Annual Report

Transcription

1 Annual Report

2 Start of the Annual Report Contents page of the Annual Report Contents page of current chapter Previous page Next page PwC the Netherlands has more than 4,700 professionals operating in 12 offices and from three different perspectives: Assurance, Tax & HRS and Advisory. We deliver sector-specific services and seek innovative solutions, not only for national and international companies, but also for public sector and civil society organisations. PwC is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together these firms make up the global PwC network, within which 169,000 people in 154 countries share their ideas, experience and solutions in developing new perspectives and meaningful advice. In this Annual Report, the terms PricewaterhouseCoopers and PwC refer to PricewaterhouseCoopers B.V. including, depending on the context, its consolidated Dutch group companies. These are also jointly referred to as PwC Netherlands, PwC NL or the Group. 2 PwC

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5 Foreword from our Chairman 6 Key figures PwC 10 Report of the Local Oversight Board 12 Report of the Board of Management 14 Financial Statements PricewaterhouseCoopers B.V. 74 Transparency Report 114 Information about PwC 166 Appendices 178 Annual Report

6 What started five years ago as a crisis of confidence in the financial markets moved on to hit the real economy and has now become what we call the Euro crisis. The flip side of economic globalisation is that the effects are felt in every economy in the world, including most definitely the Dutch economy, and by virtually all companies and organisations. Furthermore, not only have economic circumstances changed significantly, the social context has also changed. Foreword from our Chairman Changing communication patterns, greater focus on differences rather than on areas of commonality, the tendency to judge others with no margin of flexibility or degree these have all contributed in recent years to polari zation within society. Happily a growing realization is emerging that the significant problems we all face can only be effectively dealt with by reaching out and working together, both nationally and across borders. In recent years, our strategy has been the compass we have used to steer us through these difficult economic and social circumstances: investing in talent, an unremitting commitment to quality improvement, encouragement of promising product/market approaches, clarifying the social relevance of our organization and also of our people, the introduction of new methodologies and technologies, and the expansion of diversity within our organisation and all of this while keeping a critical eye on our costbase. In this Annual Report 2011/2012 we are pleased to present our achievements during the year ended 30 June After two years of decline, our revenue is now again increasing. Assurance, Tax & HRS and Advisory have all seen increases an outstanding performance given the past year s difficult economic circumstances. TruEconomy and Proxyon, acquired during the past year, have both settled into our organisation well and have contributed to the increased revenue. We are delighted to be able to report that the four pillars of our strategy (Clients, Growth, Society and People) have all been further strengthened during the past year. We have made substantial progress towards achieving our ambitions in all four, and we have some excellent successes to report. For instance, we achieved the number one position in our sector in terms of reputation, our clients gave us almost an eight for client satisfaction and recommendation, we have been able to attract several excellent new clients and engagements, and our partners and staff have together been successful in making our social relevance more visible. Having said that, we do have concerns to share with you in this report concerns about our economic expectations for the future. We believe that, for a number of reasons, there is currently insufficient leadership in terms of taking the robust steps necessary to deal with the crisis. The status quo must make way for the measures and reforms which are needed to transform the economic and financial systems. We are also concerned about the discussions being held, both in the Netherlands and in Europe, regarding the restructuring of our financial systems. We are well aware that new avenues must be sought to restore confidence, and we are happy to make our contribution. Our concern is that this drive towards change will involve measures which will have exactly the opposite effect on independence, on quality, and on the (civil society) role which accountants and advisors need to fill - with all the ramifications that this will have on those involved in the economic cycle, from companies to our people. 6 PwC The Board of Management: Peter van Mierlo, Robert Swaak, Sytso Boonstra and Arno Pouw (from left to right).

