Netcompany Group A/S (NETC) Earnings Call Transcript & Summary

Yes. On behalf of Netcompany Group, I will warm welcome you all to this Annual Group Meeting 2020. My name is Bo Rygaard, and today, I will be the representative of the Board of Directors as I'm the Chairman. And from the executive management, we have 2 representatives sitting up here next to me: first one is our CEO, Andre Rogaczewski; and to the left-hand side, CFO, Thomas Johansen. I will later on present the Board of Directors under Item 5 on the agenda. 2019 has been an exciting year for the company as a group and also the first full year as a listed company. The share price increased by approximately 44% during the year. And in the end of '19, Netcompany had more than 4,300 registered shareholders. Approximately 35% of the share capital was held or managed by the 5 largest shareholders and approximately 58% of the registered share capital was held by shareholders outside Denmark. And then some few remarks from my side in terms of investor relations. Netcompany seeks full transparency and open dialogue with all investors and analysts. We strive to ensure equal, timely and adequate information for all investors. And with these short remarks from my side as an opening, I would like now to hand over to our Attorney at Law, Thomas Holst Laursen, who has been appointed Chairman of this general meeting by the Board of Directors. Once again, welcome to all of you, and Thomas, please take the stage.

So thank you very much for the appointment. As it's the -- now the tradition in Netcompany, we will keep it rather informal. But we will be very sure that every single little rule in the book is well adhered to. The general meeting will be about the management's presentations, the proposals that are supposed to be resolved by and giving the opportunity for shareholders to comment and ask questions. The first role of a Chairman of a meeting is to ensure that the meeting is legally convened, that all the formalities have been adhered to, and I have been through all the notices, the papers, the time deadlines and so forth. And today, the meeting is legally convened and we will proceed with the meeting today, unless anybody objects. Thank you. With that, we have 54.1% of the shareholders represented here today either by in the room or with the votes that has been cast before the meeting today. There will be, as I said, well, opportunity to take the word. We have a table here to my left with Tine, our General Counsel in the company, and she will be able to register you and make sure that you are given the opportunities to speak and comment when you want. I will make sure that the appropriate times are selected. For the purposes of personal data and so forth, please go to the company's website where you can find the company's privacy policy. We have the press here today. They are more than welcome, and -- which is common in listed companies that they come and participate. For the purposes of voting, if any shareholders should so require today, we have an electronic voting mechanism. This is called Lumi. And if and when it becomes relevant today, we will go through it in more detail. So first of all, if you, as a shareholder, do not have the mechanism, you can download it, follow the instructions there. You get the router there and then you download it. We will be hopeful if it becomes relevant. The agenda for this year contains the following 9 items, and I will not stand here and read them out loud. We will come to them through the meeting as we go along. What is the tradition is that first, management and the Chairman will present the report, the 3 first proposals. So we will now hand over the word to management to go through the Board of Directors' report on the company's activities. And in that, we will also deal with the presentation and approval of the company's annual report as well as the resolution on the distribution of profit. So items 1 to 3. In addition, Bo Rygaard, our Chairman, he will give a few comments about the company's corporate governance at the end. After that, there will be ample opportunity to comment and ask questions. So with that, I give the word to Andre.

