers, we help them with questions about their water meter through remote video assistance. Via a link on the customer’s mobile phone, an employee can look at the water meter in real time together with the customer. By making a note on the screen, the employee can give instructions to the customer to solve the issue as soon as possible. This way, customers receive faster assistance and don’t have to stay home for an appointment with a service engineer.
Customer satisfaction rating Customer satisfaction is important for us, that is why we conduct ongoing customer satisfaction surveys. In 2018, customers were very satisfied with our fixing of malfunctions (8.9), telephone contacts (8.5) and our new chat assistance (8.4) and WhatsApp assistance (8.9). They were less enthusiastic about the installation of new connections (5.9). We will obviously continue to work on increasing our customer satisfaction.
Electronic mail We are stepping up our e-services to better serve our customers. Many customers like to have the option to make arrangements at a time that suits them. Therefore, we constantly work on improving our e-services through our self-service feature in ‘My Evides’ for sending electronic invoices and online contacts about meter readings. The share of customers who receive their invoices by email increased with 11 percentage points to 73.5% in 2018. This increase is partly the result of a direct mailing campaign among 62,000 customers in Zeeland, Brabantse Wal and Goeree-Overflakkee. Of these customers 24% stated that they would like to receive in future our invoices and other information by email.
Number of customer contacts in 2018: - Telephone: 244,470 - WhatsApp: 94,659 - Email: 70,874 - Facebook and Twitter: 12,066 - Chat: 30,452
Evides Waterbedrijf – Annual report 2018 – Summary 10
Smart data use Smart data use and data enrichment help us to reduce business risks, to better guarantee a stable water supply, and to improve our customer service. Evides makes targeted investments in the development of systems to make smarter use of data for both customer processes and operational work. In this way, we can manage our assets with the help of data. For example, we can better determine where and when maintenance or replacement of our mains or installations is required. At the same time, we are also strongly committed to protecting this valuable data.
Sharing data Together with network operators and municipalities, Evides is working on a better coordination of replacement projects in public spaces. By sharing GIS (geographical information system) data with the map layers of various stakeholders, we can pinpoint the locations of water, gas and sewage pipelines. Combining these data provides valuable insights, making visible where we have a joint replacement task, enabling coordinated infrastructure projects. Evides is already collaborating in the Westland region and in the municipality of Rotterdam on the basis of GIS, and preparations have started for a partnership with the municipalities of Barendrecht, Albrandswaard and Ridderkerk from 2019. We ultimately want to further expand this approach to our entire service area.
Virtual reality and inspection robots Evides is examining how new technologies can be used for work on the mains network. One of these is the use of virtual reality glasses to prevent damage during excavation work. By means of holograms, the underground cables and (water) mains become visible to the excavator driver, enabling him to work more accurately. Evides is developing this method together with other network operators.
In 2018, various mains inspections were also carried out using robots. Two inspection robots for large diameter mains were successfully tested. Together with six other drinking water companies, we have started research into the use of autonomous inspection robots suitable for mains with a small diameter.
New data privacy legislation Evides manages the personal data of over a million customers. We store this data carefully, in compliance with the privacy legislation. Since 25 May of 2018, new European data privacy legislation is in force: the General Data Protection Regulation (GDPR). In anticipation of the introduction of this legislation, we organised an awareness-raising campaign for our employees, including a ‘Privacy Week’. In addition, we adjusted our policy in accordance with the principle of ‘privacy by design’. By incorporating data protection into our systems and processes in advance, we ensure that we do not store more information than strictly necessary.
Cybersecurity The business processes of Evides are highly dependent on IT and digital information. It is essential that the confidentiality, integrity and availability of information is guaranteed. This requires well-protected IT systems. To this end, we rolled out new antivirus software and put in place a set of technical and procedural security measures in 2018.
Cybersecurity also requires the digital resilience of our employees. We organized a cybersecurity awareness campaign in the past year. We conducted a number of tests to ensure that our employees are vigilant when it comes to protecting important data. This includes dangers such as hacking, phishing, viruses and other digital threats.
Evides Waterbedrijf – Annual report 2018 – Summary 11
Limiting supply interruptions We want to supply our customers with safe drinking water at all times. In the event of a malfunction, we aim to limit the period of supply interruptions as much as possible and to provide appropriate, transparent communications to customers. We communicate about this on the website www.waterstoring.nl, on Twitter and in the working field through our service engineers.
Average number of minutes of supply interruption 2018 2017
(per year, per customer)
- Scheduled 17.9 minutes 14.5 minutes
- Unscheduled 5.5 minutes 4.6 minutes
- Total 23.4 minutes 19.1 minutes
Total number of user addresses 1,045,400 1,041,332
Evides Waterbedrijf – Annual report 2018 – Summary 12
Working in a versatile company Evides wants to offer its employees a challenging and inspiring job and to encourage them to work together in networks within and outside the organisation. We pay a lot of attention to training, and we have developed new digital competencies. Working safely is our top priority. Therefore, our aim is to have zero accidents. Activities to raise safety awareness were therefore high on the agenda in 2018.
Increasing safety awareness To put more emphasis on working safely, Evides has introduced a ‘days without accident’-counter. On the homepage of our intranet, employees can see at a glance how many days have been worked without accidents that led to absence from work. Despite our focus on safe working practices, there were seven accidents that led to absences. When an incident occurs, we immediately analyse and discuss what caused it and take measures to prevent a recurrence. During the annual Safety Week, we paid extra attention to working safely, including by looking at the role of leadership. During this week, we also organised safety roadshows at our various production sites and several workshops were given on topics such as fall protection and respiratory protection.
Sustainable employability Evides wants to offer a stimulating working environment for people of different ages and backgrounds. That is why we started a new assessment system in 2018, centred on the ‘Good Conversation’ between the manager and employee. Together, they discuss job performance and personal development and possible points for improvement. In addition, attention is given to the ‘sustainable employability’ of employees. In 2018, a project was started to give this term more meaning. In addition, work experience placements, equivalent to 6.8 FTEs, were filled by 16 jobseekers with poor employment prospects and we also filled a number of trial placements. In this way, we implement the requirements under the Participation Act and we carry out our social responsibility.
Personally handling HR matters In order to make it as easy as possible for our employees to personally handle HR matters, we introduced a new digital HR environment in January 2018. All functionalities from the former HR IT landscape are now integrated into a portal. Employees can now handle more matters themselves, such as checking pay slips and annual statements, submitting expense claims and applying for leave. In the new system, managers can, for example, post a vacancy and approve leave requests electronically. All our employees can now personally handle HR matters at a time of their own convenience.
Employer in the future We work closely together with various schools and training institutes to get a new generation of talented young people excited about a career at Evides. We attend job market fairs, give guest lectures and offer internships. In the past year we also organised the Evides Company Case. During this 24 hours event, a group of 15 students from different educational backgrounds worked on cases from our practice. They were introduced to Evides as an employer and the versatility of our work. The event also helps us to scout young (technical) talent. Together with VEI, we also offer employees the opportunity to gain international experience by sharing knowledge with water companies in developing countries. Our aim is to support these companies in the development of future-proof operations.
Key personnel figures for 2018 Number of FTEs 732.9 Education and training programmes 2,722 Accidents that led to absence 7 Short-term missions of VEI 55 Sickness absence rate 4.4% Long-term missions of VEI 10
Evides Waterbedrijf – Annual report 2018 – Summary 13
Sustainability in the local area As a water company, we have a strong connection with the environment, which enables us to work together with our partners on sustainability. In this way, we are contributing to the fight against climate change. We do this not only by adjusting our own business processes, but also in collaboration with our partners and by raising public awareness of the importance of clean (tap) water for people and the environment.
Opening of Braakman solar park In 2018, we opened our first solar park at the Braakman production site. These solar panels provide an estimated annual yield corresponding to the energy consumption of 500 households. All the energy generated is used in the drinking water treatment process. The opening is part of the Evides Energy Neutral (EEN) programme, which aims to make Evides completely climate- and energy-neutral by 2025. In the coming years, we want to develop solar parks at all our drinking water treatment sites; on land and on water.
Smart collaboration Evides works together with fellow water companies and network companies, research institutes, municipalities, Water Boards, contractors and other organisations to guarantee the stable production and supply of sustainable drinking water in the short and long term. In 2018, we continued our collaboration with network operator Stedin and the municipality of Rotterdam through a new covenant. In this covenant, we agreed to carry out joint maintenance work during the replacement of underground pipelines. In this way, streets have to be under construction only once. That saves costs and reduces inconvenience. Through a number of partnerships which now cover our entire service area, we are implementing the agreements made in the context of the National Administrative Agreement on Water. In addition, the contract with our four preferred contractors was extended by two years in 2018, with the allocation of roles and responsibilities shifting from that of a traditional client- contractor relationship to that a fully-fledged partnership. This enables us to make the best possible use of everyone’s experience and power of thought in carrying out the work.
Shared interests Together with local environmental organisations, Evides manages nature areas covering more than 825 hectares in total. To ensure that the use of these valuable and often vulnerable areas is properly managed, we regularly meet with municipal executives, village councils, and environmental organisations. Together, we look at the future development of the water collection areas. We do this, for example, in the Brabantse Wal region, where we invest in nature together. In 2016, for example, a water mains was laid from the nearby Nol-Stappersven nature area in Belgium to lake De Groote Meer. The result was clearly visible this year: lake De Groote Meer was full of water again. A new pumping station has been put into use in the Oranjezon nature area in Zeeland. This pumping station has been built into in a dune hollow and 90% of the building is below ground, leaving more space for nature. There were also several working visits by partners to our water collection areas and production sites in 2018. Thanks to these visits, we create a better understanding of our work and we can quickly engage with these partners when necessary for the protection of the areas, and therefore our drinking water supply.
Raising public awareness Evides is not only a supplier of tap water, but we are also committed to making people aware of the importance of clean (tap) water and its use. We do this, for example, with an information folder to make municipalities, provinces, and other stakeholders aware of our shared interests. The folder contains information on legislation, disaster management and collaboration in raising public awareness about drinking water. We also install public water taps, give guest lectures at schools, and provide tap
Evides Waterbedrijf – Annual report 2018 – Summary 14 water decanters to the hospitality industry. Together with various partners, including municipalities that tackle youth obesity through the JOGG scheme, Evides takes action to promote healthy eating and exercising.
2018 87 guest lectures in primary schools 12 new public taps 384 decanters were provided to hotels, restaurants and bars 9 partnerships with municipalities under the JOGG scheme
Evides Waterbedrijf – Annual report 2018 – Summary 15
Our organisation and strategy
Strategy for 2017-2021 Evides makes water valuable.
Water is essential for people and businesses. 2.5 million people in the south-west of the Netherlands rely on us for reliable drinking water. Industrial companies in the Netherlands and abroad rely on our innovative water services. We make water valuable for our customers; that is what Evides Waterbedrijf stands for. This is what we do based on our mission: Providing reliable and innovative water solutions.
Vision At Evides, we put ourselves in the shoes of the customer and our environment. We do this by staying in touch with our environment, by looking from outside in. We guarantee our customers a stable water supply, excellent water quality, and good services. We aim to achieve controlled growth in our industrial water activities. Our drinking water and industrial water activities reinforce each other. Circularity is our conceptual framework in realising water solutions. We work safely, within the legal frameworks and in a socially responsible manner. We achieve a socially acceptable return from our public task. We are an attractive employer with committed and driven employees. We are an innovative knowledge company, with well-organised digital processes based on which we can get the most out of our data.
Pillars In order to implement this, we have defined six strategic pillars: Achieving excellent water quality Growing in industrial water Delivering on customer promises Digitalization of processes Working in the future Connecting with our environment
This means that we are working more intensively on improving our services to customers (‘customer- centric’) and digitising our processes. We will accelerate the improvement of the biostability of our drinking water. We actively and systematically monitor trends and assess their potential significance for us as an organisation. We will continue to focus on the controlled growth of our industrial water activities, with circularity forming the new conceptual framework. We will continue our efforts in the area of corporate social responsibility and environmental management, making additional efforts to achieve our ambition to be energy and climate neutral by 2025.
Core values The following values are core values in achieving our mission and vision: competent, service-oriented, connecting, entrepreneurial, efficient
Evides Waterbedrijf – Annual report 2018 – Summary 16
Organisation chart The organisation chart as at 31 December 2018.
Evides Waterbedrijf – Annual report 2018 – Summary 17
Internal risk management and control systems
By being aware of the risks in its operations, Evides Waterbedrijf can take preventive measures to avoid these risks. In addition, Evides Waterbedrijf has taken measures to limit the impact in the event that these risks materialise. In this way, the negative consequences for our operations and operating costs are minimised as much as possible. In view of the social importance of our activities as a water company, reducing and managing risks is a top priority for Evides Waterbedrijf. In 2018, Evides continued to invest in its internal risk management and control systems. For example, we paid much attention to our online customer services and we further strengthened our compliance management system and information security in 2018. The operating activities of Evides are exposed to risks. The Managing Director is responsible for the design and operating effectiveness of Evides’ internal risk management and control system. The aim of this system is: to ensure that we are always timely informed about the extent to which Evides achieves its strategic, operational, and financial objectives; to ensure reliable financial reporting; and to ensure that we act in accordance with the applicable laws and regulations.
Running a business without running any risk is impossible. But Evides is working on gaining the most comprehensive insight possible into the potential risks to enable sound decisions to ensure the continuity of the water supply and our organisation.
Internal risk management and control system
Evides uses its internal risk management and control system to minimise the risk of errors, wrong decisions, and unforeseen circumstances as much as possible. However, it cannot guarantee absolute assurance. Evides may be exposed to risks that are not yet known or are not yet considered important. Evides’ internal risk management and control system aims to prevent risks through the implementation of additional measures. Should risks still arise, Evides has measures in place to minimise the impact. No internal risk management and control system can absolutely assure corporate goals are achieved nor can it entirely prevent all errors, losses, fraud, legal or regulatory breaches.
Evides is an organisation in which roles and responsibilities are clear, we can address accountabilities and there are short lines of communication. This is also the core of the risk management and control system across the company. In this context, the following are important instruments for internal risk management and control at Evides:
Risk management This involves identifying and analysing risks, along with implementing and monitoring control measures that minimise these risks. The Executive Board and the management team are ultimately responsible for the risk management process at Evides. Line managers are responsible for managing risks. There is a project risk management system in place for risk management when running projects.
Planning & control cycle Evides uses rolling multi-year and annual budgeting, quarterly reports (including forecasts and risk management) and monthly financial, and operational management reports. Evides compiles quarterly treasury reports for the Executive Board and the Supervisory Board. We have structured procedures in place for financial month-end and year-end closing.
Evides Waterbedrijf – Annual report 2018 – Summary 18
Water quality and security of supply The important factors here are quality systems for delivering water and systems guaranteeing a reliable and safe supply. Drinking water is supplied according to the guidelines laid down in the Dutch Drinking Water Act (Drinkwaterwet). These guidelines ensure there is always drinking water available, even in the event of a disruption, or that access to drinking water is restored within the prescribed timeframe. The asset management process ensures there is a balance between maintenance and management and investing in replacements for a future- proof water supply. The so-called ‘Delivery plan’ (Leveringsplan) is the overarching document in which Evides brings together its various plans for capacity (Capaciteitsplan), emergency drinking water (Nooddrinkwaterplan), disruption risk analysis (Verstoringsrisicoanalyse), and analyses of security of supply (Leveringszekerheidsanalyses).
Security and crisis management In addition to supporting measures that safeguard the physical water supply, the Delivery plan includes the above-mentioned topics as well plans covering crisis organisation, crisis communication and security. Evides also has measures in place for crisis management organisation, crisis procedures, and training; evaluating training; and an employee selection policy (including declarations of good conduct).
Other This includes an integrity policy, a code of conduct and house rules, a Whistleblower Policy, a treasury charter, a tax-control framework, and a fraud framework.
The essential components are regularly audited to test the intended effectiveness of the control mechanisms. The Executive Board is responsible for the structure and effective operation of the internal risk management and control system and reports on this to the Audit Committee and to the Supervisory Board.
Based on its evaluation, the Executive Board believes the risk management and control system functioned properly throughout 2018 with respect to financial reporting risks and that this provides reasonable assurance that the 2018 annual accounts contain no material errors. The Executive Board continues to be committed to further strengthening and professionalising its internal risk management and control system in 2019, while paying ongoing attention to possible ways of improving efficiency in these processes.
Business risks Taking risks is inextricably linked to running a business and implementing the strategy. The extent to which risks are deemed acceptable is closely related to the nature and scope of the specific risk. Our risk management system enables us to take controllable business risks, to actively monitor them and to take appropriate action where necessary. In 2018, we made progress on reducing our key business risks, which are explained in more detail below.
