Centric Public Report 2020


Management report

In 2020, a solid foundation has been laid for a future-proof Centric. Despite the impact of corona on the various markets, profitability remained stable and our IT services to customers continued almost unimpeded. In this board report, the board members discuss the most important developments of 2020 and talk about the course for the coming years. How does Centric look back on 2020?

'Centric is a great Dutch brand with an important role for Dutch society'


Louis Luijten

Chairman of the Board

INVESTING AND INNOVATING In 2020, Centric founder Gerard Sanderink approached me about joining the board of the company. I have enormous esteem for him; he has a keen eye for business. Gerard wisely realised that it was in the best interest of the company that he take a step back, which is why I have taken over his role as chairman of the board. Gerard Sanderink still remains our sole shareholder. Accountability and reporting are well arranged in the articles of association, via the shareholders meeting, as it should be.

Governance We have learned that we need to be more open and transparent towards our stakeholders and that we need to approach the market more proactively. Meanwhile, customers see that there is a proper, solid governance structure in place that works well. This is particularly relevant in the sectors in which we are a strong player. With the arrival of Peter Mous, the non-executive board is now complete. Henny Luijrink, who filled the CEO role on an interim basis, transferred his responsibilities to Johan Taams in 2021. My remit: strategy & agility My first impression is that we have a lot of people with their heart in the right place.

We are lagging behind in terms of innovation, however, because we have not been investing enough in this. Gerard Sanderink’s request was that I direct the focus towards renewing the strategy and adapting the company to a rapidly changing environment. Because Centric is a wonderful Dutch brand with an important role in Dutch society, I was happy to take on this mission.

Financial and commercial performance Innovation has lagged behind, and this is reflected in lower sales and a narrowing profit margin. In addition to its commercial aspect, innovation is also important if we, as an employer, are to remain attractive to talented professionals. Those indicators need to start pointing in the other direction. That said, the company does not have any borrowed capital, and both the solvency and liquidity position are very healthy.

HR policy It all starts with people. With a lack of innovation you risk losing the right, creative people. This has put us in a downward spiral: when people feel there are no prospects, they leave. And it is human capital that determines how successful you are, from management and the technical talent to the people who build the products. As an employer, we want to become attractive once more by doing exciting, appealing new things and by giving people the space to develop.

‘Human capital determines how successful you are’

A look to the future

Centric is in a good position, the finances are healthy and we are valued by our customers. We also have a lot of quality people working for us. But the question now is where we want to be in 2025. We must address our weaknesses and build on our strengths; then we can really make a difference. We are now in the process of making choices and determining what to invest in. In 2020, we identified five strategic KPIs: 1. Reset our strategy 2. Make Centric an even better place to work 3. Work hard to keep enthusiastic and loyal customers 4. Regain our reputation as a leading it-company 5. Drive high performance Together with many of the directors, we are now working hard on our new strategy. We will first work this out in detail and roll it out properly within the company. With such a process there is no finish line however: every year you have to check whether the underlying principles still apply. We need to catch up, then we need to find a way to regain our competitive edge. The company absolutely has potential, but also faces challenges internally. My impression is that the company has been managed for the short term, and this has resulted in a feeling of resignation and in a lack of enthusiasm. As I said, it starts with people, so this is something we are going to change. It is essential that we once again animate and inspire our people, and I have every confidence that, with the current team, we will succeed in this endeavour.

‘Proud of how we have adapted to working from home’


Henny Luijrink

CEO until september 2021

THE FACE OF 2020 In 2020, we laid the groundwork for future-proofing Centric. This was also my task when I took office as CEO. We now have the basis for the direction we need to take for the sake of our company’s future. Profitability was reasonable, but we need to keep investing.

And that is exactly what we did in 2020, invest – a lot. We have embarked on a course that should lead to our applications being fully available in the cloud by 2023. Our customers demand this: 24/7 availability is the new standard.

We also critically looked at how we can optimise our own cybersecurity: information security simply has to be effectively arranged, especially in a company like ours. We have also chosen to centralise procurement, to get a better overview of and insight into these activities. This encompasses aspects like contract management and procurement policy, but also the implementation of a good ERP system that enables the creation of connections between HR, Finance and Marketing. This contributes to efficiency and ensures transparency and real-time management information.