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8 The audit profession s future hangs on the outcome of these discussions. Changes to financial reporting standards and the issue of new regulation governing the relationships between auditors, companies, audit committees, investors and regulators are under consideration. What exactly these changes will mean for the role of the auditor is still unclear. Equally uncertain are the consequences for other professionals - those who work closely with auditors to help achieve the high levels of client service expected. In any event, it is clear that significant change is on the way. One change that we would very much like to see is in the way in which our external supervisory body, the AFM, reports the findings of its quality reviews. This change should be the next step in the regulatory development process. We are convinced that the publication of firmspecific reporting (rather than generic, non-attributable reporting) will make a significant contribution to the competitiveness in the audit profession that the political world so dearly wishes to see. On the one hand, it would provide audit firms, large or small, with greater opportunity to use quality as a competitive edge and, on the other hand, it would encourage audit firms to achieve the highest levels of quality. In our view, such publication is wholly consistent with the robust dialogue that should be taking place between the AFM and the audit firms. In the Transparency Report we include in this Annual Report, we provide details of all we are doing on a day to day basis to monitor quality and of new initiatives we have been taking in our constant drive for quality improvement. We are also concerned about the future of the European Union, which we believe is critical to our prosperity. The ongoing Euro crisis not only heightens tensions among European countries (in particular the north-south relationships), but it also affects the way Europe is viewed here in the Netherlands. We therefore very much welcome the VNO- NCW initiative to publicize the achievements of Europe and the financial and economic consequences thereof for the Netherlands. (VNO-NCW is the largest organisation representing business in the Netherlands). Both our international competitiveness and our natural position as a bridge between Europe and other important economic markets benefit from us keeping an open mind as we look beyond our own borders. This conviction has led us to take steps during this past financial year to reinforce strongly the relationships we have with our German and Austrian colleagues. The Dutch economy lives largely on exports, and an open mind is critical to progress. We are convinced that our future prosperity needs borders to be brought down and not set up. The way we are reporting this year is different from what you have been used to. We believe strongly that stakeholders wish to be informed not only of financial performance but also of the broader impact that a company or organization makes (for instance its impact on staff and clients), and that they want this not through a variety of different reports but from one integrated report which places financial and non-financial performance aspects in their right context. We have made this clear during the past year, amongst other things in the context of the debate about the future of financial reporting generally. 8 PwC

9 With this Annual Report 2011/2012 we intend to put our words into practice, and provide you with better insight into how we implement our strategies and what the broader impact thereof is. This is our first step on the road to integrated reporting. At the heart of our strategy lie our clients and our people. Also in difficult times, it remains our ambition to continually exceed our clients expectations, to support them with high quality service delivery and innovative solutions, and above all to be there when they need us. We greatly appreciate the trust they have placed in us during this past year. This applies also to our people. They too can expect us to provide them with the support they need. We have again continued to invest in their talent this past year. Through coaching, learning on the job, our extensive learning and development programme, competitive conditions of employment, and the facility to work with colleagues in other Lines of Service, we aim to continue to be an attractive employer. In these difficult circumstances, our people act as our ambassadors on a daily basis, both at clients and in the market place generally. We are very grateful to them and we are fortunate to have them, together with the partners, as part of our firm. We also wish to express our appreciation to those colleagues who have left us during the past year. The success of PwC is determined, to a large extent, by how we are continually able to stimulate, challenge and encourage each other to combine the best in each of us with the knowledge and creativity of our colleagues, driven by the ambition that good can always be bettered. Furthermore, particularly for as long as the current circumstances continue, it remains critical that we continue resolutely along the strategic path we have set, focused on a flexible and robust organization that is able to adapt at a moment s notice to the fast changing market conditions. But, above all, the strength of PwC is, and will continue to be, the outstanding and highly committed colleagues who demonstrate more than 100% dedication day in day out by leveraging all the knowledge we have within our organization and continuing to exceed our clients expectations. As chairman, I can only say it is a privilege to be in a position to provide leadership to this. Amsterdam, 26 September 2012 Robert Swaak Chairman of the Board of Management PricewaterhouseCoopers B.V. Annual Report

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11 2011/ / / / /2008 Revenue Net revenue ( millions) Increase/decrease +4.3% -3.1% -9.4% -2.3% +7.1% Net revenue per person ( 000s) Increase/decrease -0.3% +1.2% -5.6% -5.8% +3.8% External revenue per Line of Service ( millions) Assurance Tax & HRS Advisory Total Results Operating profit ( millions) Increase/decrease -20.2% -14.4% +3.8% -16.9% +14.1% Profit after tax ( millions) Increase/decrease -21.9% -14.9% +2.8% -18.6% +16.7% Operating profit per Line of Service ( millions) Assurance Tax & HRS Advisory Management fee, salary and emoluments Available for distribution to partners ( millions) Average partner management fee* ( 000s) Increase/decrease -16.8% -7.4% +0.9% -14.8% +8.4% Average financing per shareholder at year-end ( 000s) Staff bonuses ( millions) Average salary cost per FTE ( 000s) Average bonus per FTE ( 000s) 4.9 ** Average headcount (in FTEs) 4,463 4,265 4,457 4,643 4,478 Partners Professional staff 3,323 3,132 3,249 3,389 3,281 Support staff * From the management fee, payments are made relating to items such as goodwill rights, pension contributions, social security and disability contributions, and life insurance premiums. ** Following a partial switch from variable to fixed remuneration, 2011/2012 is not wholly comparable with previous years. Annual Report