Company-wide risks
Operational risks
Insufficiently accurate asset data In order to supply drinking water and industrial water of the right quality and with the right service level, Evides uses a large number of water treatment plants and a water mains network with a total
Evides Waterbedrijf – Annual report 2018 – Summary 19 length of more than 14,000 kilometres. Maintaining these assets is one of the organisation’s core tasks and one of its biggest cost items. It is therefore important that decisions on the maintenance of these assets are made on the basis of reliable data that is gathered through reliable and uniform processes. If the quality of asset data is insufficient, this can lead to direct capacity, product, and financial losses.
Control measures In 2018, important steps were taken in various implementation programmes to improve the quality of asset data. The ownership of more and more data domains is now acknowledged and experienced. This is an important prerequisite for improving quality. In addition, an increasing number of activities are being launched to improve data quality. This includes activities focused on technology, such as the purchase and implementation of a data quality tool, as well as activities aimed at behavioural change, such as the development of an e-learning module to increase data awareness.
Risk of increasing cyberthreat A great deal of attention is paid to IT security, especially in view of the increasing threat of cyberattacks. The government has declared that the drinking water sector is of critical importance, which underlines the importance of information security. Insufficient protection against cyberattacks can in particular lead to significant (financial) losses. In addition, there is a risk that personal data becomes public knowledge, which may lead to a loss of trust in Evides on the part of customers, partners and employees.
Control measures In 2018, a lot of progress was made in the area of cybersecurity. The cybersecurity implementation programme has been planned with the help of a roadmap. Five subprojects have been formulated that focus on identifying vulnerabilities in cybersecurity and implementing software that is more resistant to cyberattacks. In the second half of 2018, the focus was on increasing cybersecurity awareness among Evides employees and Deloitte Risk Advisory conduced an assessment of the maturity of the organisation in this area. In addition to known points for improvement, these activities have also identified new points for improvement that will be addressed further in 2019.
Financial risks
Financing risk Given the nature of its activities, Evides is highly dependent on financing. Both economic developments and new legislation and regulations can affect the availability and cost of financing.
Control measures The treasurer of Evides manages credit risk. The treasurer submits an annual treasury plan to the treasury committee. The Managing Director and the Supervisory Board endorse this plan. In the annual treasury plan for 2018, special attention was paid to policy and measures to reduce financing availability risks. The aim is to further diversify the loan portfolio, including by entering into new (banking) relationships and ensuring a better diversification of the loan portfolio across the existing (banking) relationships.
Each quarter, the treasurer reports to the treasury committee, the Managing Director and the Audit Committee on the progress of the treasury policy. Given the importance of guaranteeing a stable water supply, this policy is primarily focused on ensuring the availability of financing. For further information on the other financial risks, see the financial risks section in the notes to the consolidated balance sheet.
Evides Waterbedrijf – Annual report 2018 – Summary 20
Fraud and integrity risk Our stakeholders expect that Evides always acts with integrity. Evides therefore strives to reduce the fraud and integrity risk as much as possible. However, fraud can occur in any organisation and is often based on a combination of circumstances which may lead to the unlawful withdrawal of company assets and/or misstatements in the financial reporting.
Control measures In order to support employees in acting with integrity and making the right choices, Evides has drawn up a Code of Ethics. Through this code, Evides wants to further increase our employees’ awareness of the importance of acting with integrity. The Code of Ethics summarises the existing regulations, guidelines and instructions and provides guidance on how to act with integrity based on common sense. Audits are conducted on a regular basis and control measures are further tightened up where applicable. New employees must submit a certificate of good conduct (VOG) before joining the company.
Financial reporting risks
Risk with regard to the independence of the external auditor The external auditor reports the findings in the annual management letter and the audit report to the Managing Director, Audit Committee and Supervisory Board. Evides reports periodically to the Audit Committee on the follow-up to the external auditor’s recommendations. The relationship between an auditor and a company is usually long-term, which creates the risk that the auditor will become too closely involved with the company and may therefore partially lose the independence that is necessary for the proper performance of the auditor’s auditing and advisory duties.
Control measures In order to guarantee the independence of the external auditor, Evides has opted to apply a 7-year audit firm rotation period. Following a change of audit firm, the former audit firm will not perform any statutory audits at Evides for two consecutive financial years. Deloitte Accountants was first appointed as the external auditor with effect from the financial year 2015. Based on an evaluation of the audit of the financial statements 2017, we have renewed the audit engagement.
Legal and regulatory risks
Risk of non-compliance with legislation As a water company, Evides is confronted with a multitude of laws and regulations. Also in view of our social responsibility, Evides is committed to demonstrably comply with all relevant laws and regulations, with particular attention to the obligations arising from the Drinking Water Act. This requires that compliance with the relevant legislation and regulations within Evides is safeguarded.
Control measures The compliance management system is embedded in the general quality assurance system within Evides. For example, compliance gas been incorporated in the policy statement of the quality assurance management system. Compliance has also been added to Evides’ vision and is part of our Code of Ethics. The Compliance Officer role has been formally assigned to the Management Team. In 2017, compliance management programmes (CMPs) were launched for legislation such as the Competition Act, public procurement law, the Drinking Water Act and the GDPR. Within these programmes, compliance will be audited and the findings will be worked out in an improvement plan. The progress
Evides Waterbedrijf – Annual report 2018 – Summary 21 of the CMPs is monitored by the Compliance Steering Committee, in which two MT members participate.
Drinking water risks
Operational risks
Insufficiently accurate asset data The quality of our customer data needs to be sufficient so that we can correctly and adequately implement the customer processes for both business and private customers. Keeping customer data up-to-date remains a challenge, particularly with regards to personal information such as contact details, bank account numbers, and permission for digital communication. If customer data are unavailable or unreliable, this has direct financial consequences. Contact details and the related permission for digital communication in particular have an impact on costs.
Control measures In 2018, various measures were taken to reduce this risk. First of all, the data management implementation programme has resulted in improvements, including a better allocation of ownership, a better description and traceability of customer data, and the periodical measurement and improvement of the data quality. Thanks to the implementation of the General Data Protection Regulation (GDPR) on 25 May 2018, and the compliance programme that underlies it, awareness of (the quality of) personal data has increased. We use channel management, including digital communication, for both consumers and large business customers This reduces the probability of error. The digital share is now at a level of 50-60%. In addition, validating the correctness of customer data has become part of the regular process for telephone customer contacts. These and other measures have ensured that this business risk is no longer considered a high-priority risk. Nevertheless, further activities will be launched in 2019 to further improve the quality of customer data and the maturity of data management in general.
Legal and regulatory risks
Risk with regard to compliance with regulation of drinking water rates In order to protect consumers, the Drinking Water Act requires supervision over the transparent tariff structure and accountability of the return realized on the supply of drinking water compared to the maximum return as legally determined.
Control measures Following coordination with the Living Environment and Transport Inspectorate and the Authority for Consumers and Markets (ACM), we launched various initiatives in 2017 and 2018 to provide better insight into the structure and allocation of costs to the rates. This has led, among other things, to various improvements in the rates structure report 2018 and the notes thereto. The rates structure report 2018 was submitted to the Living Environment and Transport Inspectorate at the end of 2017 in accordance with the statutory regulations and reviewed and approved by this Inspectorate and the ACM in the course of 2018.
Evides Waterbedrijf – Annual report 2018 – Summary 22
Industrial water risks
Financial risks
Credit risk In contrast to the drinking water activities, the industrial water activities are not regulated and there is no certainty that all (budgeted) operating costs can be reflected in the rates. This concerns in particular costs that may arise due to payment defaults.
Control measures The creditworthiness of counterparties is assessed before entering into industrial water contracts and subsequently at least once a year. Evides uses, among other things, credit risk reports from third parties for this purpose. Furthermore, during the contract period, the legal ownership of the installations in principle lies with Evides.
Legal and regulatory risks
Corporation tax risk The Modernisation of Liability for Corporation Tax (Government Enterprises) Act aims to ensure that public enterprises that perform economic activities in a market in which non-public enterprises (private companies) also operate are liable for corporation tax in the same way as those private companies. The purpose of the legislative amendments is to create a level playing field between parties. Until 2016, Evides was in principle exempt from corporation tax in the Netherlands. Since 2016, Evides is liable for corporation tax in respect of its entire profit generated in the Netherlands, but an exemption can be obtained for income arising from the performance of a statutory duty.
Control measures Evides is still in discussions with the Tax and Customs Administration to agree on further arrangements regarding the details and application of the liability for corporation tax. This concerns, among other things, the opening balance sheet for tax purposes, the applicability of exemptions and internal transfer prices. As these discussions are still ongoing, the tax position is still uncertain. In order to ensure a true and fair view of the corporation tax position in the financial statements, we have obtained external tax advice.
Evides Waterbedrijf – Annual report 2018 – Summary 23
Corporate governance
Evides Waterbedrijf has a corporate governance structure which is in line with its vision, strategy, and objectives, focusing on ensuring a sustainable water supply, also in the future. This is embedded in our culture and the strategy and pillars are in line with this.
Evides Waterbedrijf is a public limited liability company. 50% of its shares of Evides are owned by B.V. Gemeenschappelijk Bezit Evides (GBE, owned by the municipalities in the south of the province of South Holland) and the other 50% are owned by PZEM (PZEM is owned by the provinces of Zeeland, South Holland and North Brabant, 13 municipalities in Zeeland, 2 municipalities in North Brabant and 1 municipality in South Holland).
As a public company with an important social task, Evides Waterbedrijf voluntarily follows the principles and best practices of the Dutch Corporate Governance Code. In this way, Evides aims to provide clarity and openness, both internally and externally, about its governance and how it manages its operations. Evides has implemented the principles and best practices from the Code in its governance documents, company regulations and working methods.
Evides is managed by one Managing Director, who is charged with and responsible for the management of the company. The Managing Director is accountable to the Supervisory Board and the General Meeting of Shareholders. The Managing Director works together with a Management Team that functions as an Executive Committee within the meaning of the Code. The Management Team is made up of the first-line managers of the six business units of Evides, who are not directors under the articles of association. The Management Team contributes to company’s decision-making on the basis of an integrated vision in a culture of openness and transparency. This approach contributes to the effective and efficient corporate governance of Evides and its subsidiaries, ensuring sufficient support for decisions and fast decision-making, and also facilitates a good provision of information. The members of the Management Team have meetings with the Supervisory Board several times a year.
Since the amendment of the articles of association on 1 December 2018, the Supervisory Board consists of five independent members. Previously, the Supervisory Board consisted of seven members, four of whom were appointed on the recommendation of the shareholders. The Supervisory Board has an Audit Committee, a remuneration committee and an (ad hoc) selection and appointment committee.
In accordance with the Drinking Water Act, Evides applies the mitigated two-tier board regime. By law, a number of important decisions, such as the drinking water rates and the profit appropriation, as well as the appointment, dismissal, and remuneration policy for the Managing Director, require the approval of the shareholders. The Supervisory Board decides the specific remuneration and terms and conditions of employment of the Managing Director.
Evides renders itself accountable on the basis of Dutch Corporate Governance Code. Based on an impact analysis conducted in 2017, the corporate regulations have amended and revised; these changes were definitively adopted in 2018. In accordance with the ‘comply or explain’ principle’, Evides deviates from the Code on the following points: The rules that have been explicitly stipulated for listed companies are not applied; The Managing Director of Evides Waterbedrijf is appointed for an indefinite period; Due to the size of the company, Evides has not appointed an internal auditor. The Audit Committee has agreed to this;
Evides Waterbedrijf – Annual report 2018 – Summary 24
Because of the company’s direct relationship with and provision of information to its shareholders, the Evides website does not serve as a means of communication with the shareholders With regard to remuneration, the company follows the Standards for Remuneration Act, which applies to senior officials in the Dutch public and semi-public sector.
Evides Waterbedrijf – Annual report 2018 – Summary 25
Participations
Evides N.V. is a drinking water company and as such it is assigned to a legal distribution area. This company is at the head of the Evides group. The Evides group has various locations in the Netherlands and is headquartered in Rotterdam.
Evides N.V. (and various subsidiaries and minority interests) is responsible for all activities related to the sourcing, production and delivery of drinking water. Evides Industriewater B.V. – a wholly-owned subsidiary of Evides N.V. – (and its minority interests and subsidiaries) focuses on sourcing, producing and delivering industrial water and on waste water treatment.
The diagram below shows the structure as at 31 December 2018 of the group of companies that includes Evides Waterbedrijf. An explanation of the participating interests can be found on the following pages:
Evides N.V. participations In addition to owning Evides Industriewater B.V., Evides N.V. is shareholder of:
Facturatie B.V. A 50/50 joint venture between Evides N.V. and Vitens N.V. that is focused on invoicing and collecting drinking water invoices for households and small business water customers. This joint venture can be seen as a cost centre and is a not-for-profit organisation.
Evides Waterbedrijf – Annual report 2018 – Summary 26
KWH Water B.V. Through KWH Water B.V., Evides N.V. gains access to research and development related to drinking and other water, particularly research commissioned in the context of Vewin, the association of Dutch drinking water companies. Evides N.V. holds a share of 11.3%.
AquaMinerals B.V. AquaMinerals B.V. was established by Dutch drinking water companies in order to collectively find ways of managing the residues released during the production of drinking water. Evides N.V. holds an 11.3% stake. Nowadays, other Water Boards and foreign drinking water companies can also join.
N.V. Waterwinningbedrijf Brabantse Biesbosch (WBB) WBB owns the storage basins where water from the river Meuse is pre-treated before it is transported to Evides N.V.'s treatment plants. This water is the most important source of drinking and industrial water for the Evides distribution area. Evides N.V. is by far WBB’s largest customer (97%) and operates WBB under the terms of a multi-year contract. Evides N.V. owns 60% of WBB; the remaining 40% is owned by Brabant Water N.V. This participation can be seen as a cost centre and is a not for profit organisation.
Aqualab Zuid B.V. Aqualab Zuid B.V. is an accredited laboratory that conducts water analyses for shareholders and external customers. Evides N.V. owns 50% of Aqualab Zuid B.V., 32.5% is owned by Brabant Water N.V. and 17.5% by N.V. Waterleiding Maatschappij Limburg.
VEI B.V. Evides N.V. participates in this 50/50 joint venture with Vitens N.V.. VEI B.V. focuses on acquiring and implementing international projects to make drinking water more accessible by sharing knowledge and transferring skills. In this way, Evides N.V. contributes to the United Nations' Sustainable Development Goals. This participation can be seen as a cost centre and is not for profit organisation.
Evides Industriewater B.V. participations Evides Industriewater B.V. is shareholder of:
Evides Afvalwater B.V. Evides Afvalwater B.V. treats waste water for customers connected to the Sloe and Schiphol waste water treatment plants. Evides Industriewater B.V. owns 100% of this company.
Delfluent Services B.V. (DSBV) The DSBV operating company manages the Houtrust and Harnaschpolder waste water treatment plants. It holds a 30-year maintenance contract (until 2033) with Delfluent B.V. for this. Evides Afvalwater B.V. owns a 100% share.
Delfluent B.V. (DBV) The DBV consortium was contracted by Water Board Hoogheemraadschap van Delfland to design, construct, finance and run the Harnaschpolder waste water treatment plant, make changes to the existing Houtrust waste water treatment plant and operate both plants for a 30-year period until 2033. DBV is owned by Evides Industriewater B.V. (54.5%), DIF Infrastructure II B.V. (35.5%) and Strukton Finance B.V. (10%).
Evides Waterbedrijf – Annual report 2018 – Summary 27
Brielse Meer water B.V. Water from the Brielse Meer lake is an important source of industrial water for the Rotterdam harbour area and is supplied via Brielse Meer water B.V. Evides Industriewater B.V. owns 100% of this company.
Evides Terneuzen Water B.V. Evides Terneuzen Water B.V. supplies company in Terneuzen with industrial water via local installations. Evides Industriewater B.V. owns 100% of this company.
North Water B.V. North Water B.V. is a joint venture with Waterbedrijf Groningen N.V. to acquire and operate projects and activities related to industrial water and waste water in the northern provinces of the Netherlands. Evides Industriewater B.V. has a 50% share in North Water B.V.
North Water Afvalwater B.V. is a 100% subsidiary of North Water B.V. and focuses specifically on constructing and operating waste water treatment plants in the northern provinces of The Netherlands.
Evilim Industriewater B.V. Evilim Industriewater B.V. is a joint venture with N.V. Waterleiding Maatschappij Limburg to acquire and operate projects in the market for processed water and waste water in the southern part of The Netherlands. Evides Industriewater B.V. holds a 50% share.
Sloewarmte B.V. Sloewarmte B.V is a joint venture that has been started in 2014 between Evides Industriewater B.V, Zeeland Seaports Beheer B.V. and Martens Havenontvangstinstallatie Vlissingen B.V. to jointly develop sustainable residual heat systems in the area around the city of Vlissingen. Evides Industriewater B.V. acquired an 80% majority interest in Sloewarmte B.V. Zeeland Seaports Beheer B.V. and Martens Havenontvangstinstallatie Vlissingen B.V. each hold a 10% share.