Partnership with Microsoft In 2020 we migrated one data centre to Equinix in Amsterdam; two more will follow in 2021. In 2020, we entered negotiations with Microsoft, the leader in IT in the Netherlands, with the aim of forming an extensive collaboration. These talks resulted in us signing a multi-year partnership agreement in 2021. For us, an intensive partnership with Microsoft was the logical step, both for our own company and for our customers. We are, to put it mildly, very pleased with this development. Because we are constantly looking at needs and wishes in the area of infrastructure, we are not excluding other parties like Amazon or Google for the future. Thanks to our partnership with Microsoft, we can now jointly conduct pilots at customer locations. That means being the first to get there and leading the way rather than following.

Centric Academy We have completely revamped the learning environment at our Centric Academy. All training and learning modules are now online, so that our people can develop and can earn their certificates. Especially now, at a time when we are working a lot from home, this offers ideal learning opportunities. We will also continue to work on Learning & Development. We feel it is important that we focus on the professional and personal development of our people at all times.

'I am very happy to hear from customers that they experience that peace has returned'

Smart Working From September, our programme with which we will be shaping our working method for the future will get under way. We call it ‘Smart Working’. It is a great step given that we have been working remotely for some time already. Although, for everyone, working from home took some getting used to, it also offers opportunities and advantages, such as less travel time, high productivity and a pleasant work-life balance. Over the past period, we have learned that we can collaborate very effectively in a different way too, which is why we are opting to combine working from home and working at the office, i.e. Smart Working. To support this new way of working, we are adapting the layout of our offices and training managers in a new way of leadership. Employees will receive a daily allowance and a home-working allowance and choose a division of work at the office and remotely that is right for them. We will implement this new way of working in the second half of 2021.

The technology is already fully in place, some offices have been closed or scaled back, and the floors of our head office in Gouda will be adapted in the near future. We are creating wonderful meeting places where you can sit comfortably with a good cup of coffee. This internal transition is currently in full swing. I would like to take this opportunity to express how proud I am of how our people have so quickly adapted to working from home in response to the coronavirus. Our services to customers and our internal projects have hardly been affected by this.

Our colleagues outside the Netherlands We are significantly expanding our nearshoring activities in Romania and Lithuania. Centric focuses on cybersecurity, infrastructure, software development, artificial intelligence and virtual and augmented reality. In the Netherlands, there are insufficient resources of the required quality available for this; the job market is very tight. This is why we make use of the expertise in these other countries, where there are sufficient well-trained developers, engineers and testers who are happy to work for Centric. I would like to pay a big compliment to all our colleagues outside the Netherlands: they have also adapted very well to the new working method the pandemic forced on us. As with our people in the Netherlands, with them too I perceive the intrinsic motivation to create calm, bring focus and get the most out of this together.

Changes on the Board To be honest, it has been quite a difficult year for Centric in terms of publicity. There is no denying that the negative coverage has put a dent in our reputation. I would like to express my appreciation to our founder Gerard Sanderink, who, in the interest of the company, has stepped down. Everyone is handling this with utmost professionalism inside the company. And I am very happy to hear from customers that they feel that calm has once again returned.

The commercial result

As Patrick also indicates in his analysis, sales have lagged somewhat. On the other hand, we were able to add several new, attractive customers to our portfolio. We will be placing additional focus on growth in sales and margin, which means providing even more added value to existing customers and increasing our efforts to come into contact with companies and organisations who are not yet doing business with us.

My task was to give our people assurance about their jobs and to ensure a financially stable company, and of course to help my successor Johan Taams get off to a good start as CEO. I was happy to advise and assist him in the period leading up to him taking over my duties in August 2021.

‘Knowledge is our

company’s

most precious

asset’


Johan Taams

CEO

FOCUSING ON THE CUSTOMER I feel I am in an enviable position in that I can continue to build on the solid foundation that has already been laid. That new foundation was also needed. We have set five strategic goals, which Louis also discussed. For 2021, we aim to adjust our strategy and bring our governance and leadership team into alignment with this strategy. Collaboration starts with language and structure. That also means making choices, applying focus and putting our customers first. Making choices also entails determining what we are good at and what we want to be.

We will be distinguishing ourselves more based on our knowledge of the processes and systems within the public sector, retail and financial institutions. In-depth market and process knowledge is truly our company’s most precious asset. That knowledge is in the heads of our employees. They have worked hard to bring us to where we are today, and now we will be giving them what they need to take the next step. If we continue to invest in our employees and our customers, we will have a golden future; of that I am convinced.