12 The Local Oversight Board (LOB) is the Board of the Local Oversight Board Foundation. It consists of six professional practitioners from the three Lines of Service plus an independent chairman. The tasks, powers and responsibilities of the LOB are set out in the corporate documentation and consist of supervision, (preliminary) advice and representation of interests. Report of the Local Oversight Board (LOB) Report for the year The year has been dominated by the weak economic climate. The financial markets are volatile, and the sociopolitical environment offers little solace in these uncertain times. Regulators, both national and international, are issuing new frameworks that are attracting significant attention from the auditing profession and other professional service providers. The economic climate has had its effect on our results, with modest volume increases being offset by severe competitive price pressures across all our businesses. The effect on results could not be offset by cost reductions. The increased volume was achieved almost entirely at our international clients. Private companies and the public sector have both responded to the economic climate by subjecting purchase of services such as ours to an increasingly high level of scrutiny. This further globalization of our activities does bear out the strategic decision we took to further strengthen our international positioning (particularly in Europe) by reinforcing the relationships with our German and Austrian colleagues. These above matters were all on the agenda at the year s regular meetings between the Board of Management and the LOB. Regulation and quality The auditing profession and the position of service providers such as ourselves have been fully in the national, European and global spotlights this past year. Regulators and supervisory bodies have issued often farreaching proposals affecting the manner in which we provide our services. The response from our organization has been focused on the need for an active dialogue with all stakeholders as to how confidence can be restored in financial reporting, coupled with an undiminished commitment to and investment in the quality of the services we provide, an issue which has been addressed regularly in discussions with the management board member responsible. This Annual Report has been put together on the broader integrated reporting basis, and it sets out clearly the way in which our organization is prepared to stand up to meet its responsibilities in this area. People The quality of the services we provide is determined, in the end, by the quality of our organization, that is to say, the knowhow and expertise of our people. It is gratifying to see that our investments in training, conditions of employment, staff retention (particularly in this uncertain economic climate), and tech nology have all resulted in a high level of engagement and involvement on the part of our staff. It is this involvement, right at critical moments, that determines the quality of the services we provide, and any initiatives and investments designed to maintain the quality of our people deserve our ongoing attention and support. This aspect has also been discussed with the management board member responsible. Looking ahead The social and economic developments will be challenging in the coming financial year. Economic recovery is not expected in the near future, and we will need policies focused on continuity, consistency of quality, and clarity. 12 PwC

13 We must press on with the investments we have been making in the quality of our services. Furthermore, in the current market situation, it will be important to reappraise our current business models to achieve structural reductions in the cost of our service delivery while not compromising on quality. Business transformation will be critical in maintaining the business at sustainable levels of profitability. This too was a subject of regular discussion with the management board member responsible. Management and organization There were changes to the Board of Management during the financial year. Walter de Zeeuw resigned as of 1 January His portfolios, Human Capital and Markets, were assumed by other members of the Board. We would like to express our thanks to Walter for his contribution to PwC NL. The Assurance Board has remained unchanged. On 1 January 2012 Diederik van Dommelen was appointed to the Tax & HRS Board and Jac Veeger stepped down. On 30 June 2012 Jan Maarten van der Meulen and Chris Meijnders stepped down from the Advisory Board and Ad van Gils and Martin Blokland were appointed. Composition of the LOB The composition of the LOB remained unchanged during the financial year. It consists of the following persons: Peter Tieleman (Independent chairman) Stan Beelen (Tax & HRS) Martin Blokland (Advisory) Peter Dams (Assurance) Maarten van Ginkel (Assurance) Bert Oosterloo (Assurance) Ron Unger (Tax & HRS) Meetings The LOB met a total of sixteen times during the financial year, including eight times with representation from the Board of Management. The LOB also held four conference calls. The Chairman of the Board of Management and the CFO were invited to all of the LOB s meetings, and other members of the Board of Management were invited to attend meetings at which their individual port folios were discussed. In addition, there was regular consultation and direct discussion with portfolio holders in the Audit, Remuneration, Compliance, People and Clients Committees (see page 176). Annual Report The Annual Report, consisting of the Report of the Board of Management, the Financial Statements, the Transparency Report and appendices, was discussed and endorsed by the LOB. The Annual Report reflects the significant effort put in by the entire organization to achieve high quality levels of service during these uncertain times, and this effort must be acknowledged. The LOB wishes to thank all PwC staff for their contribution. Amsterdam, 26 September 2012 On behalf of the Local Oversight Board Foundation, Peter Tieleman, Chairman Annual Report

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15 PwC in the Netherlands 16 About our Management Board Report 17 Strategic ambition 19 Strategic achievements 27 How we create value 41 Stakeholders 55 Governance and remuneration 63 Expectations for the future 69 Annual Report Report of the Board of Management 15