Other holdings For international industrial water projects, Evides Industriewater B.V. wholly owns the following subsidiaries: Evides Stade Wasserbetrieb GmbH (Germany) and Evides Antwerpen Water BVBA (Belgium).
Minority interests A number of the participating interests shown above are not included in the consolidated financial statements of Evides N.V. These participating interests are presented under the heading ‘Financial fixed assets’ (amounts in EUR million):
Company Participating Valuation principle Value in 2018 Value in 2017 interest Delfluent B.V. 54.5% Equity method 0.0 0.0 Evilim Industriewater B.V. 50.0% Equity method 0.8 0.8 North Water B.V. 50.0% Equity method 19.6 15.9 VEI B.V. 50.0% Equity method 0.8 0.8 Facturatie B.V. 50.0% Equity method 1.9 1.9 Aqualab Zuid B.V. 50.0% Equity method 1.6 1.6 Sloewarmte B.V. 80.0% Equity method 0.4 0.5 Aqua Minerals B.V. 11.3% Cost of acquisition 0.1 0.1 KWH Water B.V. 11.3% Cost of acquisition 1.4 1.4 Total 26.6 23.0
Evides Waterbedrijf – Annual report 2018 – Summary 28
The following is an overview of key figures for minority holdings per 2018* (in EUR million). * Based on draft financial statements 2018 Company Sales Profit (loss) after Assets Solvency FTEs revenue corporation tax Delfluent B.V.1 41.3 -1.9 210.0 -25% 0.0 Evilim Industriewater B.V. 1.3% -0.1 1.7 89% 1.5 North Water B.V. 9.5% 0.7 46.6 91% 0.0 VEI B.V. 19.8% 0.1 10.4 16% 9.8 Facturatie B.V. 22.6% 0.0 8.1 47% 0.0 Aqualab Zuid B.V. 11.9% 0.0 7.9 43% 92.0 Sloewarmte B.V. 0.1% 0.0 0.7 80% 0.0 Aqua Minerals B.V. 8.0% 0.1 2.4 40% 8.5 KWH Water B.V. 23.6% 0.1 33.3 40% 158.0 1 Based on the way in which Delfluent B.V. is financially structured, a ‘cash flow sharing component’ is paid to the shareholders in respect of the subordinated loan extended to Delfluent. This payment is charged to the profit or loss for the year and results in a temporary loss and negative equity.
Evides Waterbedrijf – Annual report 2018 – Summary 29
Financial results
General For operational purposes, Evides N.V. (Evides) differentiates between its drinking water business and the industrial water business. The drinking water business supplies drinking water to approximately 2.5 million connected consumers and businesses. The industrial water business provides industrial water services to large industrial customers in the Netherlands, Belgium and Germany. It owns and operates various industrial and communal water treatment plants.
Evides’ drinking water business provides services to the industrial and waste water business, and vice versa. This is agreed in service agreements, which also include agreements on associated prices for intercompany transactions (internal transfer price).
For the purposes of financial transparency, the condensed balance sheet before distribution of profit at the end of 2018 and the condensed income statement for 2018 are presented separately below for the drinking water business and the industrial and waste water business.
Condensed Balance Sheet for 2018
(in EUR million) Drinking Water Industrial Water Consolidated
Assets Fixed assets Intangible fixed assets 21.0 9.5 30.5 Tangible fixed assets 862.0 103.5 965.5 Financial fixed assets * 159.0 98.8 104.7 Total fixed assets 1,042.0 211.8 1,100.7
Current assets Inventories and projects in progress 2.4 1.8 4.2 Receivables 24.5 26.1 50.6 Cash and cash equivalents 6.2 7.9 14.1 Total current assets 33.1 35.8 68.9
Total assets 1,075.1 247.6 1,169.6
(in EUR million) Drinking Water Industrial Water Consolidated
Liabilities Equity* 510.0 149.1 510.0 Third-party minority interests 6.1 0.0 6.1 Provisions 2.6 1.3 3.9 Long-term debt * 487.0 4.4 487.4 Short-term debt 149.5 12.7 162.2 Intercompany receivables and debts -80.1 80.1 0.0 Total liabilities 1,075.1 247.6 1,169.6 * In the consolidation, the participation value for Industrial Water stated under Drinking Water (EUR 149.1 million) is eliminated by equity. This also applies to a long-term loan of EUR 4.0 million that has been provided to Industrial Water by Drinking Water. In addition, mutual receivables and debts among Drinking Water and Industrial Water (EUR 80.1 million) are eliminated.
Evides Waterbedrijf – Annual report 2018 – Summary 30
Before distribution of profit, the solvency ratio for the consolidated balance sheet is 43.6%. After distribution of the proposed 2018 year-end dividend of EUR 17.7 million, the solvency ratio is 42.1% compared to the target solvency ratio of 38.5%. In 2017, our shareholders voted for a phased increase of our minimum target solvency ratio to 40% in 2021. This will ensure we have a robust foundation from which we can finance our future investment programme.
Condensed income statement for 2018
(in EUR million) Drinking Water Industrial Water Consolidated
Net sales* 235.0 107.9 327.9 Cost of sales* 205.6 87.3 277.9 Gross margin 29.4 20.6 50.0 Interest income and expense -5.9 4.1 -1.8 Profit before taxes 23.5 24.7 48.2 Corporate Taxes -0.8 -5.8 -6.6 Result from participations 0.0 0.8 0.8 Net result 22.7 19.7 42.4 * In the consolidation, revenues related to intercompany transactions between Drinking Water and Industrial Water (EUR 15.0 million) are eliminated together with the purchasing value of those intercompany transactions, which is incorporated in cost of sales.
Regulation of return on drinking water activities Since 2012, a statutory maximum return on capital is applicable for the drinking water activities, which is based on the weighted average cost of capital (WACC). This is the maximum fee drinking water companies may charge for costs of capital (interest and profit mark-up) when setting drinking water rates. The WACC for 2018 was 3.4%.
The return on the statutory activities is calculated by deducting the capital and profits/losses of Evides Industriewater and the other non-statutory drinking water activities from Evides’ consolidated net assets and profit (loss) for the year. Any excess return realised in previous years must be compensated for. In 2018, Evides’ return on its statutory drinking water activities did not exceed the statutory maximum.
Profit for 2018 compared to 2017 In 2018, the net profit for the year was EUR 4.9 million lower than in 2017. The development of the profit was as follows.
(in EUR million) 2018 2017 Difference Operating income 327.9 335.4 -7.5 Operating expenses 277.9 279.1 -1.2 Operating profit (loss) 50.0 56.3 -6.3 Financial income and expenses -1.8 -2.6 0.8 Profit (loss) before taxes 48.2 53.7 -5.5 Taxes -6.6 -7.2 0.6 Income (loss) from participating interests 0.8 0.8 0.0 Net profit (loss) 42.4 47.3 -4.9
Evides Waterbedrijf – Annual report 2018 – Summary 31
Operating income Operating income decreased by EUR 7.5 million in 2018 compared to 2017. This decrease is the due to a fluctuation in one-off income from construction contracts and other operating income. In 2017, Evides realised one-off construction contracts with a realisable value of EUR 14.5 million, compared to EUR 1.0 million in 2018 (effect of - EUR 13.5 million). In 2018, Evides Industriewater realised one-off other operating income of EUR 2.9 million (2017: EUR 0.0 million) related to the measurement of the participating interest in North Water B.V. Net sales revenue from drinking water activities increased in 2018 due to an increase in the number of invoiced connections (+ EUR 1.9 million), the higher volume of drinking water sold due to the dry and hot summer (+ EUR 1.6 million) and an increased exchange of water volumes with industry companion (+ EUR 1.1 million). However, this was more than offset by a decrease in net sales revenue from industrial water activities as a result of a decrease in contractual maintenance obligations (- EUR 1.8 million) and the expiry of a supply contract with a fellow drinking water company (- EUR 1.3 million), the effects of which were partly offset by a higher sales volume due to increased operating activities with industrial customers in our region (+ EUR 1.2 million).
Operating expenses Operating expenses decreased by EUR 1.2 million in 2018 compared to 2017. The development of the construction contracts and contractual maintenance obligations mentioned under ‘Operating income’ had a cost effect of - EUR 9.5 million and - EUR 1.2 million respectively. The increased exchange of water volumes with a fellow drinking water company mentioned under ‘Operating income’ led to an increase in the costs of raw materials and consumables of EUR 1.0 million.
Adjusted for the aforementioned effects, operating expenses increased by EUR 8.5 million in 2018 compared to 2017. The delivery of the demineralised water plant on the Maasvlakte and new investments in the area of automation led to an increase in depreciation and amortisation charges of EUR 2.4 million. The commissioning of the demineralised water plant on the Maasvlakte also led to an increase in the costs of raw materials and consumables of EUR 0.7 million. In addition, the cost of raw materials and consumables increased due to a sharp increase in the purchase price for used chemicals (+ EUR 1.0 million) and higher costs during the dry and hot summer (+ EUR 0.6 million). In 2018, the personnel costs of the company’s own employees increased by EUR 2.1 million, mainly due to the indexation and increase of the pension contributions. Other costs of outsourced work and external costs increased due to our intensified efforts in relation to the multi-annual research programme NOVIE (+ EUR 2.1 million) and automatization (+ EUR 1.1 million). The analysis costs, however, were lower, as there was no recurrence of the one-off spike in analysis costs that occurred in 2017 (- EUR 1.0 million).
Financial income and expenses Financial income and expenses decreased by EUR 0.8 million compared to 2017. This was mainly due to lower interest expenses as a result of (re)financing debts at lower market interest rates.
Taxes Until year-end 2015, a tax exemption applied for public enterprises, based on which Evides was exempt from corporation tax in the Netherlands, except for its group company Delfluent Services B.V. Since 1 January 2016, the Modernisation of Liability for Corporation Tax (Government Enterprises) Act is in effect. As a result of the introduction of this Act, Evides has in principle become liable for corporation tax in respect of its entire profit generated in the Netherlands. However, an exemption can
Evides Waterbedrijf – Annual report 2018 – Summary 32 be obtained for income arising from the performance of a statutory duty, such as supplying drinking water.
Evides is currently in discussions with the Dutch Tax Authority. This concerns, among other things, the opening balance sheet for tax purposes, the applicability of exemptions and whether or not profit mark-ups must be applied on internal supplies. In order to ensure a true and fair view of the corporation tax position in the financial statements, we have consulted with an external tax specialist.
Since 2016, the balance sheet includes deferred tax assets and deferred tax liabilities relating to differences between the carrying amounts and tax bases of assets and liabilities. The tax expense for 2018 decreased by EUR 0.6 million compared to 2017. This decrease is mainly due to a decrease of the taxable profit of Evides Industriewater.
Income (loss) from participating interests The company’s share of the profits or losses of the entities in which it participates can be specified as follows.
(in EUR million) 2018 2017 Delfluent B.V. 0.0 0.0 North Water B.V. 0.8 0.5 Evilim Industriewater B.V. 0.0 0.0 VEI B.V. 0.0 0.1 Aqualab Zuid B.V. 0.0 0.2 Total 0.8 0.8
Investments Expenditure on investment projects amounted to EUR 97.5 million in 2018. Of this amount, EUR 7.5 million related to software expenditure, which is presented under ‘Intangible fixed assets.’ With respect to the tangible fixed assets, projects totalling EUR 84.2 million were delivered in 2018 and the increase in the value of the work in progress amounted to EUR 5.7 million. In 2017, total investment expenditure amounted to EUR 92.1 million.
Solvency ratio Evides has a captive customer market and a corresponding monopoly, plus a competitive market of industrial customers. In 2018, the net sales revenue from supplying industrial water amounted to EUR 102.1 million or 34% of Evides’ total net turnover. The non-drinking water activities have a higher risk profile than the drinking water activities. This difference in risk profile is reflected in the target solvency ratio after profit appropriation of the industrial water activities and the drinking water activities, which is 50% and 35% respectively. Based on the share in the sales revenue of both activities, the minimum (consolidated) solvency ratio after profit appropriation of Evides N.V. has been set at 38.5% In 2017, our shareholders approved a phased adjustment of the minimum (consolidated) target solvency ratio to 40% by 2021.
Loan capital
Evides Waterbedrijf – Annual report 2018 – Summary 33
As a supplement to the company’s equity, financing is arranged through the capital and money market to fund the operations. At the end of the year under review, the loan capital before profit sharing amounted to EUR 659.6 million. This was 56% of the balance sheet total (2017: 56%). The share of short-term loan capital came to EUR 162.2 million, or 14% of the balance sheet total (2017: 14%). Including the provisions and the minority interest of third parties, the long-term loan capital amounted to EUR 497.4 million. The provisions totalled EUR 3.9 million, or 0.3% of the balance sheet total.
Based on the net profit of EUR 42.4 million and the depreciation and amortisation totalling EUR 76.9 million, the net cash flow amounted to EUR 119.3 million. In 2018, new long-term loan capital totalling EUR 85.0 was raised and a total of EUR 80.0 million was repaid. As at year end 2018, the average interest rate due on the long-term liabilities came to 1.4% (year-end 2017: 1.5%).
Evides Waterbedrijf – Annual report 2018 – Summary 34
Outlook 2019
2019 is the third year of our Strategic Plan 2017-2021. We have already achieved some important results in our six strategic pillars, as also evident elsewhere in this report. We reviewed our Strategic Plan in light of the latest developments around us and concluded that we are still heading in the right direction. As such, we will continue in 2019 on the path we have taken, setting a number of specific goals per pillar:
Pillar 1: Achieving excellent water quality Good quality drinking water and industrial water always starts with a clean source. That’s why we continue to give the protection of our water sources our fullest attention. Our focus lies on setting up and implementing measurement programmes, as part of which we also look at new analysis methods for monitoring anthropogenic substances. Working together with water supply chain partners remains important to us, as this gives us a good overview of possible pollution in the Meuse river basin – the most important source of tap water.
We will develop our water treatment and distribution processes, using research conducted at a pilot level into improving the biological stability of tap water. We will measure the effects of this on various biological parameters at the far ends of the pipeline network. It goes without saying that we will continue to optimise our asset (pipeline) management, as laid down in our asset management plan and long-term asset plan, as this ensures robust assets.
We will develop a new future-proof water treatment concept for our Baanhoek production site, which will combine all the challenges faced in the water treatment process into a design for realistic and robust water treatment.
Pillar 2: Growing industrial water To achieve our intended growth in industrial water, we are focusing on our domestic and international customers, and explicitly presenting ourselves as a long-term water partner that is mindful of circularity. This growth will be realised in a careful, controlled manner by Evides Industriewater (EIW) and as such have a lasting effect on the results of Evides Waterbedrijf.
Construction of the central waste water treatment plant in Botlek will start in 2019. EIW will also further its Water Without Waste mission, which seeks to minimise the impact of new industrial water activities on climate.
Pillar 3: Fulfilling our customer promises We will continue to enhance our customer focus through activities such as targeted research on customer needs, the results of which we will use to improve our processes. We continuously optimise the online customer experience, allowing us to offer more customers the convenience of digital services. All outgoing communication, e.g. service announcements and newsletters, social media, online chat, WhatsApp, email, etc. leads customers to our digital channel.
We constantly strive for a high level of customer satisfaction. By trialling innovations and artificial intelligence applications for analysing photos of metres, for instance, we are keeping pace with our customers’ changing expectations. We also continuously analyse the results of our (digital) services and improve our customer processes to be more successful with first-time fixes, reducing telephone contact and improving customer convenience.
Pillar 4: Digitalising processes
Evides Waterbedrijf – Annual report 2018 – Summary 35
By utilising available data in an optimal and secure way, our processes will run in a smarter and more convenient fashion. A key point here is cybersecurity, something we will continue to strengthen and safeguard through various technical measures and raising awareness.
We will improve and expand data-sharing with our contractors in the Digital Partnership Platform. A digital scheduling process will optimise the engineers’ scheduling process. Company-wide data management will be improved by implementing new tools and clearly assigning roles in the process.
Pillar 5: Working in the future We will continue to develop key competencies important to us, such as digital skills, innovativeness and being socially conscious. We are working on further leadership development by implementing the new Management Development programme. Despite pressures on the job market, our workforce remains robust because we are an attractive employer that offers a complete package of employment benefits and we have an appealing and effective diversity policy. Thanks to the updated innovation agenda, we will build up experience with the ‘new water services’ innovation lab and work on developing innovative tools in our day-to-day work.
Pillar 6: Building connections with our environment We are flexible and anticipate changes in good time. Our team of trend-watchers are following important trends and developments in society and proactively sharing their knowledge and insights inside the organisation. The developments relevant to us are translated into concrete actions or further research.