The best employer We will be focusing more on employee satisfaction and continuously looking at what we can do to improve even further. We will also invest more in employee development. This is essential given that developments in IT are moving at lightning speed. Gone are the days of ones and zeros: these days it is all about insights at customers and using new technology. That is why we want to build up our competencies not only in the Netherlands but in all ‘Centric countries’ and make this knowledge and these insights available to everyone. As Henny said, our infrastructure and online work environment are ready to accommodate this.

Location no longer relevant Coronavirus has shown that our physical location is irrelevant. Romania and Lithuania were and are an integral part of our proposition. We are seeing the emergence of more and more collaborations and exchanges, of knowledge being shared. That is something we would like to encourage. By focusing on modern technology, knowledge sharing, innovation and collaboration with partners, we become even more attractive as an employer. And that is important, because good people are crucial for translating customer wishes and requirements into technological solutions. For this, as a Centric employee your physical location is irrelevant.

'We want and need to be continuously concerned with what motivates our customers and how we can help them with their IT issues'

The best customers At the best employer you work for the best customers. Customer focus is a very important matter for us. We want and need to be continuously engaged in determining what moves our customers and how we can help them with their IT issues and business challenges. This we do by engaging and conversing with them more extensively, through our service and sales channels, but also through market research and our marketing activities. One Centric With the new strategy, a culture that focuses on personal development and customer-oriented working, we want to raise our performance to a higher level. To do this, we need to adapt our processes and systems so that we are all working in the same way. With this approach, we ensure a consistent story within and outside the company, enabling us to become a more powerful, identifiable brand on the market. We do this not by revolution, but by evolution – through a process of continuous improvement. People can and even should make mistakes, as long as they learn from them. And we take those lessons to heart so that improvement becomes an iterative process. I also call that being agile.

My role is to ensure that we speak the same language along the way and collectively stay focused on our shared objective. We need to cherish our most precious assets and become even more of a coherent entity. With around 3700 employees, Centric provides customers in various markets with a very broad portfolio, doing so from several European countries, and yet always as one Centric.

‘Because we are a healthy company, we are in a position to invest a lot’


Patrick Rosengarten

CFO

ABOUT THE RESULTS To start with our figures for 2020: sales came in at 437 million euros, the net result was 14 million euros and the solvency ratio was 43%. Although sales were 9.9% lower, profit and the underlying margin were higher than in 2019. The result for 2020 was achieved with 3,684 FTE, of which 1,125 FTE work outside the Netherlands. Without placing all the blame with coronavirus and its consequences, we did suffer from this: we were faced with a drop in demand from existing customers, especially at Professional Staffing. Also, some customers, such as in retail and managed services, put their investments on hold. Furthermore, selling to new customers was more difficult than usual: we value building relationships and we were not able to do that in our preferred manner.

We are the market leader in the public sector and this will not change. We are investing heavily in solutions for local councils and other government bodies, especially by migrating products to the cloud and making them SaaS solutions. We also see a stable line in the financial sector, where, in addition to processing payment transactions, we also provide workplace management for a number of large financial institutions. For Centric Pension and Insurance Solutions, 2020 was a year of transformation, a year in which a new target platform was put into use and the organisation was restructured. In retail, the third sector in which Centric is strongly represented, we have seen a temporary decline in sales due to the shops being closed as part of the lockdown measures.

sales

0

million euros

net income

0

million euros

solvency

0%

No external financing Centric has been a healthy and stable company right from day one. This can be clearly seen in the key figures in our annual reports and from the fact that for years we have had no external financiers. Of course there are points for attention, aspects that we are actively addressing. For the coming year, for example, we will focus on growth in sales and on investments in innovation with a view to staying ahead.

No government support requested Because the decline in sales as a result of the pandemic was not too bad, as a financially healthy company we have not applied for government support. We owe our good results in 2020 to the fact that we have used our resources sparingly and that, despite the unprecedented situation, we still achieved reasonable sales with a good margin.

Dividend Centric has followed a conservative dividend policy in recent years. This resulted in a very high solvency ratio of around 60%. There was also the cash pool construction, which we will talk more about later in this annual report. A dividend of 80 million euros was paid in 2020, which means that Sanderink Investments’ position in the cash pool has decreased by the same amount. The remaining amount of 40 million in the cash pool will be reduced to 0 over the next three years. At 43%, our solvency position is still excellent. My role in the financial domain I see it as my task to place responsibility as low as possible in the organisation. This way, people know exactly what their task and role is. Having this sort of clarity works, and it ensures greater engagement. This does mean, however, that management information must also be available at that same level: this puts you in the best position to manage what you need to manage.

