1 ANNUAL REPORT 2019 KONINKLIJKE BRILL NV BRILL ANNUAL REPORT 2019 2 Supervisory Board Members Steven Perrick Catherine Lucet Robin Hoytema van Konijnenburg Theo van der Raadt Management Board Members Peter Coebergh Jasmin Lange Olivier de Vlam KONINKLIJKE BRILL NV Plantijnstraat 2 PO BOX 9000 2300 PA Leiden T +31 71 53 53 500 This annual report is available as PDF: https://brill.com/page/InvestorRelations/investor-relations BRILL ANNUAL REPORT 2019 3 CONTENTS MANAGEMENT BOARDS’ REPORT FOR THE YEAR 2019 4 Introduction by the CEO 6 Company Profile 7 Key Figures 8 Data per Share 9 Shareholder Information 11 Mission, Core Values, and Corporate Strategy 13 Value Creation Process at Brill 14 Publishing Program 16 Financial Report 20 Human Resources 22 Risk Management 28 Corporate Sustainability 31 Responsibility Statement 32 Corporate Governance 35 Supervisory Board’s Report regarding the year 2019 39 Remuneration Policy and Report 44 Financial Statements for the year 2019 45 Consolidated Financial Statements 85 Company Financial Statements 97 Other Information 98 Independent Auditor’s Report 111 Supplemental Information 112 Report of Stichting Administratiekantoor Koninklijke Brill 114 Report of Stichting Luchtmans 115 About this annual report BRILL ANNUAL REPORT 2019 4 MANAGEMENT BOARD’S REPORT FOR THE YEAR 2019 Introduction by the CEO We are happy to present you with our annual report for 2019, reflecting significant progress from last year. Driven by our renewed mission and strategy, we showed growth above our expectations, resulting in Brill’s best year ever in terms of revenue and EBITDA. Organically, Brill’s revenue grew by 2.5% and the total revenue growth was 3.3%. Operating profit increased by 39.5% against 2018. In view of these positive results, but also considering the recent developments around the Covid-19 pandemic, we propose an all-cash ordinary dividend of EUR 0.50 per (certificate of) ordinary share at the General Meeting of Shareholders that will be held on 25 June, 2020. Strategic Progress in 2019 During 2019, we continued to make progress in achieving our strategic objectives as laid out in our mission statement and corporate strategy (refer to Mission, Core values and Corporate strategy). Brill’s new mission statement, which underlines the relevance of humanities research in today’s world, is being promoted and shared online with all our stakeholders through blogs, podcasts, and interviews, and has been very well received. Strategic progress is reflected in the further increase of our digital revenue, in the expansion of our Open Access publishing program, and in the launch of a new open source text editions platform developed in-house. Brill expanded its portfolio by acquiring several journals from competitors and by launching a range of new reference works and primary sources. Furthermore, we started a collaboration with Jus Mundi, a start-up company that has developed a specialized search engine in the field of international law, which will strengthen our digital capabilities. The German imprints Schöningh & Fink have developed their portfolios to include more English language publications, journals, and Open Access books, and have started to generate increasingly more revenue from digital publications. Operational Progress in 2019 The migration to the new Brill.com platform was successful and made it possible to fully retire the previous platform, putting an end to the double costs we had to bear in 2018. At the end of the year, we launched a new project to perform a company-wide digital health check. The goal of this project is to ensure that our digital and IT infrastructure is future proof and able to support our strategic objectives. Many improvements have been made to the organization of our finance and accounting processes and reporting. We are thankful for Wim Dikstaal’s contribution as interim CFO and we were very happy to see Olivier de Vlam return as full-time CFO in September to continue to lead improvements to Brill’s financial workflows. Our gross margin increased yet again, to 70%. Our profit improvement plan, launched in 2018, delivered savings as anticipated, which helped us to restore profitability to our targeted level. People and Society Again in 2019, more valuable content and primary sources were made digitally available for the scholarly community and for society at large due especially to Open Access models and new technologies. We continued our global activities under the Research4Life and UN Global Compact banners and locally, we supported various cultural institutions and events. BRILL ANNUAL REPORT 2019 5 In the publishing industry, people still make the greatest impact. Therefore, I would like to thank all our employees, authors, editors, freelancers and suppliers