16 PwC in the Netherlands * 77 FTEs joined Advisory during the year as a result of two acquisitions. PwC NL is an independent organization PwC is a global network of firms that are committed to working together to provide a consistent level of quality service offerings to clients throughout the world. We, PwC Netherlands, as a member firm of this network are connected to PricewaterhouseCoopers International Limited (PwCIL). PwCIL does not practice accountancy or provide services to clients. Rather its purpose is to act as a coordinating entity for member firms in the PwC network (as further set out on pages ). The PwC network is not one international partnership or multinational company. The national legislation of most countries in which PwC network members operate prescribes that the audit firms of these member firms be independent and owned by local practitioners. Assurance Tax & HRS Advisory* Client service staff (in FTEs) ,790 1, ,000 1,500 2, / /2011 PwC NL has three core activities PwC NL has split its service offerings into three different areas of activity run from three discrete Lines of Service: Assurance, Tax & HRS and Advisory. Assurance focuses on the audit of information and processes, and provides assurance thereon. The most significant element of our Assurance practice is the statutory audit of annual financial statements. A smaller element is focused on the provision of assurance on process and numerical (non-financial) information and the on the provision of advice on accounting issues. Tax & HRS helps companies, individuals and organizations with their tax strategy, planning and compliance, and provides a wide variety of advisory services in the area of taxation. This Line of Service also has specialists in the area of Human Resources, providing advice on such matters as remuneration structures, pension plans, and crossborder staff exchanges. Advisory focuses on two specific areas. The first is to help companies and institutions with transformation processes arising mainly as a result of changes in strategies, business models, and/or information systems. The second is to provide advisory services in the area of mergers and acquisitions, from strategy determination right through to assistance with corporate integration. 16 PwC

17 About our Management Board Report PwC reports annually on the more important aspects of its strategy. This strategy is determined in consultation with our stakeholders. We have chosen this year for an integrated approach, based on the framework currently being developed by the International Integrated Reporting Council ( This framework sets out a number of reporting elements and these are reflected in this report, though we have opted for a different sequential order than that proposed by the IIRC. As a result of this integrated approach, the scope and extent of the report is different from last year. The definitions and reporting criteria have been changed slightly from the proposed framework of the IIRC in order to better match the wording we use in our strategy considerations. Additional explanation is provided where this may not be clear to the reader. For the quantative information, we have also included the comparative amounts from prior year. The information in this report has been tailored to PwC s activities in the Netherlands. Both the qualitative and quantitative information provided in this report relate to the financial year from 1 July 2011 up to and including 30 June All the quantitative information in this report has been measured, unless other methods of quantification are stated. We do not have automated systems for all the information provided (for instance, the CR information is based on a predetermined questionnaire), but we do collate all strategic information systematically on a quarterly basis using predetermined reporting templates that are completed by the departments involved. We apply the G3.1 Guideline issued by the Global Reporting Initiative (GRI) to the extent that this is applicable to our organization. The appended GRI Table sets out those indicators which we have identified as relevant for our stakeholders. For each indicator, the table refers to the page where further explanation is provided. G3.1 applies differing application levels. For this report, we have applied the so-called B+ application level, which means that the report includes all matters that the GRI requires for B-level reporting. The + refers to the level of assurance provided by our external auditor. The brief to our external auditor was to provide a reasonable level of assurance on the entire report. The external auditor s assurance report is included on pages This includes details of the work performed together with certain recommendations as to how future reporting could be further improved. Annual Report Report of the Board of Management 17

18 Frans Gielen (Tax consultant) and Sytso Boonstra (Member of the Board of Management). Peter van Kampen (Advisor, Chairman of YoungPwC) and Robert Swaak (Member of the Board of Management). A permanent transformation process Our clients who operate cross-border are working in a world that is constantly shifting. They face severe competition, opportunities in upcoming economies, and often fastchanging international and national regulation. The economic environment and prospects are uncertain and largely unpredictable. They are under pressure to reduce costs while, at the same time, being expected to remain flexible and ensure that their business processes are made more and more sustainable. Shareholders and other stakeholders are putting pressure on these international companies to reflect current societal expectations as regards the location, structure and organization of their value chains. They are therefore continually searching for the best production locations (which may not necessarily always be the cheapest), for the best structure for their procurement, and for the most attractive and stable conditions. In short they are looking to optimize their value chain within the prevailing circumstances. Given the significant global dynamics, this is often a never ending process. In our Value Chain Transformation group, we have pulled together a diverse group of specialists, from both Tax & HRS and Advisory, and they are helping clients through these transformation processes. They advise on changes regarding the location and structure of their clients value chains, the structure and management of the business processes, and the most suitable legal and tax structures. We acquired supply chain specialists, TrueEconomy Consulting, during the year to strengthen our service delivery in this area. 18 PwC