We seek out and maintain working relationships with all relevant partners (both in and outside the water supply chain) in our distribution area. Within these partnerships, we underline drinking water and industrial water interests, and identify opportunities to further optimise and safeguard these interests. Our work with network companies is partly aimed at improving customer perception of quality by minimising any disruption caused by work on the pipeline network.
We are continuing with our Evides Energy Neutral programme to keep our CO2 emissions to a minimum. What’s more, through Blauwe Netten for instance – a coalition with other Dutch drinking water companies – we are encouraging sustainable production among those companies supplying us with pipes and chemicals.
We are incorporating compliance governance and the compliance system into our quality care system and as such are further safeguarding our compliance. In anticipation of the introduction of the Environmental Code (Omgevingswet), we are proactively promoting the interests of water supply.
Drinking water rates In 2019, the drinking water rates will change. The rates customers pay are directly based on the fixed and variable costs of Evides. In 2019, the price for 1,000 litres of drinking water is EUR 0.85. The standing charge for households is EUR 70.02 a year (excluding VAT, tax on tap water and any municipal tax on encroachments on or above public land). These new household rates apply for the entire Evides Waterbedrijf distribution area. Depending on their water use, households will either see an increase or decrease in their drinking water bill.
Investment We expect to invest more than EUR 120 million in 2019. Compared to previous years, our investment expenses are increasing structurally. This is in part due to the relatively high level of investment in water quality and the development of an even closer working relationship with other pipeline network
Evides Waterbedrijf – Annual report 2018 – Summary 36 operators, because of which some replacement investment has been accelerated to benefit from certain efficiencies.
Because the central waste water treatment plant in Botlek (part of the industrial area of Rotterdam) will open later than originally planned, part of the intended investment for 2018 has been shifted to 2019 and 2020. The construction of the Bergsche Maas intake pump station is also a one-off large investment. Other reasons for the increase in the average level of multi-year investment are: increasing investment in Evides Industriewater and replacement of pipelines in collaboration with network operators.
Employees We expect our employee headcount at end-2019 to be 771.0 FTEs – a decrease of 7.9 FTEs compared to 2018. Employee numbers in the 2020-2023 period will also decrease slowly. The employee headcount within Infrastructure will decrease by 5.0 FTEs each year in 2018-2021, primarily because of expected efficiency improvements. This will be partly compensated by an increase in the employee headcount for the industrial and waste water business, to support planned growth in the commercial portfolio and the management of plants on behalf of prospects.
An additional challenge will be to achieve a sufficient inflow of new staff due to increasing economic growth and the associated competitive employment market. Through targeted campaigns for job market communication and recruitment plans, specific attention for encouraging an inflow of technical staff and the implementation of the diversity policy we developed in 2018, we expect to have sufficient employees to be able to achieve our strategic goals in 2019.
Confidence The commitment and enthusiasm of our employees is essential in everything we do. We are confident that we can rely on their hard work and commitment again in 2019, so we can remain a reliable and innovative water supplier for households, businesses and industry.
Evides Waterbedrijf – Annual report 2018 – Summary 37
About the Supervisory Board
Message from the Supervisory Board
The Supervisory Board supervises the policy of the Managing Director and the general state of affairs at Evides Waterbedrijf. In addition, the Supervisory Board provides advice to the Managing Director. The Supervisory Board is regularly in contact with the Works Council and the shareholders to ensure that it properly weighs up the various interests in performing its advisory and monitoring tasks.
Formal offering of annual report We hereby present you with the annual report of Evides N.V. drawn up by the Managing Director, which includes the financial statements for 2018. Deloitte Accountants B.V. has issued an unqualified auditor’s report on the financial statements.
In the opinion of the Supervisory Board, the report provides a good overview of the activities carried out by Evides Waterbedrijf and the progress made on the strategic objectives set by the company. The employees of Evides work on continuity and change in all parts of the organisation with tremendous dedication. Guaranteeing a stable supply of drinking water requires an excellent operational organisation. At the same time, the dynamics in the environment around Evides Waterbedrijf require permanent alertness and adaptability. The Supervisory Board supervises both aspects: a stable, predictable and reliable supply of drinking water and an enterprising, environmentally conscious and forward-looking organisation.
Evides performed well in the year under review and largely achieved its objectives. The Supervisory Board would like to express its appreciation for this and is pleased with this result.
We have discussed the annual report, including the financial statements, with the Managing Director in the presence of the auditor. We approve the annual report and the profit appropriation proposed by the Managing Director. We submit the annual report, the financial statements and the profit appropriation to the General Meeting for adoption at the meeting of 29 May 2019.
We also request the General Meeting to discharge the Managing Director from liability for her management and the members of the Supervisory Board for their supervision in respect of the year 2018.
On behalf of the Supervisory Board, A.G. Nijhof, chair 29 May 2019
Evides Waterbedrijf – Annual report 2018 – Summary 38
Composition and profile The Supervisory Board currently consists of five independent members, who are appointed by the General Meeting of Shareholders.1 The Works Council has a right of recommendation with regard to the appointment of a Supervisory Board member.
Two subcommittees have been set up by the Supervisory Board; the Audit Committee and the remuneration committee. The selection and appointment committee is set up on an ad hoc basis.
The profile of the Supervisory Board describes the basic principles that apply to the composition of the Supervisory Board. The aim is to achieve a balanced composition of the Board in terms of experience and affinity with the nature and culture of the company, as well as with the Zeeland or South Holland part of the service area, as well diversity in terms of the male/female ratio as envisaged in the Management and Supervision Act.
The aim of the Management and Supervision Act is to achieve a more balanced gender ratio in the Management and Supervisory Boards of companies. A balanced gender ratio is defined as a situation where at least 30% of the seats are occupied by men and at least 30% by women (insofar as the seats are occupied by natural persons). The Supervisory Board currently consists of two women and three men. The current composition of the Supervisory Board and the subcommittees is in line with the profile.
The Supervisory Board has specialist knowledge in the following areas: finance, risk management, treasury and external audits drinking water supply and affinity with the water chain entrepreneurship in a capital-intensive sector and knowledge of the (international) market and customers for industrial water and the related industrial services (including wastewater treatment) knowledge of and networking in public administration customer and consumer interests HRM policy, business organisation and change management Corporate governance and legal affairs Corporate social responsibility
Composition On 31 December 2018, the Supervisory Board of Evides Waterbedrijf consisted of the following members: Ms A.G. Nijhof - chair of the Supervisory Board and member of the remuneration committee Mr H.G. Bouwman (on the recommendation of the Works Council) - Supervisory Board member and chair of the remuneration committee Mr P.C. Hartog - Supervisory Board member, chair of the Audit Committee and vice-chair of the Supervisory Board Mr D.A. van Doorn - Supervisory Board member and member of the Audit Committee Ms C.A. Brandenburg - Supervisory Board member and member of the Audit Committee
1 Until 29 November 2018, under the articles of association the Supervisory Board of Evides had seven seats, one of which had been vacant since the autumn of 2017. PZEM and GBE each had the right to nominate two members of the Supervisory Board. On this point, Evides deviated from the Corporate Governance Code.
Evides Waterbedrijf – Annual report 2018 – Summary 39
In 2018, the following changes took place in the Supervisory Board: In connection with the new composition of the Supervisory Board, Mr G.J.A. Uytdewilligen and Mr B.J. de Reu stepped down from the Supervisory Board on 28 November 2018. Ms C.A. Brandenburg was appointed as a member of the Supervisory Board with effect from 29 November 2018.
No reappointments to the Supervisory Board were made in 2018.
Duty to report conflicts of interest Pursuant to the Corporate Governance Code, a member of the Supervisory Board or Management Board or a Managing Director must immediately report any (potential) conflict of interest that is of material significance to the company and/or to this Board member or Managing Director to the chair of the Supervisory Board. No reports were received during the year under review.
Meetings and other activities The Supervisory Board met five times during the period under review. The Supervisory Board also participated in a strategy session together with the Managing Director and the MT. The Supervisory Board generally met in full session in 2018 and none of its members was frequently absent. Regular consultations took place between the Managing Director and the chair of the Supervisory Board. In connection with the death of Mrs Hagdorn-van der Meijden, Ms Nijhof acted as acting chair of the Supervisory Board. She was appointed as chair on 28 November 2018. During the meetings the developments at Evides were discussed. This included, among other things:
Status and progress of the operating activities of Evides Annual report 2017, proposal for profit appropriation and the audit report, and the financial reporting process in general Corporate governance, revision of corporate regulations, preparations for amendment of the articles of association, change in the composition of the Supervisory Board, associated appointments, profile and retirement schedule, governance in general Nomination of new Supervisory Board member Financial affairs; including accountability for rate structure and financial policy, annual risk management update Rules governing treasury activities and annual treasury plan, solvency Remuneration report, remuneration of Supervisory Board members Annual social report 2017, formation and key positions at Evides, strategic personnel planning Progress of IT projects Drinking water rates for 2019, including the rates policy on which they are based and the terms and conditions of Evides, development of rates in relation to the maximum permitted return on capital Activities and growth strategy of Evides Industriewater Various commercial matters and service agreements Accommodation vision and strategy Business plan 2019, including the long-term investment plan Progress of discussions with trade union on collective agreement Developments at shareholder PZEM
Evides Waterbedrijf – Annual report 2018 – Summary 40
The Supervisory Board evaluated its performance in 2018 and formulated a number of actions based on this.
The Audit Committee met five times in 2018. During these meetings, the Audit Committee made subject-matter preparations for the Supervisory Board’s decisions on internal financial auditing, the controlling of financial risks – including fraud policy and integrity – external reporting, treasury and solvency, IT, various commercial matters, the development of rates and the Business Plan. The committee members also had discussions with each other over the phone during the year. In addition, the Audit Committee had discussions with the external auditor, including on the management letter and the audit report.
The Remuneration Committee met once in 2018. Both the Remuneration Report 2017 and the objectives of the Manging Director were discussed at this meeting.
Remuneration of the Managing Director and Supervisory Board
Managing Director The principles of the remuneration policy for the Managing Director are as follows: the remuneration should be high enough to attract and retain good management; it should be in line with the remuneration paid by similar companies in a similar market, taking into account the public nature of the company; the remuneration encourages the achievement of both the short-term and long-term objectives of the company; the remuneration should comply with the standards for remuneration laid down in the Standards for Remuneration Act; the other terms and conditions of employment are competitive within the sector; the remuneration is indexed in accordance with the indexation under the Standards for Remuneration Act, except if the performance on pre-agreed objectives is such that it does not merit granting (partial or full) indexation. The indexation is determined by the Supervisory Board. For the amount of the remuneration in 2018, please refer to the notes to the consolidated income statement.
Supervisory Board The policy is based on the principle that competitive remuneration is paid, which does not depend on the operating profit or loss, and which should comply with the standards laid down in the Standards for Remuneration Act. For the amount of the remuneration in 2018, please refer to the notes to the consolidated income statement.
Personal details of members of Supervisory Board and Managing Director The personal details of the members of the Supervisory Board and the Managing Director of Evides Waterbedrijf are shown below.
Evides Waterbedrijf – Annual report 2018 – Summary 41
Ms ir. A.G. Nijhof MBA (born 1966), chairman Nationality: Dutch Profession/main role: Senior Consultant of Tauw Group B.V. Date of first appointment: 30 September 2012 Current term of appointment: 30 September 2020
Ancillary positions: Board member of the Council for the Environment and Infrastructure Supervisory board member of the Royal Netherlands Meteorological Institute (KNMI) Chairman of the Social Advisory Council of the National Institute for Public Health and the Environment, RIVM Chairman of the Climate Agreement Mobility Table Government supervisory board member of De Nederlandsche Bank (the Dutch central bank)
Work experience includes: CEO Tauw Group B.V. Board member of Grontmij Director-General Water of the Ministry of Infrastructure and the Environment
Mr drs. P.C. Hartog (born 1962) Nationality: Dutch Profession/main role: Head of Operational Performance APM Terminals BV Date of first appointment: 26 May 2016 Current term of appointment: 26 May 2020
Ancillary positions: Supervisory board member of WoonInc, Eindhoven Managing director/owner of PH Business Development BV
Work experience includes: Managing director of APM Terminals Maasvlakte II BV and APM Terminals Rotterdam BV Managing director of Rockwool Benelux Holding BV Managing director of Forbo Flooring BV
Mr mr. H.G. Bouwman (born 1952) Nationality: Dutch Profession/main role: Director of legal advice office Date of first appointment: 30 September 2012 Current term of appointment: 30 April 2020
Ancillary positions: Advisory board member of The Waste Transformers
Work experience includes: Board member of Sara Lee International Senior Vice President of Legal Affairs for Royal Dutch Papierfabrieken N.V.
Mr drs. D.A. van Doorn (born 1950) Nationality: Dutch
Evides Waterbedrijf – Annual report 2018 – Summary 42
Profession/main role: Director/owner of Van Doorn Consultancy Date of first appointment: 28 June 2012 Current term of appointment: 30 November 2019
Ancillary positions: Supervisory board member of the Central Commission for the Navigation of the Rhine Chairman of Delta Port Donatiefonds (donation fund)
Work experience includes: CEO of Europees Massagoed Overslagbedrijf (EMO) and Erts en Kolen Overslagbedrijf Maasvlakte (EKOM) Board member of Van Ommeren Nederland B.V. Managing director of Van Ommeren Binnentankvaart B.V.
Ms dr. C.A. Brandenburg MSc PhD (born 1968) Nationality: Dutch Profession/main role: Chairman of the Board of Admiraal de Ruyter Hospital Date of first appointment: 29 November 2018 Current term of appointment: 29 November 2022
Ancillary positions: Chairman of the Supervisory Board of Tante Louise West Brabant
Work experience includes: Business manager Cardiology cardiothoracic surgery (Amphia Hospital) Program Manager Performance funding (NFU) Management Consultant (Arthur Andersen, Deloitte, Protiviti)
Executive Board
Ms ir. A.M. Ottolini (born 1958) Nationality: Dutch Position: CEO of Evides Waterbedrijf Date of appointment: 1 November 2014
Ancillary positions: Supervisory Board member of Delfluent B.V. Board member of VEI B.V. Board member of Water for Life Foundation Supervisory board member of Spaarnelanden N.V. Supervisory board member of housing association Ons Doel Board member of Deltalinqs Board member of Gergiev Festival
Evides Waterbedrijf – Annual report 2018 – Summary 43
Annual Account 2018
Consolidated balance sheet as at 31 December 2018 (before distribution of profit)
(in EUR millions) 31 December 31 December Ref. 2018 2017 ASSETS
Fixed assets Intangible fixed assets 1.1 30.5 32.0 Tangible fixed assets 1.2 965.5 943.4 Financial fixed assets 1.3 104.7 110.0 Total fixed assets 1,100.7 1,085.4
Current assets Inventories 3.2 3.7 Projects in progress 2.1 1.0 1.4 Receivables 2.2 50.6 53.7 Cash and cash equivalents 2.3 14.1 9.4 Total current assets 68.9 68.2
Total assets 1,169.6 1,153.6
LIABILITIES
Equity 3 510.0 503.0 Third-party minority interests 4 6.1 6.1 Provisions 5 3.9 4.1 Long-term liabilities 6 487.4 482.4 Short-term liabilities 7 162.2 158.0
Total liabilities 1,169.6 1,153.6
Evides Waterbedrijf – Annual report 2018 – Summary 44
Consolidated profit and loss account for 2018
(in EUR millions) Ref. 2018 2017 Revenues Sales 299.0 297.2 Revenue from third-party work 6.4 19.4 Capitalised production for own company 13.2 12.7 Other revenues 9.3 6.1 Total revenues 8 327.9 335.4
Cost of raw materials 9.1 29.5 25.9 Cost of outsourced work and other external costs 9.2 108.4 116.9 Salaries and wages 9.3 51.0 49.5 Social securities 9.3 12.0 11.3 Depreciation on fixed assets 9.4 76.9 74.5 Other changes in fixed assets 9.5 0.0 0.0 Other operating costs 0.1 1.0 Total operating costs 277.9 279.1
OPERATING PROFIT 50.0 56.3
Income from fixed asset receivables 10.1 6.4 6.5 Other interest income and similar income 0.1 0.2 Interest expense and similar costs 10.2 -8.3 -9.3 -1.8 -2.6 Result before tax on ordinary activities 48.2 53.7 Corporate taxes 11 6.6 7.2 Result from participations 0.8 0.8 Result after tax on ordinary activities 42.4 47.3 Third-party minority result 0.0 0.0
NET PROFIT AFTER TAXES 42.4 47.3
Evides Waterbedrijf – Annual report 2018 – Summary 45
Consolidated cash flow statement for 2018
(in EUR millions) 2018 2017 Cash flow from operating activities Operating profit 50.0 56.3 Adjustments for: Depreciation 76.9 74.5 Changes to provisions -0.2 -0.6 Changes in working capital: change in receivables 3.1 3.2 change in inventories 0.5 -0.2 change in projects in progress 0.4 0.2 change in short-term liabilities 4.1 -1.9 8.1 1.3 Cash flow from company operations 134.8 131.5 Interest income and expense -1.7 -3.8 Dividend received 0.0 0.0 Income taxes -7.0 -8.2 -8.7 -12.0 Cash flow from operating activities 126.1 119.5
Cash flow from investing activities Investments in financial tangible assets -2.9 0.0 Repayments received 8.7 7.5 Investments in tangible fixed assets -97.5 -92.1 Cash flow from investing activities -91.7 -84.6
Cash flow from financing activities Dividend paid -35.4 -41.0 Receipts from long-term debt 85.0 102.0 Repayments of long-term debt -80.0 -101.3 Cash flow from financing activities -30.4 -40.3
Increase/decrease in cash* 4.0 -5.4 * Including the change in short-term bank debts.