for their contribution and dedication throughout the year. Last year we published an article together with the Annual Report about the relevance of the humanities for today's challenges. This year’s article features Joseph Justus Scaliger, one of the pioneers of Oriental Studies in the Netherlands. His carefully curated book collection became the foundation of the great library at Leiden University. The collection not only provided an important impetus to academia in the region and beyond, but also to Brill’s publishing program. Even today, Brill remains connected to Scaliger in various ways. We share his curiosity for foreign languages and cultures, and his idea of universal scholarship. And for more than ten years, we have been proud sponsors of the Brill scholarship at the Scaliger Institute, which provides funding for research in the Special Collections of the Leiden University Library. Outlook Although we made significant progress in 2019, we currently face material uncertainties concerning the impact of the Covid-19 pandemic. The operational and commercial effects may significantly affect our ability to generate sufficient revenues in this year and we may not be able to decrease costs enough to mitigate the loss of income. Management is addressing the crisis by implementing measures in Publishing, Operations, Financing and Sales and is adjusting its policy as the situation develops (refer to going concern disclosure “The entity’s ability to continue as a going concern – Covid-19’’ in the notes to the consolidated financial statements). Given these uncertainties we do not provide an outlook for 2020. Once the crisis subsides, we will continue to pursue our strategic roadmap in order to achieve our long-term financial objectives and yield sustainable value for all our stakeholders. As always, Pallas Athena and Hermes will be on our side, making sure that, while striving to reach these objectives, we maintain the same balance between them as in the past 336 years. Leiden, 7 April, 2020 Peter Coebergh Chief Executive Officer BRILL ANNUAL REPORT 2019 6 COMPANY PROFILE Overview Brill, founded in 1683 and publicly listed since 1896, is a leading international scholarly publisher with a rich portfolio. We mainly publish in the fields of the humanities (history, the arts, languages and literature, philosophy), social sciences, and international law. Currently, Brill uses the following imprints: Brill, Brill ǀ Nijhoff, Hotei, Brill ǀ Hes & De Graaf, Brill ǀ Rodopi, and Brill ǀ Sense. In Germany we also use the imprints Ferdinand Schöningh, Wilhelm Fink, and mentis. Books are the leading publication format within the portfolio with journals as a strong second pillar. Brill also supplies primary source material, such as scans of historic archives and collections of documents, which are primarily sold online. Digital is the prevailing format across books, journals, and primary sources. Brill has also ventured into the digital humanities arena where innovative uses of technology in both research and publication methods enable new and dynamic publication offerings. Due to the long-term value of scholarly information in the humanities, the lifespan of and demand for our products is generally long. Since 2007, all new books titles are available in e-book format and some of our much older and long-running book series were digitized and offered to the market as collections. This initiative, together with the emergence of print on demand (POD) has extended our product lifecycles even further. In this way, too, we assure our authors that books from Brill will remain permanently available. Publishing Rights and Distribution Brill uses standardized author contracts to establish a reasonable and legally sound basis for controlled distribution of the research by authors themselves or by their institutions. This legal basis is achieved by a transfer of copyright or by a licensing agreement that includes Open Access options. International Authors and Clients Brill has been an international player from the start. More than 95% of Brill's revenue is generated outside of the Netherlands, which is comparable to the proportion of Brill's authors who reside abroad. Most clients are in Europe and North America, with Asia becoming increasingly important every year. Brill maintains relationships with all leading global academic research centers while cherishing its traditionally strong link with the University of Leiden, due in part to Brill's leading position in several areas in which the University specializes – such as Islamic studies, minor languages, archeology, and sinology. Marketing and Sales Brill's marketing and sales strategy is focused on achieving the widest possible distribution of its products within the academic market and beyond.