Thank you, Thomas. Thanks. Yes, it has, indeed, been a exciting 2019 and Netcompany's today a big Northern European player. We are now having a turnaround of DKK 2.5 billion and an approximate growth of around 20% in 6 countries and 2,500 employees. And 2019 has certainly also been a year where our message about delivering IT systems, delivering IT projects and IT value at the time, at the budget and within the required quality has been tested fully because it has truly been a year where Netcompany has been delivering some of the most complex IT systems and engagements ever seen in the countries that we are present in. I will go into more detail about that in due time here. So our revenue that has increased from around DKK 2 billion to DKK 2.5 billion and a company that actually delivers what it has promised all the time. You can see that also in the cash conversion figure that is high, over 90%. And that can only be done if and when you always deliver what you promise to your clients. In this business, it's very important to -- when you engage with customers, to make sure that every delivery is timely put into a system where the chances of delivering value are high and that you get in with a product at the required quality, and that ends with the customer actually paying for the services you provide. A lot of the things we do while the customer needs to be satisfied in order to keep on doing business with you and also in order to, well, pay the bills. And when we look into what has happened in the public space, we divide our business into 2 main areas: the public; and the private space. We've won a considerable amount of new contracts. I don't think it has -- I think most people have found out that we actually won Digital Post. It's a huge contract. It's a great infrastructure project for an entire nation where our Digital Post is an important component in the way that we communicate. We've also anchored ourselves very well into municipalities, both in terms of KOMBIT, which is a company assembling municipalities in Denmark, but also addressing individual customers. And finally, we've also won a great engagement with the Danish Police Force. Now I will not go into details in all these cases, but I think the most important point to make here is that these systems and these contracts are of very complex nature. And over the last 2 to 3 years, we have shown 2 things: one, we can actually win these contracts; and two, more importantly, we can deliver them. And that has made the company complete in the sense of the IT disciplines that we actually are able to deliver. It's not a question of whether we are some of the best in only administrative systems or we're some of the best in real-time systems, we can actually do combinations of that. And to put it simply, we are very, very good at delivering society critical systems and that's very, very important and very important fact to mention here. And that has put Netcompany on the map as one of the most visionary, but also one of the most stable vendors when it comes down to delivering value. Good news are also that we have a great deal of new contracts in the private space. We see a market where private customers are more and more willingly engaging into projects and engagements where the entire IT stack is changing, and where we are addressing more than just the front-end systems, where we're also addressing the very core systems of private businesses. And yes, that is complex. Yes, it's challenging. However, this is also where the long journeys with customers are to be found, and this is where the real value is created in many of the big private customers, right? And here, we have a couple of examples. In the U.K., we're delivering a switching program to DCC, Ofgem utility company. And in Denmark, we're delivering a complete modernization of one of the largest insurance company's IT stack and services -- IT services, replacing the core mainframe systems. So we're definitely well positioned to engage with private large customers also on the more complex journeys and in business-critical areas of their businesses. And looking at the employees, which, to put it simple, is the most important resource in this company. Now we can talk about customers. We can talk about types of engagements. We can talk about the company being complete when it comes to technical disciplines. But at the end of the day, the employees are the most important part of the company's business. The average employee age is around mid-30s. And we increased the average number of FTEs to around 2,468 in Q4. Now most of the employees in Netcompany, as it has been the case for over the last 20 years, they are client facing. And that means, not necessarily that they're sitting in client meetings all the time, but they are definitely delivering IT systems to clients and delivering end value to clients directly. So we don't have many functions in the company where people are not engaged with delivering some concrete value to a concrete customer. So the nonclient-facing proportion of the company is only 6.9% -- sorry, 6.5%, and we actually intend to decrease that to around 5%. And maybe most importantly, when we're looking at all the people that we hire and many of them are very young people, 8 out of 10 people still come from universities, we can see that the satisfaction of the employees is consistently very, very high. We have a high level of employee satisfaction, and that is very, very important for us because that attracts even more talented people. And with talented people, you can create even more value for customers and engage in even more exciting projects. And when you do that, you get into this positive spin, and you can actually attract even more talented employees. So it's -- I'm very pleased to see that, that has been the case over 2019 and that, that development has continued into 2020. And Looking at Netcompany from an international perspective, it is no secret that we went into different countries. We've done it with the approach of getting a strong footprint and building that out to be a strong hold in the various countries that we are present in. Firstly, in Norway, where we started 3 years ago. Norway is now a complete country in the sense that all tools, methodologies, the way we approach customers, the way we deliver is very much the same as in Denmark. We have a strong pipeline there, and the awareness of us being there is coming up to a level that reminds of Denmark. Now we expect increasing margins in Norway, and we will definitely target larger projects there, take on engagements similar to the ones we have in Denmark. So that's the plan. So we are very much in a good shape there. The numbers are not exactly the same as in Denmark, but compared to the rest of the Norwegian market, these are actually very, very strong numbers. U.K., well, we have been in U.K. for a shorter time. The revenue growth there has been over 16% in 2019, and we've had a good growth in the profitability. The margins have been going up in 2020. And in the U.K., we will make a change from having less contractors and going into more permanent employees there. So we expect increasing margins. We still have 3 years to go in the integration plan, but U.K. is certainly an interesting market for us, and we have a great opportunity there to go and target the same types of customers that we see in the other markets. And by transforming some of our employees and attracting a lot of new ones, I am very confident that U.K., over time, will become a great, great asset -- a strategic