Movement in cash and cash equivalents is as follows:
2018 2017 Position as of 1st of January 5.8 11.2 Change during the financial year 4.0 -5.4 Position as of 31st of December 9.8 5.8
Cash as presented in the cash flow statement can be specified as follows: 2018 2017 Cash and cash equivalents 14.1 9.4 Short-term bank debt -4.3 -3.6 Total 9.8 5.8
Evides Waterbedrijf – Annual report 2018 – Summary 46
General explanatory information and accounting policies
General Evides N.V. has its registered offices in Rotterdam at Schaardijk 150 and is registered with the Dutch Chamber of Commerce under number 24170650. The activities of Evides N.V. and its subsidiaries (hereinafter ‘Evides’) consist of supplying drinking water in the southern part of the Province of South Holland, the entire province of Zeeland and the far west of the province of North Brabant. In addition, Evides performs activities in the area of supplying industrial water in the Netherlands, Belgium and Germany. Lastly, the industrial water activities also include the treatment of waste water.
The results of Evides N.V. are presented in the consolidated financial statements. Pursuant to Section 2:402 of the Dutch Civil Code, the company income statement of Evides N.V. is presented in a condensed format.
The financial statements have been prepared in accordance with the provisions of Title 9 of Book 2 of the Dutch Civil Code and Dutch generally accepted accounting principles. The application of the accounting policies and regulations in order to prepare the financial statements requires that the management of Evides N.V. makes judgements on various matters and makes estimates that may be critical to the amounts presented in the financial statements. Where necessary to provide the insight required by Section 2:362(1) of the Dutch Civil Code, the nature of these judgements and estimates, including the related assumptions, is disclosed in the notes on the relevant items in the financial statements.
Foreign currency The financial statements for 2018 are presented in euros. Transactions in foreign currency during the financial year are recognised in the financial statements at the exchange rate at the transaction date. Monetary assets and liabilities in foreign currency are translated into euros at exchange rate as at the balance sheet date. Gains and losses arising from the settlement and translation of items in foreign currency or credited and debited respectively to the income statement. Non-monetary assets and liabilities in foreign currency that are measured at cost of acquisition are translated into euros at the exchange rate (or a reasonable approximation of the exchange rate) at the transaction date.
The assets and liabilities of the consolidated participating interests with functional currencies that differ from the presentation currency are translated into euros at the exchange rate as at the balance sheet date; the relevant income and expenses are translated at the average exchange rates during the financial year. Goodwill and adjustments to fair value of identifiable assets and liabilities are deemed to be part of these participating interests and are also translated into euros at the balance sheet at the exchange rate as at balance sheet date. The translation gains and losses arising from this are directly credited and debited respectively to the statutory foreign exchange translation reserve in equity.
Changes in accounting policies Compared to the previous financial year, there have been no changes in the accounting policies.
Changes in estimates Compared to the previous financial year, there have been no changes in estimates.
Evides Waterbedrijf – Annual report 2018 – Summary 47
Changes in classifications The method of classification is consistent with the previous financial year.
Basis of consolidation The consolidated financial statements include the financial information of Evides N.V. and its group companies. Group companies are legal entities where Evides can directly or indirectly exercise effective control because it holds the majority of the voting shares or because it can control the financial and operating activities in some other way. Group companies are wholly consolidated. The minority interest of third parties in the assets of Evides is presented in the balance sheet under ‘Minority interest’ and their minority share of its profit (loss) for the year is presented in the income statement under ’Minority share of profit (loss)’. As Evides has no effective control over the joint ventures in which it participates, its participating interests in joint ventures are not consolidated. Intercompany transactions, intercompany profits and receivables and payables between group companies are eliminated. Unrealised losses on intercompany transactions are also eliminated, except in the case of impairment losses. The following companies are included in the consolidation scope of Evides N.V.: • 60% Participating interest in N.V. WBB (’s-Hertogenbosch); • Evides Industriewater B.V. (Rotterdam) and its wholly-owned subsidiaries Evides Afvalwater B.V. (Rotterdam), Brielse Meer water B.V. (Rotterdam), Evides Terneuzen Water B.V. (Rotterdam), Evides Stade Wasserbetrieb GmbH (Stade, Germany), Delfluent Services B.V. (The Hague), Evides Antwerpen Water BVBA (Antwerp, Belgium).
Principles for the valuation of assets and liabilities
General Assets and liabilities are generally measured at cost of acquisition or production or at fair value. If no specific valuation principle is stated, assets and liabilities are measured at cost of acquisition.
Intangible fixed assets Intangible fixed assets are measured at cost of acquisition less amortisation. Any expected permanent impairment losses at the balance sheet date are taken into account. An impairment loss is recognised whenever the carrying amount of an asset (or of the cash-generating unit to which it belongs) exceeds its recoverable amount.
Goodwill arising from mergers and acquisitions is recognised and amortised using the straight-line method over a period of ten and fifteen years respectively. The amortisation period is based on the estimated economic life.
Other intangible fixed assets are measured at cost of acquisition and amortised over their expected future useful life. This useful life is based on the asset’s contractually agreed term or its estimated economic life.
Tangible fixed assets Tangible fixed assets are measured at cost of acquisition or production, less straight-line deprecation based on their estimated economic life. The cost of acquisition or production includes the cash cost of labour hours worked by the personnel of Evides and contributions by third parties related to a tangible fixed asset are deducted in measuring the asset’s cost. Depreciation starts when the asset is taken into use. Any expected impairment losses at the balance sheet date are taken into account in calculating the depreciation charges.
Evides Waterbedrijf – Annual report 2018 – Summary 48
Maintenance expenditures are only capitalised if the expenditures exceed EUR 50,000 and they extend the asset’s economic life by at least one year.
Financial fixed assets Financial fixed assets comprise participating interests, securities, receivables under finance leases, other receivables and deferred tax assets.
Participating interests concern entities where Evides directly or indirectly exercises significant influence, but not effective control, over the financial and operating policies. This generally applies when Evides holds 20% to 50% of the voting shares. Joint ventures are agreements whereby Evides performs activities together with one or more other parties, with all these parties jointly controlling the entity. Participating interests and joint ventures are measured according to the net asset value method. At their initial recognition, acquired participating interests are measured based on the fair value of the identifiable assets and liabilities at the date of acquisition. Subsequently, they are measured according to accounting policies applied for these financial statements on the basis of their amounts determined at their initial recognition. The undistributed portion of the share attributable to Evides of the profits of entities in which Evides has a participating interest but cannot not exercise effective control is recognised in a legal reserve.
The other shares and bonds included in financial fixed assets are measured at cost of acquisition or lower market value and presented under the item ‘Securities’.
Deferred tax assets are recognised for deductible temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts determined based on tax requirements, with the provision that deferred tax assets are only recognised if it is probable that future taxable profits will be available against which the temporary differences can be utilised and losses can be offset. Deferred tax assets are measured based on the tax rates prevailing at the end of the reporting year or the rates applicable in future years, to the extent that they have already been enacted by law. Deferred tax assets are measured at nominal value.
The other receivables included in the financial fixed assets are at initial recognition measured at fair value less directly attributable transaction costs. Subsequently, these receivables are measured at amortised cost less any provision for items deemed uncollectible. The difference between the fair value and nominal value of the receivables, consisting of share premium or discount and/or transaction costs, is recognised in the income statement over the term to maturity of the receivables according to the effective interest method.
Inventories The warehouse inventories concern materials that are measured at cost of acquisition, determined using fixed transfer prices, or lower realisable value. The cost of acquisition includes all costs related to their acquisition, including costs incurred to bring the inventories to their present location and condition. The realisable value is the estimated selling price less directly attributable costs to sell. In determining the realisable value, any obsolescence of inventories is taken into account.
Construction contracts Construction contracts are measured based on the realised contract costs less the losses recognised and contributions invoiced.
The contract costs comprise the costs that relate directly to the contract, the general costs that are attributable to the contract and other costs that are contractually chargeable to the client.
Evides Waterbedrijf – Annual report 2018 – Summary 49
If the sum total of all construction contracts shows a debit balance, this balance is presented under current assets. If the sum total of all construction contracts shows a credit balance, this balance is presented under current liabilities.
Receivables and prepayments and accrued income Receivables and prepayments and accrued income are at initial recognition measured at the fair value of the consideration. Subsequently, trade receivables are measured at amortised cost. Provisions for uncollectibility are deducted from the carrying amount of the receivables.
Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and balances on deposit accounts with a term of less than 12 months. Amounts payable to banks under overdraft facilities are included under short-term debts to banks. Cash and cash equivalents are stated at nominal value.
Minority interest The minority interest in group equity held by third parties is measured at the amount of the net interest in the relevant group companies.
Provisions Provisions are recognised when Evides has a present legal or constructive obligation at the balance sheet date, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the amounts required to settle the obligations at balance sheet date. Additions to and releases of provisions are debited and credited respectively to the income statement. When a provision is measured at present value, the periodical increase is presented as an addition to the provision.
The provisions comprise employee benefits provisions, the provision for deferred tax liabilities and other provisions. The employee benefits provisions and other provisions are measured at the present value of the relevant liabilities.
Deferred tax liabilities are recognised for the expected tax consequences of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts determined based on tax requirements. Deferred tax liabilities are measured based on the tax rates prevailing at the end of the reporting year or the rates applicable in future years, to the extent that they have already been enacted by law. Deferred tax liabilities are measured at nominal value.
Liabilities At their initial recognition, liabilities are measured at fair value, which includes transaction costs that are directly attributable to the acquisition of the liabilities. Subsequently, liabilities are measured at amortised cost, which consists of the amount received, taking into account any share premium or discount, less transaction costs.
The difference between the determined carrying amount and the ultimate redemption amount is together with the interest due determined in such a way that the effective interest over the term of the liabilities is recognised in the income statement.
Evides Waterbedrijf – Annual report 2018 – Summary 50
Leases Finance leases Evides Industriewater supplies customised industrial water and waste water treatment solutions, usually on the basis of Design, Build, Finance and Operate (DBFO) contracts. On this basis, it could be the case that the company transfers all or substantially all the risks and rewards incidental to ownership of the underlying assets to its customers. In such situations, the lease contract qualifies as a finance lease, which is measured at the present value of the lease payments, calculated by discounting the lease payments using the interest rate implicit in the lease contract.
The payable lease instalments are split into a principal repayment and an interest component by applying an annuity factor based on a fixed interest rate. The receivables under finance leases, excluding the interest fee, are presented under the financial fixed assets.
The interest component is recognised in the income statement when the relevant lease instalments fall due.
Operating leases Leases where a large part of the risks and rewards incidental to ownership of the underlying assets do not lie with Evides are recognised as operating leases. Liabilities arising from operating leases are recognised in the income statement on a straight-line basis over the term of the lease contract, taking into account fees received from the lessor.
Financial instruments Evides uses derivative financial instruments with unlisted underlying assets. The derivative financial instruments are measured at cost, as part of which Evides applies cost price hedge accounting for the interest rate swaps, which ensure that the variable interest rates on certain short-term debts are swapped against fixed interest rates during the terms of these loans. This is documented by Evides at the inception of the hedging relationship. By means of a test, Evides periodically assesses the effectiveness of the hedging relationship. This may take the form of comparing the critical characteristics of the hedge instrument with those of the hedged item, or comparing the change in the fair value of the hedge instrument with that of the hedged item. The ineffective portion of the value change of the interest rate swaps is recognised in the income statement under ‘Financial income and expenses’.
Principles for result determination
General The profit (loss) for the year is calculated as the difference between the realisable value of the supplied performances and the costs and other expenditure for the year. Gains or losses on transactions are recognised in the year in which they were realised. Losses are recognised as soon as they are foreseeable.
Since the financial year 2012, the cost of capital fee that may be included in the charged drinking water rates is capped based on the weighted average cost of capital as determined by the minister of Infrastructure and the Environment. If this permitted fee is exceeded in any financial year, the resulting surplus must be recognised in the income statement in the period in which it occurs. No liability is recognised in the balance sheet for any such surplus.
Operating income
Evides Waterbedrijf – Annual report 2018 – Summary 51
Net sales revenue Net sales revenue comprises the revenue from supplying water, net of discounts and suchlike and net of the taxes due on sales revenue and after eliminating transactions between group companies.
The water revenue concerns the sales revenue from supplying drinking water and industrial water to water users and from the treatment of waste water. Most of the water used is measured through meters. The invoicing for unmetered water usage is based on a fixed amount per household. For the metered water usage, the revenue consists of a fixed water charge plus the supplied volume times the rate per cubic metre.
Revenue from construction contracts The revenue from construction contracts relates to the revenue and net income (loss) of work completed throughout the reporting period.
Capitalised production costs for own operations The amounts stated under ‘Capitalised production costs for own operations’ concern the capitalised labour costs related to the deployment of own personnel for investment activities and construction contracts.
Other operating income Revenues from services rendered are recognised based on the stage of completion of the services, which is based on the services rendered up to the balance sheet date in relation to the total services to be rendered
Personnel costs
Benefits during the period of service Wages, salaries and social insurance contributions that apply in accordance with the terms and conditions of employment are recognised in the income statement when they are payable to employees.
Pensions The company pension schemes are subject to the provisions of the Dutch Pensions Act and Evides pays the pension contributions for these schemes to ABP, the pension fund for the government and education sectors. The pensions are based on a career average scheme. The pension contributions are recognised as personnel costs when they fall due. Prepaid pension contributions are recognised as prepaid expenses to the extent that this prepayment will lead to a cash refund or a reduction in future payments. Pension contributions still to be paid are recognised as a liability in the balance sheet.
The pension obligations are measured based on the ‘obligation to pension administrator approach’. Under this approach, the pension contribution payable to the pension administrator is recognised as an expense in the income statement.
Based on the pension administration agreement, it is assessed whether any obligations exist, in addition to the payment of the annual pension contributions, which is payable to the pension administrator. Any such additional obligations, including any obligations arising from recovery plans of the pension administrator, result in expenses for the group and are recognised in a provision where applicable. If the effect of time value of money is material, the relevant liability is measured at present value. Such liabilities are discounted to present value based on the interest rates of investment-grade
Evides Waterbedrijf – Annual report 2018 – Summary 52 corporate bonds. Additions to and releases of provisions are debited and credited respectively to the income statement.
A receivable is recognised for any surplus at the pension administrator as at balance sheet date if the company has the power to withdraw this surplus, it is probable that future economic benefits embodied in the surplus will flow to the group, and the receivable can be measured reliably.
As at year-end 2018 and year-end 2017, the group had no receivables and no liabilities related to pensions other than the annual pension contributions payable to the pension administrator.
Other operating expenses The costs of raw materials and consumables concern the purchase of water and the consumption of energy and chemicals.
The costs of outsourced work and other external costs include the direct costs attributable to the revenue as well as other costs of outsourced work and other external costs.
Other operating costs concern the costs chargeable to the year that are not attributable to the aforementioned categories of costs, including costs recognised in the provisions for uncollectible receivables and representation costs.
Depreciation and amortisation The depreciation- and amortisation rates of the tangible and intangible fixed assets is based on the expected useful life of these assets. Land is not depreciated. Gains and losses on the disposal of fixed assets are recognised under the item ‘Depreciation and amortisation’.
Impairment of fixed assets As at each balance sheet, the company assesses whether there are any indications for the impairment of fixed assets. If such indications exist, the asset’s recoverable amount is estimated. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount; the recoverable amount is the higher of the fair value less costs to sell and value in use. If it is determined that an impairment loss recognised in prior years no longer exists or has decreased, the carrying amount of the asset is increased up to the estimated recoverable amount, but not in excess of the carrying amount that would have been determined if no impairment loss had been recognised for the asset.
Interest income and expenses Interest income and expenses are recognised pro rata temporis based on the effective interest rate for the relevant assets and liabilities. The transaction costs recognised for the loans received are taken into account in accounting for the interest expenses.
