Report of the Supervisory Board
The past year
Last year marked Hydratec Industries N.V.’s 25th anniversary as a listed company. We celebrated this milestone with the Management Board, employees and their families. 2022 was also a year in which economic and social developments created uncertainties. The year was characterised by supply chain problems, limited availability of materials and rising procurement prices and wage costs that could not be directly reflected in sales prices. Despite these challenges, Hydratec Industries N.V. achieved the highest net profit in the company's history in 2022: €15.8 million, compared to €15.1 million in 2021. Consolidated operating profit in 2022 was €21.8 million, compared to €22.0 million in 2021.
Industrial Systems and High-Tech Components posted positive operating results. They were both impacted by the effects described above to a greater or lesser extent during the year. At Industrial Systems, it led to a limited decrease in the operating result. The operating result was higher at High-Tech Components.
Annual report
We are pleased to present the 2022 annual report of Hydratec Industries N.V. prepared by the Management Board, which includes the financial statements. These financial statements were audited by Ernst & Young Accountants and were discussed with the Management Board on 27 February 2023 in the presence of the auditor. We therefore believe that the annual report meets the requirements of transparency and constitutes an adequate basis on which the Supervisory Board can account for its supervision. We propose that the financial statements should be adopted, the dividend proposal accepted and that discharge should be granted to the Management Board in respect of its management and to the Supervisory Board in respect of its supervision.
Composition of the Supervisory Board
The personal information about the Supervisory Board can be found here. The Supervisory Board’s profile is published on the company’s website.
The members of the Supervisory Board have varied backgrounds and experience. One Supervisory Board member has held various positions in business during his career, finishing his active career as a member of the Management Board and CEO of a listed group of companies in the manufacturing industry. The second member of the Supervisory Board has extensive experience as an entrepreneur and as a member of various companies’ supervisory boards. The third member of the Supervisory Board is an experienced entrepreneur who was furthermore closely involved for many years in the development of Hydratec Industries in its current form.
The Supervisory Board considers that this variety in terms of experience and background produces sufficient diversity. The current composition is a good balance between the required skills, relevant knowledge and experience, allowing the Board to operate critically. The composition of the Board meets the legal requirements on gender diversity. Mr E. ten Cate does not meet the independence requirements as described in the Corporate Governance Code. The board as a whole does meet the requirements for independence. This enables us to properly perform our statutory duty of supervising and advising the management.
Supervision
Each month, the Board is informed of the operational course of business within the company by means of a financial report with explanatory notes from the Management Board. We also receive a quarterly comprehensive report on the developments of the previous three months and on the progress and achievements in relation to the annual budget and goals. Conclusions and action points are formulated and addressed at the next Supervisory Board meeting. Every year, we discuss the strategy for the coming years with the management boards of each segment during a strategy day. The Supervisory Board met the Management Board six times in 2022 according to a fixed schedule, and all members of the Supervisory Board were present at each meeting.
The risk profile, risk management system, strategy, activities and measures taken to mitigate these risks were reviewed during the year. Finally, the effectiveness of the design and the operation of the internal risk management and control systems were evaluated.
In the Supervisory Board’s opinion, Hydratec’s overall risk profile has declined because the Management Board has been able to mitigate the negative consequences of developments in 2022 to an acceptable level, as described in the risk paragraph in the annual report.
Prior to the General Meeting of Shareholders on 26 May 2022, the Supervisory Board discussed, without the presence of the Management Board, its own performance, the performance of the Management Board (both as a whole and of the individual members) and the remuneration of the Management Board. In evaluating their own performance, various subjects were addressed, including the time and attention devoted by all members, how the supervisory function is carried out, the division of roles and the composition of the Supervisory Board in terms of independence, expertise, competences and experience. The Management Board was evaluated in a meeting between the Supervisory Board and the Management Board. Following the evaluation, the Supervisory Board concludes that the separate meetings of the Audit Committee led to the desired result. If required, the Board will meet before the start of the meeting when the Management Board is not present.
Audit Committee
The Audit Committee consists of Ms Sanders and Mr Veenema. Both committee members are experts in financial reporting or auditing of financial statements. The committee monitors annual figures, the statutory audit of annual figures, the administrative organisation and reporting process, fraud, cybersecurity, claims, the results of internal control and risk management systems, auditor independence and the auditor selection process, and periodically holds talks with managers and other employees of companies to gain a clear image of the developments in the market and in the companies and segments. Hydratec does not have an internal audit department or function, which has to do with its size and approach. The committee met on five occasions in 2022 according to a fixed schedule, and all members were present at each meeting.
Hydratec has a culture of entrepreneurship where employees’ personal responsibility, independence and ownership come first. It is a widely held belief within the organisation that this ensures optimum risk management.
However, opportunities have been identified to apply the knowledge and experience available within the organisation more broadly to the effectiveness and efficiency of the established control processes. Audits and reviews of internal control and risk management are carried out periodically at segments by the Group. They address identified vulnerabilities in risk management. The results are reported to the Supervisory Board and the Audit Committee. The Supervisory Board, Audit Committee and Management Board check annually whether adequate alternative measures have been taken.
At the meeting held on 26 May 2021, EY was appointed to audit the financial statements for 2021, 2022 and 2023. The Supervisory Board held consultations with the external auditor three times in 2022, once without the entire Management Board. The external auditor’s work was assessed and the audit plan approved.
Composition of the Board of Directors
No changes took place in the Management Board of Hydratec Industries N.V. in 2022. Mr B. F. Aangenendt is CEO, Ms E. H. Slijkhuis RA is CFO. Ms Slijkhuis’ term of office expired in 2022. The Supervisory Board reappointed Ms Slijkhuis at its meeting on 29 September 2022.
The Supervisory Board compliments the Management Board, the management teams and all employees for the outstanding results and is grateful for their commitment, motivation and ambition in 2022.
Amersfoort, 16 March 2023
Supervisory Board
E. ten Cate (Chair)
M. E. P. Sanders (Vice-Chair)
P. Veenema