asset and a growth market for this company. And in the Netherlands, we just started there. We did the acquisition last year. Plans are ahead of track. Around 100 people situated in the town of Delft, very strategically placed close to Hague and government offices and with great access to talent from Delft University, which is one of the best technical universities in Holland and in fact, in Europe. We expect increasing margins there also in 2020, and we are building up an interesting pipeline. However, that is still early days. So altogether, looking at the acquisitions, I think you can safely say that the strategy of getting a footprint and building that out to a stronghold is very much on its way. We are following our plans. And in all 3 countries, we started in a very interesting journey, and we've shown results already. Technology is certainly changing the game, and I always talk to a lot of people in different industries and that's the privilege of my work. I visit a lot of different companies with -- in all kinds of business and industries, but they all have one thing in common and that is, technology is a strategic path for them to follow. Most industries and businesses are now changing rapidly because of technology. And where Netcompany is situated in the very core and most complex part of businesses and the usage of technology, is a great place to be. It's a place with a lot of challenges, but it's also a place with a lot of potential, and it's where businesses are going. Whether they like it not, this is, in any business, the future of the business, very heavily relies on how to use technology as an asset and use it as a strategic force in driving the business models and how the business becomes more competitive. In Netcompany, we are very much aware of the trust and the responsibility that lies on our shoulders when we digitalize both private and government customers. When we go into what we call the digital core of businesses, the transformation from old systems to new systems and the transformation from a more static world to a much more agile one where you can change and configure your businesses faster is also a risky one. And we have to make sure that every customer and every project and every business that we address finds the best outcome -- the best comes out of these products and that the businesses that we leave after this transformation are better than the ones we addressed when coming there. And I'm pleased to say that the digital core -- what we call digital core, this development is happening everywhere. We call it into the core where before, over the last, say, 10 years and 10 years is a long time in IT history, most of the investments made both in public and in private businesses has been around the front. So it's been in the apps. It's been in the web pages. It's been in the self-service areas where integration into other system has been key. We see, for the first time in IT history, a real investment wave into older systems. Many companies now realize that in order to prevail, in order to get the best out of technology, they actually need to change the older systems that they have. It's not enough anymore just to put some layers on top of it, you really have to look into the very stomach of the business and change the core systems in order to follow suit and become much more agile and introduce more services, products and capabilities into the businesses that we address. And I'm happy to say that this is an area that we've been working with constantly over the last 20 years. This is where we want to be. It's complex, and the complexity also assures the business because being there, working together with customers and being able to grasp the complexity and actually deliver value here means that you become a trustful partner, and you create partnerships with your customers more than a classical vendor client relationship. So -- and we say that very often. We are actually reinventing IT delivery. The whole idea of having IT people, leading IT people, and taking on responsibility to change companies and deliver at time, budget and within the right quality, has certainly made us able to reinvent IT delivery. The old myths about IT projects always going wrong, and IT projects not being the source of a better business, a source of creating competitiveness, well, that myth is a myth when it comes to many of our projects. We are actually delivering value. And I do believe that in many businesses today, without having a larger IT project in hand or plan for how to digitalize the company, you would not be in that business in the future. We are working with legacy-free technologies, modern technologies, and our solutions are scalable, robust, and that's very, very important. And the right people building the right solutions, as I said before, 8 out of 10 people come straight out of university, we have a very high level of professionalism and skills, attracting the right talent and actually building upon the talent and building on the base of the right people is also an ability that we've shown to be capable of over many years. We have a very strong academy. We have very strong people who know how to teach the next person in the hierarchy, in the next generation, how to deliver. Everything is delivery focused, and I think that's very important, and this is the recipe we've been following for 20 years, and this is the recipe we will follow also in the coming years. And our solutions are sincerely in the midst of society from child to pensionist on this very descriptive figure. Netcompany's solutions are actually in place for many of the life events that we see. And as we can see here, this is happening in many of the other countries that we're addressing as well. Society needs to service its customers. The modern welfare society needs to be relevant and personalized and deliver a very high level of service to its citizens. And our solutions help citizens throughout the life journey, whether they're public, government or even in private businesses. I think it's very important to say that sustainable growth and responsibility is a very important part of this -- the fundamental of this business. The solutions that we are creating are making our customers grow and creating sustainable societies, where resources are used in a rational way and where most people get the best out of it. And we will, with the capabilities that we have in the company and the systems and references that we have in hand, we are able to become a real Northern European digital challenger. And we are working on that journey to become a Northern European champion. And that is not something you do overnight. We do it every day, and with great focus on quality in a modest, but very professional manner. And I'm sure that will, over time, create the position that we are striving for in Northern Europe. When it comes to performance guidance -- performance and guidance, this is -- I've been cited for that many times, this business is not an accurate business. You cannot be absolutely accurate and determined and foresee anything that could happen. However, on this slide, as you can see, we've been quite good at guiding for 2019. Only small variances in terms of reported revenue growth, organic growth, adjusted margins, EBIT margins. So altogether, we must say that we are satisfied with our guidance throughout the year and our ability to actually hit those targets, and we will strive to do the same in 2020. And with those words, I'll leave the stage to our CFO, Thomas Johansen. Please, Thomas.