19 Strategic ambition Annual Report Report of the Board of Management 19

20 Our strategic ambition is to be the leading professional services firm. We have identified four pillars to our strategy to get us there: Clients, Growth, Civil society and People. Our goal is to differentiate ourselves by providing services that enable us, as committed auditors and advisers, to help address the major issues that society at large is currently facing. The leading professional services firm Clients Growth Civil society People Recognition through: Outstanding relationships High impact Market leader in both size and reputation Significant level of social relevance Employer of choice for top talent 20 PwC

21 Clients What stands at the heart of this strategic pillar is the need to have a real understanding of our client the client who is looking for a tailored solution not a standard one. Our clients are having to deal with real and complex issues in an uncertain environment. They expect more from their auditor, tax professional and adviser more than just a technical solution; they are looking for a service provider who can see things through their eyes, someone who shares knowledge and can implement solutions, and who is prepared to invest in the relationship and understands the social context of the client s business someone who can see the short and long term aspects and bring them together. It s not just a question of know-how, but also of behaviour. This is what we call the PwC Experience. We are continually looking to interact with our clients and other stakeholders, and we invest a great deal of energy in sharing knowledge (see pages 24 and 45). We seek feedback from clients on every engagement - before, during and after (see also page 29). Growth We define growth not only in terms of revenue and profit, but also in terms of reputation. We seek to differentiate ourselves through our solutions, our approach, and our contribution. For four consecutive years (since 2008), PwC has been ranked the largest professional services firm in the Netherlands in terms of revenue. This past financial year, we also achieved the number one ranking in terms of reputation (see page 34 regarding the Brand Health Index). Growth can happen organically, or it can happen through acquisition. During the past financial year, Advisory has made two strategic acquisitions: Proxyon (a specialist in financial closing processes supported by SAP) and TruEconomy (a specialist in supply chain management). These have enabled Advisory to further improve the quality of clients processes in these areas. Clients People and Teams We focus on client value We put ourselves in our clients shoes Value Ownership & Accountability We focus on enhancing the value of our people We put ourselves in each other s shoes We share and collaborate Robust dialogue We share and collaborate We invest in client relationships Trust-based relationships We invest in teams and relationships Annual Report Report of the Board of Management 21

22 In these times of economic slowdown, the strategic pillar of Growth inevitably includes cost reduction. Using our strategy as the yardstick, we cut only those costs that do not support our strategy. Many initiatives go ahead, though perhaps more muted and geared to the times we live in. In addition we are continuing to make our business processes more efficient. An example of this is that we are now having some of our more straightforward and standard processes handled by the PwC member firms in India and South Africa, and we are looking critically both at staffing levels and at mobility within our organization. Civil society Combined product/market offerings When developing new service offerings we identify what their relevance is to society, by which we mean that any new such offerings must be designed to contribute to the resolution of issues that are relevant to society. Social relevance is therefore the driver behind innovation and thereby also behind the development of our new product/market offerings. In recent years, we have undertaken several large projects in the education and healthcare sectors, we have helped companies which found themselves in acute financial difficulties, and we have helped make fiscal processes more transparent. Some of the work we do is aimed specifically in the areas of corporate responsibility and sustainability. The difference is that we have explicitly highlighted social relevance as a discrete requirement of any business case, and this drives our focus. Social relevance is required to be an integral aspect of every service we offer (similar to aspects such as quality) - something that every PwC person has in their genes. We have therefore highlighted a number of areas in which we will be intensifying and further developing our service offerings. These include, for instance, integrated reporting (see page 48) and advisory services in the areas of corporate supply chain sustainability and compliance process improvement (see page 33). Integration of CR in our day-to-day work It goes without saying that our auditors, tax professionals and other advisers are expert in what they do. Clients, business partners and stakeholders appreciate us for our technical expertise. This is our trademark, and our primary goal is to protect this. As we focus on social relevance, we need to be in a position to see the bigger picture and our people must be in a position to engage fully in the debates about the civil society issues that, directly or indirectly, our clients face. Think here, for instance, of transparency and governance and the ongoing debates about variable remuneration and pension issues. Our professionals are fully equipped to participate actively in these debates. In our training and professional development programmes and in other arenas, we focus on social relevance and on the concept of responsible leadership forming the thrust of our management development programmes. These concepts also involve the need to be able to see the bigger social picture, and are therefore inextricably linked to the concept of social relevance. 22 PwC