Income (loss) from participating interests Dividends receivable from participating interests that are not measured at net asset value and securities are recognised as soon as Evides has become entitled to them.
Taxes Until year-end 2015, a tax exemption applied for public enterprises, based on which Evides was exempted from corporation tax in the Netherlands, except for Delfluent Services B.V. This tax
Evides Waterbedrijf – Annual report 2018 – Summary 53 exemption also did not apply to its permanent establishment in Belgium and its foreign participating interests, Evides Stade Wasserbetrieb GmbH in Germany and Evides Antwerpen Water BVBA in Belgium.
Since 2016, the Modernisation of Liability for Corporation Tax (Government Enterprises) Act is in effect. As a result of the introduction of this Act, public enterprises that perform activities in a market in which non-public enterprises (private companies) also operate are liable for corporation tax in the same way as private companies. Therefore, tax exemptions are still applicable on the income generated through the performance of legal tasks (supply of drinking water). The effect of the first application of the new tax regulations has been accounted through profit or loss in 2016.
As the legislator has opted for an open standard, Evides is still in discussions with the Tax and Customs Administrator to agree on further arrangements regarding the details and application of the liability for corporation tax. This concerns, among other things, the opening balance sheet for tax purposes, the applicability of exemptions and internal transfer prices. As a result, the tax position is still uncertain.
Consolidated cash flow statement The cash flow statement has been drawn up according to the indirect method. The cash and cash equivalents in the cash flow statement consist of cash and the bank loans (including short-term bank loans) included under the current liabilities. Cash flows in foreign currency have been translated at the estimated average exchange rate. Exchange differences on cash are presented separately in the cash flow statement. Interest received and paid, dividends received and income taxes are included under the cash flow from operating activities. Dividends paid are included under the cash flow from financing activities. The cost of acquisition of an acquired group company is included under the cash flow from investing activities as soon the cash payment has been performed. If cash is present in the acquired group company, this is deducted from the cost of acquisition. Receivables under finance leases, consisting of the present value of the future lease payments plus the residual value, are recognised under the cash flow from investing activities. With regard to lease instalments received in respect of finance leases, the principal repayment component of these instalments is also classified as cash flow from investing activities and the interest component is classified as cash flow from operating activities.
Evides Waterbedrijf – Annual report 2018 – Summary 54
Notes to the consolidated balance sheet (in EUR millions)
1 Fixed assets
1.1 Intangible fixed assets The goodwill was paid upon the acquisition of 50% of the shares in Evides Terneuzen Water B.V. and in Brielse Meer water B.V. (100%). The goodwill is amortised using the straight-line method based on the expected useful life and the amortisation is charged to profit or loss. The amortisation periods are 10 and 15 years respectively, based on the useful life and planned pay-back period respectively. As at year-end 2014 and year-end 2018, the goodwill paid for the shares in Brielse Meer water B.V. and Evides Terneuzen Water B.V. was amortised in full.
Delfluent Services B.V. has acquired a maintenance contract from Delfluent B.V. Upon the acquisition of 50% of the shares in Delfluent Services B.V. on 21 December 2012, this maintenance contract was valued at EUR 12.9 million. This right is amortised using the straight-line method based on the expected useful life and the amortisation is charged to profit or loss. The amortisation period is 21 years, which is based on the remaining contract term.
In 2016, additional water withdrawal rights were acquired for lake Brielse Meer for an amount of EUR 0.2 million. The amortisation period for these rights is 15 years.
The amortisation period for software is 5 years, which is based on the expected useful life. The amortisation for design standards is 10 years. A design standard is a description of the standardised way in which Evides Industriewater B.V. designs (a component of) a waste water treatment plant.
The breakdown of and changes in carrying amounts in 2018 were as follows:
Goodwill Maintenance Concession Software Design Total contract standards Balance as at 1 January 2018 Cost of acquisition 5.5 12.9 0.2 51.3 0.0 69.8 Cumulative amortisation -5.2 -3.0 0.0 -29.6 0.0 -37.8 Carrying amount as at 1 January 2018 0.3 9.9 0.2 21.7 0.0 32.0
Changes in 2018 Investments 0.0 0.0 0.0 7.5 0.1 7.6 Amortisation -0.3 -0.6 0.0 -8.2 0.0 -9.1 -0.3 -0.6 0.0 -0.7 0.1 -1.5
Balance as at 31 December 2018 Cost of acquisition 5.5 12.9 0.2 58.8 0.1 77.4 Cumulative amortisation -5.5 -3.6 0.0 -37.8 0.0 -46.9 Carrying amount as at 31 December 2018 0.0 9.3 0.2 21.0 0.1 30.5
Evides Waterbedrijf – Annual report 2018 – Summary 55
1.2 Tangible fixed assets The breakdown of and changes in carrying amounts in 2018 were as follows:
Land, Water Installations Other Works in Total buildings, mains fixed progress etc. system operating assets Balance as at 1 January 2018 Cost of acquisition 366.9 1,110.0 304.6 23.4 88.4 1,893.3 Cumulative depreciation -191.2 -544.7 -198.8 -15.2 0.0 -949.9 Carrying amount as at 1 January 2018 175.7 565.3 105.8 8.2 88.4 943.4
Movements in 2018 Investments 3.8 0.0 1.8 0.1 0.0 5.7 Completed works 10.1 39.4 27.7 1.2 -78.4 0.0 Investments in works in progress 0.0 0.0 0.0 0.0 84.2 84.2 Disposals 0.0 0.0 0.0 0.0 0.0 0.0 Impairment 0.0 0.0 0.0 0.0 0.0 0.0 Depreciation -9.9 -36.8 -18.6 -2.5 0.0 -67.8 Total 4.0 2.6 11.0 -1.2 5.8 22.1
Balance as at 31 December 2018 Cost of acquisition 380.8 1,149.4 334.1 24.7 94.2 1,983.1 Cumulative depreciation -201.1 -581.5 -217.4 -17.7 0.0 -1,017.6 Carrying amount as at 31 December 2018 179.7 567.9 116.8 7.0 94.2 965.5
Depreciation period Type of assets (in years) Land, buildings, etc. Land n.v.t. Bought-off ground rent 50 Site facility 30 Buildings 40 Water storage reservoirs 40 Civil engineering structures 50 Water mains system Water mains 30 Water meters 30 Installations Mechanical engineering 15 Electrical and instrumentation 15 Process automation 5 Resins and membranes 5 Other fixed operating assets Information technology (hardware) 5 Ships 30 Other (vehicles, equipment, etc.) 5
Evides Waterbedrijf – Annual report 2018 – Summary 56
As at year-end, an amount of EUREUR 20.5 million (year-end 2017: EUREUR 19.1 million) in purchase commitments (orders) has been entered into. These obligations were not recognised in the balance sheet, as no goods and invoices have been received yet. The applicable depreciation rates are based on the expected useful life.
1.3 Financial fixed assets Changes in the carrying amounts of financial fixed assets in 2018 were as follows:
Participating Securities Receivables Other Deferred Total interests under receivables tax asset finance leases Balance as at 1 January 21.4 1.6 63.2 20.7 3.1 110.0 Income (loss) from participating interests* 0.8 0.0 0.0 0.0 0.0 0.8 Investments 2.9 0.0 0.0 0.0 0.0 2.9 Dividends 0.0 0.0 0.0 0.0 0.0 0.0 Principal repayments 0.0 0.0 -11.8 -3.2 0.0 -15.0 Interest income (expenses) 0.0 0.0 3.0 3.3 0.0 6.3 Change in deferred tax asset 0.0 0.0 0.0 0.0 -0.3 -0.3 Balance as at 31 December 25.1 1.6 54.4 20.8 2.8 104.7 * Based on draft financial statements 2018
Evides holds the following shares in other companies, which are measured based on the equity method.
Company Registered office Percentage of interest Delfluent B.V. Den Hoorn 54.5% Evilim Industriewater B.V. Echt 50.0% North Water B.V. Groningen 50.0% VEI B.V. Utrecht 50.0% Facturatie B.V. Utrecht 50.0% Aqualab Zuid B.V. Werkendam 50.0% Sloewarmte B.V. Rotterdam 80.0%
The receivables under finance leases concern receivables in respect of the contractual term for the construction of installations under finance leases. The receivables consist of the present value of the future lease payments plus the residual value. The average interest rate is 4.9%. As at 2018, the breakdown and residual terms of the receivables under finance leases were as follows:
Evides Waterbedrijf – Annual report 2018 – Summary 57
Nominal value Unrealised Present value of receivables interest of receivables under leases income from under leases receivables under leases Up to 1 year 10.0 2.7 7.3 Between 1 and 5 years 31.8 7.0 24.8 More than 5 years 21.4 2.8 18.6 Total 63.2 12.5 50.7 Residual value of installations built under financial leases 3.7 Receivables under financial lease contracts as at year-end 2018 54.4
The residual value of the installations built under finance leases has been contractually stipulated. In addition, upon the expiry of the aforementioned contract term, Evides is entitled to deliver the installation to the clients under pre-agreed conditions. In case of an early termination of the contract by the clients, damages apply, the amount of which depends on the remaining term of the contract.
The other receivables include a subordinated loan issued to Delfluent B.V. with a principal of EUR 24.3 million. The interest due on this loan is based on the share of Evides in the cash flows of Delfluent B.V. The loan principal will be repaid as a lump sum in 2033.
The deferred tax asset concerns the tax position of the tax group headed by Evides N.V. The deferred tax asset is the result of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts determined based on tax requirements. It is expected that EUR 0.2 million of this amount will be utilised within one year.
2 Current assets
2.1 Construction contracts The breakdown of the construction contracts was as follows:
2018 2017 Costs of work under construction contracts 1.6 16.4 Work invoiced under construction contracts -0.6 -15.0 Total 1.0 1.4
2.2 Receivables and prepayments and accrued income
2018 2017 Debtors 28.1 31.3 Receivables from participating interests 0.5 0.6 Other receivables 18.7 19.3 Prepayments and accrued income 3.3 2.5 Total 50.6 53.7
As at year-end, the items recognised under prepayments and accrued income included EUREUR 0.0 million (year-end 2017: EUREUR 0.5 million) with a residual term of more than one year. All other receivables have a residual term of less than one year. Given their short term character and the fact
Evides Waterbedrijf – Annual report 2018 – Summary 58 that provisions for uncollectibility have been recognised where necessary, the fair value of the receivables approximates their carrying amount.
The ‘Debtors’ item includes a provision for uncollectible receivables. The details of this provision are as follows:
2018 2017 Households and small businesses 1.4 1.6 Large water users and construction contracts 0.5 0.8 Total 1.9 2.4
Until September 2017, DELTA Comfort B.V. (formerly Delta N.V.) handled the invoicing to households and small businesses located in the province of Zeeland, on the island of Goeree-Overflakkee and in the far southwest of the province of North Brabant (Brabantse Wal) on behalf of Evides. Where this invoicing was done by DELTA Comfort B.V., the debtor risk on the supplies to small users was contractually covered through a debt collection agreement. As at 31 December 2018, the receivable water charges payable by DELTA Comfort B.V., including the items ‘Debtors’ (EUR 0.0 million) and ‘Other receivables’ (EUR 0.0 million), totalled EUR 0.0 million (year-end 2017: EUR 3.4 million).
Evides bears the debtor risk on the remaining invoicing to households. This receivable totalled EUR 11.7 million as at year-end (year-end 2017: EUR 10.8 million). As at year-end, the provision recognised for this came to EUR 1.4 million (year-end 2017: EUR 1.6 million).
2.3 Cash and cash equivalents The cash and cash equivalents are at the company’s free disposal.
3 Equity The changes in equity are disclosed in the notes to the company balance sheet.
4 Minority interest In 2018 and 2017 there were no changes in the minority interest. This minority interest concerns the minority interest held by third parties in the share capital of N.V. WBB.
5 Provisions The ‘Provisions’ item in the balance sheet breaks down as follows:
Ref. 2018 2017 Employee benefits provisions 5.1 2.8 2.6 Deferred tax liabilities 5.2 0.7 1.1 Other provisions 5.3 0.4 0.4 Total 3.9 4.1
Of the provisions, EUR 1.9 million had a term of more than one year as at year-end (year-end 2017: EUR 2.6 million). As at year-end, there were no provisions with a maturity of more than five years (year-end 2017: nil)
Evides Waterbedrijf – Annual report 2018 – Summary 59
5.1 Employee benefits provisions Changes in the employee benefits provisions in 2018 were as follows:
Balance as at Additions Withdrawals Release Balance as at 1 January 1 December Provision for unemployment benefits 1.0 0.6 -0.4 0.0 1.2 Provision for redundancy costs 0.3 0.4 -0.2 0.0 0.5 Provision for long-service awards 0.7 0.0 0.0 -0.1 0.6 Provision for bonuses 0.2 0.0 0.0 -0.1 0.1 Provision for long-term sick leave 0.4 0.3 0.0 -0.3 0.4 Total 2.6 1.3 -0.6 -0.5 2.8
Based on the short terms of the relevant liabilities, the average discount rate used for discounting the employee benefits provisions to present value as at year-end was 0.11% (year-end 2017: 0.31%). This discount rate is based on the yield curve for pension funds. The amount of the unwind of the discount was nil (2017: nil).
Provision for unemployment benefits The provision concerns the obligations of Evides arising because of its self-insured status with regard to unemployment benefits.
Provision for redundancy costs This provision concerns future employee benefits payable as a result of initiated restructurings and redundancies.
Provision for long-service awards and bonuses This provision concerns payable long-service awards and bonuses. This provision has been calculated by taking into account the expected personnel retention rates.
Provision for long-term sick leave This provision concerns the obligation of Evides to continue the payment of salaries of employees on long-term sick leave.
5.2 Deferred tax liabilities The deferred tax liabilities concern the tax position of the tax group headed by Evides N.V. in connection with the applied tax scheme for accelerated deprecation, as well as the measurement of liabilities arising from non-legal activities that are attributable to the loans portfolio.
Changes in the deferred tax liabilities in 2018 were as follows:
Balance as at 1 January 1.1 Change in financial year -0.4 Balance as at 31 December 0.7
Evides Waterbedrijf – Annual report 2018 – Summary 60
5.3 Other provisions Changes in the other provisions in 2018 were as follows:
Balance as at Additions Withdrawals Release Balance as at 1 January 1 December
Other provisions 0.4 0.0 0.0 0.0 0.4
Total 0.4 0.0 0.0 0.0 0.4
Given their short term character, the fair value of the other provisions approximates their carrying amount and they have therefore not been discounted to present value.
Other provisions This provision concerns a buyer who currently buys less than had been contractually agreed, but who is entitled to correct this shortfall by making catch-up purchases at a later time. These catch-up purchases are in part withdrawn from the provision.
6 Long-term liabilities The breakdown of the long-term liabilities, excluding the current portion, was as follows:
Interest % 2018 2017 0 - < 1 274.9 249.9 1 - < 2 132.5 82.5 2 - < 3 80.0 150.0 3 - < 4 0.0 0.0 4 - < 5 0.0 0.0 5 - < 6 0.0 0.0 Total 487.4 482.4
The presented liabilities include roll-over loans with variable monthly, quarterly and half-yearly interest rates. As at year-end, the long-term liabilities included EUR 65.0 million bearing variable interest rates (year-end 2017: EUR 70.0 million), which are periodically reset on the basis of 3-month or 6-month Euribor.
As at year end 2018, the average interest rate due on the long-term liabilities came to 1.4% (year-end 2017: 1.5%).
In the past financial year, the company took out a total of EUR 85.0 million in long-term loans (2017: 102.0 million).
The principal repayments that are due within one year, totalling EUR 80.0 million as at year-end (year- end 2017: EUR 80.0 million), have been recognised under non-current liabilities As at year-end, the liabilities with a residual term of more than five years totalled EUR 155.0 million (year-end 2017: 145.0 million). The residual terms of the loan portfolio can be specified as follows:
Evides Waterbedrijf – Annual report 2018 – Summary 61
Year 2018 2017 1 - < 2 87.0 80.0 2 - < 3 90.0 87.0 3 - < 4 85.0 85.0 4 - < 5 70.0 85.0 5 - < 6 75.0 70.0 6 - < 7 80.0 75.0 7 - < 8 0.0 0.0 > 8 0.4 0.4 Total 487.4 482.4
No security have been provided for these loans. However, financial covenants apply to all loans. The covenants include requirements set by the lenders with respect to the solvency ratio and interest coverage ratio. If the company does not comply with these covenants, this may result in the lender demanding immediate payment of the loan. The minimum solvency ratio required by the lenders ranges from 20-25% and for the interest coverage ratio a minimum of 1.0 applies. Evides complied with these financial covenants in 2018.