Naturally, I monitor and pursue this closely. My role is to ensure a financially healthy company so that our employees, customers and stakeholders look to us with confidence and see us as the reliable, stable partner we are.

'In the financial domain I want to move towards a uniform process with short sprints, in which we continuously think about optimisations’

Outlook

For me, 2021 will be all about exceeding our goals of returning to growth and healthy profitability. We want to do this by retaining what’s good and acquiring new customers in the markets where we add a lot of value with our knowledge. We continue to invest in products on the customer side, but also at the back end, by optimising and improving our core processes, for example, and by simplifying systems (CRM, ERP) and bringing these into better alignment. Because we are a healthy company, we are also able to invest a lot. What’s more, this is really essential to ensure that Centric remains future-proof.

Elsewhere in this report, the other board members talk about our strategy programme; the direction I have been describing arises from this update of our corporate strategy. We have intensive, amiable contact on this matter and together we make choices concerning markets and possible acquisitions.

‘Centric is the translator between technology and customer reality’


Freddie Veltmaat

CTO

NEW TECHNOLOGY & SECURITY As CTO, I don’t just look at the technology at Centric, but also at the general sentiment of the people working here. After all, we run this company together. My domain must add value, both for our own company and for our customers. Together we standardise and streamline where possible and we learn from each other along the way. We show our customers the way so that they don’t get lost in the endless possibilities and can make the choices that best suit their situation.

We see two major social trends in IT. The first is a widespread desire to get software and IT infrastructure into the cloud. That said, it is better to run certain applications on a local server, or in a hybrid cloud, i.e. a solution that combines a private cloud and a public cloud.

Technology is developing very fast, and I see uncertainty about this among customers: it is difficult to keep up with it all. And that is why it is so important to understand their actual questions, their concerns and their objectives. Centric is the interpreter who stands between the technology and the customer’s reality, not as a salesperson but as a partner. We only succeed when we make our customers more successful in their own business or industry.

With new technology, there is always the risk of teething problems, and so waiting a while is sometimes the better option. Furthermore, new technology requires investments. My job is to make choices and to explain to the company and customers why something is really necessary. Technology is a means to an end; this way we bring everything back to human dimensions. So, apart from the technology itself, not much has changed really: our customers want to be taken care of and we want to provide them with value, in an economically responsible and adequately secure manner.

'It is my job to make choices and to explain to ourselves ánd customers why something is really necessary'

Build securely, use securely The second trend is that the digital world is becoming increasingly complex and so less secure. Where in the past a firewall kept most viruses out, this is no longer the case. Even an eight-character password – still the standard for many organisations – can be cracked within minutes. As a technology company and business partner, our job is to guide customers through these developments and help them operate securely. In this regard, creating resilience through social awareness training in this area is very important. We can build secure software, but the customer must also use it securely and we are more than happy to help them with that.

How Centric is responding to these trends In 2020 we laid the foundation for a future-proof course, also in the area of technology. In his review of 2020, Henny talks about our partnership with Microsoft, for example. Thanks to this partnership we can provide our customers with better cloud solutions. We are going to the cloud shoulder to shoulder and working together on innovations. The connections between applications are better aligned and, thanks to modern technology, also more secure. Internally, we will continue to direct attention to our security policy to increase employee security awareness. Information security is largely a matter of human behaviour. A phishing email is harmless in itself: it only becomes dangerous when someone clicks that malicious link.

Cyber Defense Services unit intregrated into the organisation In Centric’s last annual report, we talked about the new Cyber Defence Services business unit. We have chosen to integrate this unit into our organisation and have it contribute to our own security processes. This ties in perfectly with the partnership with Microsoft. IT security is much more than just having an up-to-date virus scanner: you really need to be on top of it 24/7.

An agile Centric In 2020, we laid a good foundation in our company for creating innovations through sprints. This form of agile working has been taken to the next level, making it more scalable and predictable. What is more, this new way of working is more flexible and more structured, allowing us to scale back faster in the event of problems and ensuring less time is lost. And because this approach makes the value we add more transparent, it also allows us to involve the customer more in the process. Despite the fact that the teams are working remotely and our people are still learning the ropes with this way of working, even now we are working more collaboratively and effectively.

Outlook

In 2021, we will of course continue to build on our partnership with Microsoft. As well as migrating more applications to the cloud, we will be jointly developing new products and services.

We will also take a critical look at the reorientation of our strategy and determine in which areas we will invest. And in everything we do we will always keep the ultimate objective in mind: having an even sharper focus on matters that are relevant to the business of our customers.