In addition, since December 2014 Evides has had access to a loan facility amounting to EUR 175.0 million. As at year-end 2018, this facility had been fully drawn (year-end 2017: EUR 175.0 million). The covenants for this loan facility differ from those for the other loans. The main differences compared to the covenants agreed with the aforementioned lenders are a minimum interest coverage ratio of 5.0 and the fact that the relevant lender can demand additional securities if Evides defaults on its contractual obligations.
7 Current liabilities This item can be specified as follows: 2018 2017 Taxes and social insurance contributions 6.2 6.6 Creditors 16.9 21.2 Payables to participating interests 1.6 2.2 Banks 4.3 3.6 Principal repayments due within 1 year 80.0 80.0 Other liabilities 13.5 12.9 Interest payable 1.0 0.9 Other accrued expenses and deferred income 38.7 30.6 Total 162.2 158.0
As at year-end, all current liabilities had a maturity of less than one year (year-end 2017: EUR 0.0 million). As at year-end, the item ‘Taxes and social insurance contributions’ included EUR 0.6 million in pension obligations (year-end 2017: EUR 0.6 million).
Off-balance sheet commitments At the end of 2018, additional purchase commitments (orders) totalling EUR 34.9 million were entered into (year-end 2017: EUR 33.2 million).
Evides Waterbedrijf – Annual report 2018 – Summary 62
Evides has an agreement with N.V. WBB regarding the purchasing of pretreated water which matures in 2039. In addition, Evides has a services agreement with DNWG Infra B.V. with a remaining term of two years.
Evides guarantees the operating activities performed by Delfluent Services B.V. as a subcontractor for Delfluent B.V. The maximum liability of Evides to Delfluent B.V. amounts to EUR 10.0 million per calendar year and EUR 27.0 in case of early termination of the agreement between Delfluent B.V. and Delfluent Services B.V.
In 2009, environmental damage arose at a waste water treatment plant of Evides. The amount of the associated costs is still unclear, but the damage was not caused by Evides and these costs are expected to be recovered from the party that caused it.
In 2018, damage arose to two delivery pipes that are owned by the Delfland Water Board but managed by Delfluent Services B.V., a wholly-owned subsidiary of Evides. The total amount of the losses incurred because of the damage, consisting of the costs of the emergency measures taken and the repair costs, is still unclear, but is expected to be recovered from the party that caused this damage.
The company has rental obligations relating to accommodation and lease obligations relating to company lease cars.
The breakdown of these obligations was as follows:
2018 2017 Up to 1 year 2.1 2.2 Between 1 and 5 years 3.5 3.4 More than 5 years 0.1 0.1 Total 5.7 5.7
In the past financial year, the company recognised an amount of EUR 2.6 million in contractual lease obligations in the income statement, consisting of minimum lease payments (2017: EUR 2.6 million). In 2017, the company had no contingent lease payments and/or sublease income.
Financial risks As a company, Evides is exposed to various financial risks. These include: • credit risks; • interest rate risks; • liquidity risks; • availability of financing; • price risks.
Evides has no significant concentrations of credit risks. As at year-end, the receivables from customers totalled EUR 30.0 million (year-end 2017: EUR 33.8 million). As at year-end, the provision recognised for this amounted to EUR 1.9 million (year-end 2017: EUR 2.4 million). Lastly, as at year-end Evides Industriewater had receivables under finance leases on the basis of Design, Build, Finance and Operate (DBFO) contracts totalling EUR 54.4 million (year-end 2017: EUR 63.2 million) Debtor risks arising from such contracts are mitigated as much as possible through the fact that Evides Industriewater remains the legal owner of the installation during the term of the contract and only concludes such contracts with creditworthy contract partners.
Evides Waterbedrijf – Annual report 2018 – Summary 63
The interest rate risk depends on the extent to which fluctuations in long-term or short-term interest rates affect profit or loss. Evides finances its fixed assets from its equity and provisions, as well as through short-term and long-term debts, some of which bear variable interest rates. The current assets are financed through short-term debts, including bank loans with variable interest rates. Derivative financial instruments (derivates) are used to mitigate interest rate risks. This is in accordance with the treasury policy of Evides, under which derivatives may only be used to cover financial risks. Interest rate swaps have been concluded for short-term loans with a carrying amount as at 31 December 2018 of EUR 40.0 million (year-end 2017: 40.0 million) in order to swap the variable interest rate against a fixed interest rate during the terms of these loans. The carrying amount of these derivatives, which Evides measures at cost by applying cost price hedge accounting, was nil. Based on the information received from the banks, the fair value of the derivatives amounted to EUR 0.1 million negative as at 31 December 2018 (year-end 2017: EUR 0.7 million negative). As the contracts for the derivatives have been concluded based on the hedging strategy and the derivatives are demonstrably effective, the derivatives have not been written down to fair value. Evides is not subject to any special conditions or risks, such as obligations to provide additional collateral (known as ‘margin calls’) and/or other additional requirements, with respect to the use of derivatives. Any counterparty risks that may arise from the use of derivatives are reduced as much as possible by Evides by means of diversification and settlement clauses and by setting minimum requirements for the creditworthiness of counterparties.
Based on the financing position as at year-end 2018, we estimated that an increase or decrease of the euro money market rate by 1 percentage point will have an effect on the financing income of approximately EUR 0.7 million on an annual basis (year-end 2017: EUR 0.7 million). The policy is that no more than 20% of the financing should bear short interest rates.
Evides is only able to and only wants to make limited use of credit extend by suppliers for the purpose of financing its working capital. In order to reduce liquidity risks, Evides has access to uncommitted credit facilities in the amount of EUR 146.8 million, of which EUR 4.3 million was drawn as at year-end 2018 (year-end 2017: 3.6 billion). In addition, committed credit facilities in the amount of EUR 90.0 million have been extended to Evides, which have residual terms of between 1 and 3 years. These credit facilities had not been drawn as at year-end 2018.
Evides is a capital-intensive organisation and the availability of financing is critical to its ability to continue as a going concern. Ensuring our financial continuity and therefore mitigating the availability risks is the top priority of the treasury policy of Evides. The key measures taken to mitigating the availability risk are: • opting to reduce our dependence on specific lenders by spreading our financing over multiple lenders or in such a way that we do not enter into long-term relationship with our lenders; • mitigating the risk of temporary discontinuity in the financial markets by using committed credit facilities; • spreading the refinancing risk over time by spreading the loan portfolio.
Where possible and economically justified, price risks are mitigated. We have concluded multiannual contracts for the purchasing of energy, chemicals and other resources, through which the effect of interim price changes is reduced.
Related parties The following qualify as related parties (as defined in Dutch Accounting Standard 330):
Evides Waterbedrijf – Annual report 2018 – Summary 64
1. Shareholders (municipalities and provinces represented by B.V. Gemeenschappelijk Bezit Evides and PZEM N.V. or persons who are authorised to represent the relevant municipalities and province in our General Meeting of Shareholders); 2. Managing Director; 3. Delfluent B.V., VEI B.V., Facturatie B.V., Aqualab Zuid B.V., North Water B.V., Evilim Industriewater B.V. and Sloewarmte B.V.
Transactions with related parties have been accounted for on arm’s length terms.
Evides supplies support services and lends personnel to Delfluent B.V. Evides also lends personnel to VEI B.V.
Lastly, Delfluent Services B.V., as part of the public-private partnership with the Delfland Water Board, is responsible for the management and maintenance of two wastewater treatment plants, Houtrust in The Hague and Harnaschpolder in Den Hoorn, as well as the related transport system with 19 pumping stations. Delfluent Services B.V. does this work on behalf of and for the account of Evides under a contract with a term of 30 years. The contract expires in 2033.
Evides Waterbedrijf – Annual report 2018 – Summary 65
Notes to the consolidated income statement (in EUR millions)
8 Operating income The breakdown of operating income was as follows:
2018 2017 Drinking water 196.9 192.9 Industrial water 102.1 104.3 Net sales revenue 299.0 297.2 Revenue from construction contracts 6.4 19.4 Capitalised production costs for own operations 13.2 12.7 Other operating income 9.3 6.1 Total 327.9 335.4
The geographic breakdown of the net sales revenue was as follows: 2018 2017 Netherlands 290.3 289.0 Other EU member states 8.7 8.2 Total 299.0 297.2
9 Operating expenses
9.1 Costs of raw material and consumables The breakdown of the costs of raw materials and consumables was as follows:
2018 2017 Purchase of water 7.7 6.6 Energy 11.3 10.6 Chemicals 10.5 8.7 Total 29.5 25.9
9.2 Costs of outsourced work and other external costs The breakdown of the costs of outsourced work and other external costs was as follows:
2018 2017 Cost of work under construction contracts 6.0 15.2 Temporary personnel 7.8 8.0 Outsourced maintenance and materials costs 36.1 35.6 Costs of analyses 6.0 7.0 Municipal tax on encroachments of public land 11.4 11.4 Accommodation costs 6.1 6.1 Automation costs 11.1 10.0 Customer processes 8.2 8.3 Other external costs 15.7 15.3 Total 108.4 116.9
Evides Waterbedrijf – Annual report 2018 – Summary 66
The costs of outsourced work and other external costs included an amount of EUR 0.2 million (2017: 0.2 million) in fees as defined in Section 2:382a of the Dutch Civil Code. Evides has engaged Deloitte Accountants for its external audits since the financial year 2015.
The fees charged by Deloitte Accountants can be specified as follows:
Deloitte Other Deloitte Total for Deloitte (in EUR thousand) Accountants entities network 2018 Audit of the financial statements 185 0 185 Other audit engagements 25 0 25 Tax advisory services 0 0 0 Other non-audit services 0 59 59 Total 210 59 269
Deloitte Other Deloitte Total for Deloitte (in EUR thousand) Accountants entities network 2017 Audit of the financial statements 181 0 181 Other audit engagements 26 0 26 Tax advisory services 0 0 0 Other non-audit services 0 14 14 Total 207 14 221
The stated fees for the audit of the financial statements are based on the financial statements to which the audit procedures relate, irrespective of whether these procedures were already performed by the external auditor and the audit firm in the relevant financial year.
9.3 Personnel costs As at year-end 2018, the average staffing level expressed in full-time equivalents (FTEs) came to 732.9 FTEs (year-end 2017: 739.2). The average number of employees in 2018 amounted to 736.1 (2017: 728.7), of which on average 12 employees worked outside the Netherlands (2017: 15.0).
The breakdown of the average number of FTEs by type of operating activity was as follows:
2018 2017 Drinking water 573.6 569.4 Industrial water 162.5 159.3 Total 736.1 728.7
Evides Waterbedrijf – Annual report 2018 – Summary 67
The breakdown of the personnel costs was as follows:
2018 2017 Salaries 47.9 46.6 Other personnel costs 2.1 2.0 Additions to / release of employee benefits provision 1.0 0.9 Total wages and salaries 51.0 49.5 Social insurance contributions Pension contributions 5.6 5.3 Total social insurance and pension contributions 6.4 6.0 Total 12.0 11.3
Total 63.0 60.8
The personnel costs include the remuneration of the Supervisory Board members, which totalled EUR 120,232 in 2018 (2017: EUR 127,567). The remuneration of the Supervisory Board members is capped under the Standards for Remuneration Act, which applies to senior officials in the Dutch public and semi-public sector. In 2018, the maximum remuneration for the chair and members of the Supervisory Board under this Act was 15% (2017: 15%) and 10% (2017: 10%) respectively of the maximum remuneration applying to the legal entity, and therefore amounted to EUR 28,050 (2017: EUR 27,150) and EUR 18,700 (2017: EUR 18,100) respectively.
The remuneration per Supervisory Board member was as follows:
2018 Name Position Period (from / to ) Remuneration Maximum under SRA A.G. Nijhof Chair 1-1 / 31-12 EUR 28,050 EUR 28,350 P.C. Hartog Vice-chair 1-1 / 31-12 EUR 18,700 EUR 18,900 G. Uytdewilligen Vice-chair 1-1 / 28-11 EUR 17,191 EUR 17,191 H.G. Bouwman Member 1-1 / 31-12 EUR 18,700 EUR 18,900 D.A. van Doorn Member 1-1 / 31-12 EUR 18,700 EUR 18,900 B.J. de Reu Member 1-1 / 28-11 EUR 17,191 EUR 17,191 C. Brandenburg Member 29-11 / 31-12 EUR 1,700 EUR 1,709 Total EUR 120,232 EUR 121,141
2017 Name Position Period (from / to ) Remuneration Maximum under SRA E. Hagdorn Chair 1-1 / 9-10 EUR 20,025 EUR 20,959 A.G. Nijhof Chair 1-12 / 31-12 EUR 2,225 EUR 2,238 A.G. Nijhof Member 1-1 / 30-11 EUR 16,317 EUR 16,559 P.C. Hartog Vice-chair 1-1 / 31-12 EUR 17,800 EUR 18,100 F. Verhagen Vice-chair 1-1 / 25-6 EUR 8,900 EUR 8,901 G. Uytdewilligen Vice-chair 25-6 / 31-12 EUR 8,900 EUR 9,149 D.A. van Doorn Member 1-1 / 31-12 EUR 17,800 EUR 18,100 H.G. Bouwman Member 1-1 / 31-12 EUR 17,800 EUR 18,100 B.J. de Reu Member 1-1 / 31-12 EUR 17,800 EUR 18,100
Total EUR 127,567 EUR 130,206
Evides Waterbedrijf – Annual report 2018 – Summary 68
The remuneration of all Supervisory Board members complies with the Standards for Remuneration Act. In 2018, the Supervisory Board members did not receive any taxable expense allowances, nor any long-term or post-employment benefits.
Pursuant to the Articles of Association of Evides, the Managing Director has exclusive responsibility for the day-to-day management of the entire company and qualifies as a senior official under the Standards for Remuneration Act.
In 2018, the maximum remuneration per FTE under the Standards for Remuneration Act was as follows: EUR 189,000 (2017: EUR 181,000) The applicable maximum remuneration under this Act shown per person or per position has been calculated in proportion to the working hours under the employment contract (and for senior officials also the period of service), with the working hours never exceeding 1.0 FTE for the calculation.
In the context of the Standards for Remuneration Act, the remuneration of the Managing Director can be specified as follows:
2018 2017 A.M. Ottolini A.M. Ottolini Position(s) Managing Director Managing Director Period of service 1/1 - 31/12 1/1 - 31/12 Working hours under employment contract (in FTEs) 1.00 1.00 Former senior official? no no Employment or deemed employment? yes yes
Remuneration Salary EUR 197,166 EUR 197,903 Taxable expense allowance EUR 9,608 EUR 9,365 Long-term or post-employment benefits EUR 20,710 EUR 19,447 Total remuneration subject to SRA EUR 227,484 EUR 226,715 Payment not subject to maximum under SRA EUR - EUR - Total remuneration in accordance with SRA EUR 227,484 EUR 226,715 Applicable maximum under SRA EUR 189,000 EUR 181,000
The fact that the maximum remuneration under the Standards for Remuneration Act was exceeded in 2018 is due to the fact that this maximum was reduced from EUR 230,474 to EUR 178,000 with effect from 1 January 2015. As this concerns a pre-existing remuneration package, it is subject to transitional law under which pre-existing arrangements are respected for a period of four years of the effective date of the ministerial regulation.
In 2018, the remuneration of the Managing Director, including pension and social insurance contributions, totalled EUR 235,376 (2017: EUR 234,282).
In 2018, there were no other officials who received remuneration in excess of the applicable maximum remuneration under the Standards for Remuneration Act, or whose remuneration was reported or should have been reported under this Act in previous years. In addition, no termination benefits that must be reported under the Standards for Remuneration Act were paid to other officials in 2018.
Evides Waterbedrijf – Annual report 2018 – Summary 69
9.4 Depreciation and amortisation
2018 2017 Intangible fixed assets 9.1 9.0 Tangible fixed assets 67.8 65.7 Gain (loss) on disposal of assets 0.0 -0.2 Total 76.9 74.5
The depreciation and amortisation charges have been based on the depreciation and amortisation rates as explained in the notes on the tangible and intangible fixed assets.
10 Financial income and expenses
10.1 Income from receivables that qualify as fixed assets
2018 2017 Income from receivables under finance leases 3.1 3.5 Interest income from other receivables 3.3 3.0 Total 6.4 6.5
10.2 Interest expenses and similar costs
2018 2017 Interest on long-term loans -7.8 -8.8 Other interest expenses -0.5 -0.5 Total -8.3 -9.3
11 Taxes The taxes payable on the profit from ordinary activities amounted to EUR 6.4 million (2017: EUR 7.2 million). The reconciliation with the effective tax rate was as follows:
2018 2017 Profit (loss) for the financial year before taxes 48.2 53.7 Untaxed activities and temporary differences between carrying amounts and tax bases 23.6 25.8 Taxable profit (tax loss) for the financial year 24.6 27.9
Income taxes according to Dutch tax rate (2016 and 2017: 25%) 6.2 7.0 Effect of having become liable for Dutch corporation tax 0.0 0.0 Change in deferred taxes 0.0 -0.2 Effect of unrecognised deductible losses 0.0 0.0 Effect of tax rate in foreign jurisdictions (different rate) 0.3 0.4 Prior years 0.1 0.0 Total income taxes 6.6 7.2
Evides Waterbedrijf – Annual report 2018 – Summary 70
The corporation taxes have been calculated based on the applicable tax rates in the Netherlands, Belgium and Germany, taking into account the tax regulations that give rise to permanent differences between the accounting profit or loss and the taxable profit or tax loss.
In 2018, the effective tax rate for the corporation tax payable on the profit or loss for the year was 13.7% (2017: 13.4%).
12 Events after the balance sheet date There were no events the balance sheet date that provided further information about the actual situation that existed as at balance sheet date.
Evides Waterbedrijf – Annual report 2018 – Summary 71
Company balance sheet as at 31 December 2018 (before profit appropriation)
(in EUR million) Ref. 31 December 2018 31 December 2017 ASSETS
Fixed Assets Intangible fixed assets 1 21.0 21.7 Tangible fixed assets 2 799.4 776.8 Financial fixed assets 3 186.1 191.4 Total fixed assets 1,006.5 989.9
Current assets Inventories 2.0 2.5 Construction contracts 0.3 1.3 Receivables and prepayments and accrued income 4 107.8 116.5 Cash and cash equivalents 5 6.2 0.0 Total current assets 116.3 120.3
Total assets 1,122.8 1,110.2
EQUITY AND LIABILITIES
Equity 6 Share capital 0.2 0.2 Share premium 83.9 83.9 Legal reserve 9.5 8.5 Other reserves 374.0 363.1 Unappropriated profit (loss) 42.4 47.3 Total equity 510.0 503.0 Provisions 7 2.5 2.4 Long-term liabilities 8 465.0 465.0 Current liabilities 9 145.3 139.8
Total equity and liabilities 1,122.8 1,110.2
Evides Waterbedrijf – Annual report 2018 – Summary 72
Company income statement for 2018
(in EUR million) Ref. 2018 2017 Income (loss) from participating interests after taxes 10 19.7 21.0 Other gains (losses) 22.7 26.3 Net profit (loss) after taxes 42.4 47.3
Accounting policies for the company financial statements The principles for the measurement of the assets and liabilities in the balance sheet and the profit determination of the company are identical to those explained in the notes to the consolidated balance sheet and income statement.
Evides Waterbedrijf – Annual report 2018 – Summary 73
Notes to the company balance sheet (in EUR million)
The company financial statements of Evides N.V. are included in the consolidated financial statements. The explanatory information below exclusively concerns specific items relating to the company balance sheet.
1 Intangible fixed assets The breakdown of and changes in carrying amounts in 2018 were as follows:
Software
Balance as at 1 January 2018 Cost of acquisition 51.3 Cumulative amortisation -29.6 Carrying amount as at 1 January 2018 21.7
Changes in 2018 Investments -8.2 Amortisation 7.5 -0.7 Balance as at 31 December 2018 Cost of acquisition Cumulative amortisation 58.8 Carrying amount as at 31 December 2018 -37.8 Boekwaarde per 31 december 2018 21.0
Evides Waterbedrijf – Annual report 2018 – Summary 74
2 Tangible fixed assets
The breakdown of and changes in carrying amounts in 2018 were as follows: :
Land, Water Installations Other Works in Total buildings, mains fixed progress etc. system operating assets Balance as at 1 January 2018 Cost of acquisition 234.8 1,063.2 179.5 20.3 60.3 1,558.1 Cumulative depreciation -122.9 -523.8 -121.9 -12.7 0.0 -781.3 Carrying amount as at 1 January 2018 111.9 539.4 57.6 7.6 60.3 776.8
Changes in 2018 Investments 0.0 0.0 0.0 0.0 0.0 0.0 Completed works 0.8 39.3 9.8 1.2 -51.1 0.0 Investments in works in progress 0.0 0.0 0.0 0.0 76.0 76.0 Disposals 0.0 0.0 0.0 0.0 0.0 0.0 Impairment 0.0 0.0 0.0 0.0 0.0 0.0 Depreciation -6.3 -34.8 -9.9 -2.4 0.0 -53.4 Total -5.5 4.5 -0.1 -1.2 24.9 22.6
Balance as at 31 December 2018 Cost of acquisition 235.6 1,102.5 189.3 21.5 85.2 1,634.1 Cumulative depreciation -129.2 -558.6 -131.8 -15.1 0.0 -834.7 Carrying amount as at 31 December 2018 106.4 543.9 57.5 6.4 85.2 799.4
The tangible fixed assets concern drinking water facilities.
3 Financial fixed assets Changes in the carrying amounts of financial fixed assets in 2018 were as follows:
Participating Securities Other Total interests receivables Balance as at 1 January 172.8 1.6 17.0 191.4 Investments 0.0 0.0 5.0 5.0 Income (loss) from participating interests* 19.9 0.0 0.0 19.9 Dividends -30.2 0.0 0.0 -30.2 Reclassification to current receivables 0.0 0.0 0.0 0.0 Balance as at 31 December 162.5 1.6 22.0 186.1 * Based on draft financial statements 2018
Evides Waterbedrijf – Annual report 2018 – Summary 75
Evides holds the following shares in other companies, which are measured based on the equity method.
Company Registered office Percentage of interest Evides Industriewater B.V. Rotterdam 100.0% N.V. Waterwinningsbedrijf Brabantse Biesbosch Werkendam 60.0% Facturatie B.V. Utrecht 50.0% VEI B.V. Utrecht 50.0% Aqualab Zuid B.V. Werkendam 50.0%
4 Receivables and prepayments and accrued income This item can be specified as follows:
2018 2017 Receivables from group companies 80.2 87.9 Receivables from participating interests 4.9 4.3 Debtors and other receivables 22.7 24.3 Total 107.8 116.5
All items included receivables and prepayments and accrued income have a residual term of less than on year. Given their short terms and the fact that provisions for uncollectibility have been recognised where necessary, the fair value of the receivables approximates their carrying amount.
5 Cash and cash equivalents The cash and cash equivalents are at the company’s free disposal.
6 Equity Changes in equity in 2018 were as follows:
Issued Share Legal Other Unappropriated Total share premium reserve reserves profit (loss) capital Balance as at 1 January 0.2 83.9 8.5 363.1 47.3 503.0 Profit appropriation 0.0 0.0 0.0 47.3 -47.3 0.0 Addition to / release of legal reserve 0.0 0.0 1.0 -1.0 0.0 0.0 Dividends 0.0 0.0 0.0 -35.4 0.0 -35.4 Profit (loss) for the financial year 0.0 0.0 0.0 0.0 42.4 42.4 Balance as at 31 December 0.2 83.9 9.5 374.0 42.4 510.0
The authorised share capital amounts to EUR 0.25 million and is divided into 5 million ordinary shares with a nominal value of EUR 0.05 each. The issued and paid-up share capital amounts to EUR 0.2 million and is held by the following shareholders:
Shareholders B.V. Gemeenschappelijk Bezit Evides 0.1 PZEM N.V. 0.1 Total 0.2
Evides Waterbedrijf – Annual report 2018 – Summary 76
As at year-end 2018, the legal reserve included EUR 9.4 million (year-end 2017: EUR 8.5 million) for profits from participating interests for which Evides cannot independently arrange the payment of dividends and EUR 0.1 million for capitalised expenses and design standards (year-end 2017: nil). Changes in the legal reserves in 2018 were as follows:
Legal reserve
Balance as at 1 January 8.5 Income (loss) from non-controlling participating interests 0.0 Dividends paid 0.0 Foreign currency translation differences 0.0 Addition to / release of statutory reserve 1.0 Balance as at 31 December 9.5
Pursuant to Article 28(1) of the Articles of Association, the Managing Director determines which part of the profit for the financial year is to be added to the reserves. After obtaining advice from the Supervisory Board, the General Meeting of Shareholders then decides which part of the profit is added to the reserves. The profit remaining after this addition is at the disposal of the General Meeting of Shareholders.
Taking into account the target minimum solvency ratio and the planned investments, the following profit appropriation is proposed:
The net profit for the financial year 2018 amounts to: The following appropriation of the profit is proposed: 42.4 Addition to the other reserves 7.0 Profit at the disposal of the shareholders 35.4 Already paid out in interim dividends 17.7 Final dividend to be paid 17.7
The owners of ordinary shares are entitled to a dividend payment following approval by the General Meeting . At the General Meeting on 29 May 2019, a dividend per share of EUR 11.40 (total annual dividends of EUR 35.4 million) will be proposed for 2018, of which EUR 5.70 million per share has already been paid out in interim dividends.
7 Provisions
Balance Additions Withdrawals Release Balance as at 1 as at 1 January December Provision for unemployment benefits 1.0 0.6 -0.5 0.0 1.1 Provision for redundancy costs 0.3 0.4 -0.2 0.0 0.5 Provision for long-service awards 0.7 0.0 0.0 -0.1 0.6 Provision for bonuses 0.1 0.0 0.0 -0.1 0.0 Provision for long-term sick leave 0.3 0.3 0.0 -0.3 0.3 Total 2.4 1.3 -0.7 -0.5 2.5
Evides Waterbedrijf – Annual report 2018 – Summary 77
Of the provisions, EUR 1.0 million had a term of more than one year as at year-end (year-end 2017: EUR 1.0 million). As at year-end, there were no provisions with a term of more than five years (year- end 2017: nil)
Based on the short term character of the relevant liabilities, the average discount rate used for discounting the employee benefits provisions to present value as at year-end was 0.1% (year-end 2017: 0.3%). This discount rate is based on the yield curve for pension funds. The amount of the unwind of the discount was nil (2017: nil).
8 Long-term liabilities The breakdown of the long-term liabilities, excluding the current portion, was as follows:
Interest % 2018 2017 0 - < 1 252.5 232.5 1 - < 2 132.5 82.5 2 - < 3 80.0 150.0 3 - < 4 0.0 0.0 4 - < 5 0.0 0.0 5 - < 6 0.0 0.0 Total 465.0 465.0
The presented liabilities include roll-over loans with variable monthly, quarterly and half-yearly interest rates.
In the past financial year, the company took out a total of EUR 80 million in long-term loans (2017: EUR 85.0 million). As at year end 2018, the average interest rate due on the long-term liabilities came to 1.4% (year-end 2017: 1.5%).
The principal repayments that are due within one year, totalling EUR 80 million as at year-end (year- end 2017: EUR 80.0 million), have been recognised under non-current liabilities As at year-end, the liabilities with a residual term of more than five years totalled EUR 155.0 million (year-end 2017: EUR 145.0 million).
No security have been provided for these loans. However, financial covenants apply to all loans. The covenants include requirement sets by the lenders with respect to the solvency ratio and interest coverage ratio. If the company does not comply with these covenants, this may result in the lender demanding immediate payment of the loan. The minimum solvency ratio required by the lenders ranges from 20-25% and for the interest coverage ratio a minimum of 1.0 applies. Evides easily complied with these financial covenants again in 2018.
In addition, since December 2014 Evides has had access to a loan facility amounting to EUR 175 million. As at year-end 2018, this facility had been fully drawn (year-end 2017: EUR 175.0 million). The covenants for the loan facility differ from those for the other loans. The main differences compared to the covenants agreed with the aforementioned lenders are a minimum interest coverage ratio of 5.0 and the fact that the relevant lender can demand additional securities if Evides defaults on its contractual obligations.
Evides Waterbedrijf – Annual report 2018 – Summary 78
9 Current liabilities The breakdown of the current liabilities was as follows:
2018 2017 Payables to group companies 1.2 0.7 Payables to participating interests 0.0 2.1 Other external liabilities 144.1 137.0 Total 145.3 139.8
The deposits have a maturity of less than one year.
Off-balance sheet commitments Evides has an agreement with N.V. WBB regarding the purchasing of pretreated water that runs until 2039. In addition, Evides has a services agreement with DNWG Infra B.V. with a remaining term of two years.
The company has rental obligations relating to accommodation and lease obligations relating to company lease cars. The breakdown of these obligations was as follows:
2018 2017 Up to 1 year 2.1 2.2 Between 1 and 5 years 3.5 3.4 More than 5 years 0.1 0.1 Total 5.7 5.7
In the past financial year, the company recognised an amount of EUR 2.6 million in contractual lease obligations in the income statement, consisting of minimum lease payments (2017: EUR 2.6 million). In 2018, the company had no contingent lease payments and/or sublease income
Pursuant to Section 2:403 of the Dutch Civil Code, the company has issued a declaration of joint and several liability for the debts arising from the juristic acts of its group companies Evides Industriewater B.V., Evides Afvalwater B.V., Evides Terneuzen Water B.V. and Brielse Meer water B.V.
Evides N.V. heads the fiscal unity group for VAT that also includes Evides Industriewater B.V., Evides Afvalwater B.V., Evides Terneuzen Water B.V. and Brielse Meer water B.V. In addition, since 2016 Evides N.V. heads the fiscal unity group for corporation tax that also includes Evides Industriewater B.V., Evides Afvalwater B.V., Evides Terneuzen Water B.V., Delfluent Services B.V. and Brielse Meer water B.V. Based on this, Evides N.V. is liable for the tax liabilities of these tax groups.
Evides Waterbedrijf – Annual report 2018 – Summary 79
Notes to the company income statement
10 Income (loss) from participating interests The company’s share of the profits or losses of the entities in which it participates is presented below.
(in EUR million) 2018 2017 Evides Industriewater B.V. 19.7 20.7 VEI B.V. 0.0 0.1 Aqualab B.V. 0.0 0.2 Total 19.7 21.0
11 Personnel As at year-end 2018, the average staffing level expressed in full-time equivalents (FTEs) came to 685.0 FTEs (year-end 2017: 693.3). In 2018, the average number of employees amounted to 689.1 (2017: 681.0).
The personnel costs of the employees are fully charged on to Evides Industriewater B.V. to the extent that the activities relate to supplying industrial water.
Rotterdam, 13 March 2019
Managing Director, ir. A.M. Ottolini
Supervisory Board, ir. A.G. Nijhof MBA, chair drs. P.C. Hartog, vice-chair mr. H.G. Bouwman, member drs. D.A. van Doorn, member dr. C.A. Brandenburg MSc PhD, member
Evides N.V. Schaardijk 150 3063 NH Rotterdam
Evides Waterbedrijf – Annual report 2018 – Summary 80
Independent auditor's report
To: the shareholders of Evides N.V.
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS 2018 INCLUDED IN THE ANNUAL REPORT
Our opinion
We have audited the accompanying consolidated financial statements 2018 of Evides N.V., based in Rotterdam.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of Evides N.V. as at December 31, 2018, and of its result for 2018 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements comprise:
1. The consolidated balance sheet as at December 31, 2018.
2. The consolidated profit and loss account for 2018.
3. The notes comprising a summary of the accounting policies and other explanatory information.
Furthermore, in our opinion, the financial statement of 2018 complies, in all material respects, with the Standard Remuneration Act (hereafter “WNT”).
Basis for our opinion
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 "Our responsibilities for the audit of the consolidated financial statements" section of our report.
We are independent of Evides N.V. in accordance with the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance- opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
2019.071725/LT/1
REPORT ON THE OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
In addition to the consolidated financial statements and our auditor's report thereon, the annual report contains other information that consists of: Lettter from the Executive Board. Introduction to Evides Our work in 2018 Our organization and strategy Financial results Outlook 2019 Other information
Based on the following procedures performed, we conclude that the other information:
Is consistent with the consolidated financial statements and does not contain material misstatements.
Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these 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 the procedures performed is substantially less than the scope of those performed in our audit of the consolidated financial statements.
Management is responsible for the preparation of the other information, including the Management Board's Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
DESCRIPTION OF RESPONSIBILITIES REGARDING THE CONSOLIDATED FINANCIAL STATEMENTS
Responsibilities of management for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Management is also responsible for the preparation of the financial statements in accordance with the requirements of financial legitimacy as set out in the WNT and included in the audit standards WNT of the Policy implementation WNT (“Beleidsregels toepassing WNT”).
As part of the preparation of the consolidated financial statements, management is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the consolidated 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.
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Management should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the consolidated financial statements.
The supervisory board is responsible for exercising oversight over the financial reporting process of the company.
Our responsibilities for the audit of the consolidated financial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.:
Identifying and assessing the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Concluding on the appropriateness of management's use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. 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 consolidated financial statements, including the disclosures.
Evaluating whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.
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 findings in internal control that we identified during our audit. In this respect we also submit 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. 2019-07-18 18.07.2019
Rotterdam, March 26, 2019
Deloitte Accountants B.V.
Signed on the original: J. A. de Bruin
2019.071725/LT/4