Thank you very much, Andre, and good afternoon from my side also. I will now go more into details with the financial performance for 2019. So for the full year, revenue grew by 19.5% with strong performance in Denmark, despite the negative impact from the general election we saw earlier in 2019. Overall, margins also increased. And for the full year, gross margin was 40.6% against 39.7% in 2018. The negative impact on gross margin from the Dutch operation was 0.3 percentage points. As you'll see from the figures here, amortizations are starting to come down as intangible assets that originates from the FSN transaction back in 2016, where FSN acquired 52% of the old Netcompany, beginning to be fully amortized. Apart from goodwill, most intangibles are expected to be fully amortized by 2022. Net profit for the year more than doubled in 2019, both as a result of strong operations, but also as items, "Below the EBITA line," was improved significantly compared to 2018, where a number of one-off costs were incurred in connection with the IPO. Growth in Denmark, in 2019, was driven by growth in both the public and the private segment, which on balance resulted in growth of 23.4% in Q4 and 17.8% for the full year. In the public segment, in Denmark, growth was driven from both existing clients and from new contracts being initiated. The growth in the private sector in Denmark is based on wins in the spring and grew during Q4 with existing and new clients being added. A number of progress cases in the private segment pipeline lays a strong foundation also for 2020. While growth in Norway was below our initial expectation for the full year, we still grew 19% for the full 2019, which in the Norwegian market is close to twice the average organic growth in the IT service industry. Opposite to Denmark, growth in Norway was generated in the private segment that grew 41%, while the public segment was more or less flattish. In the U.K., growth was generated in the public segment, that grew 76% compared to 2018, particularly due to strong growth in that segment in the beginning of the year. On balance, the U.K. grew 16.7%, and in particular, towards the second half of the year, growth rates were reduced as the impact of a piece of new label legislation framework, called IR35, is beginning to have its impact on the U.K. market. Activities in the Netherlands remains high and also higher-than-expected based on strong performance in the public sector, where we continue to see new wins. From a gross margin perspective, Q4 was strong with total gross margin of 42.3%, an increase of 2.9 percentage points. The Danish organization grew margin as a result of increased utilization and in general, strong delivery performance on all projects, while the reduction of margin in the Norwegian business was due to the aftermath of the loss of a couple of deals in the summer of 2019, leading to lower utilization in Norway. The biggest impact -- positive impact on margins, though, came from the U.K. that saw margins more than double from 13.5% in Q4 2018 to 29.1% in Q4 2019 as a result of a combination of a better balanced product portfolio and a lower proportion of independent contractors. This development in the U.K. is reassuring for the longer-term perspective for operation in the important U.K. market, a market which is 6x the size as the Danish market. Finally, margins in the Dutch operation were around the 20% mark, both for the quarter and for the year as a whole. The strong performance on gross margin in Q4 is fully embedded most in the adjusted EBITA margin for the operating entities, and that is before allocation of central headquarter cost, which only saw a marginal lower percentage-wise increase of 2.3% compared to the 2.9% increase we saw in gross margins. The reason for this is attributed to the inclusion of the Netherlands that has realized negative margins on EBITA level as all the integration cost is reported as administrative costs and hence, suppress the EBITA margin to be negative 17% in Q4 in the Netherlands. Adjusting for this, margins in the units supporting the organic revenue growth in 2019 increased by more than 3 percentage points. The strong performance in the U.K. operation improved EBITA margin to be close to a factor 3 compared to the same period in 2018. The development in both Denmark and Norway on adjusted EBITA margins follow the same pattern and reasons as just discussed, when we talked about the gross margin. The split between development and maintenance in the group is fairly stable. For 2019, 49% of revenue is maintenance and 51% is development. Last year, it was opposite with the same percentages. The relative stable group distribution covers differences in the various countries, where a relatively larger proportion of revenue in Denmark is maintenance compared to the other geographies, a natural consequence of the portfolio of customers being more mature and to a higher degree in late-stage production mode already in Denmark. Free cash flow improved from DKK 22.8 million to DKK 116.8 million in Q4 2019. Operating profit was improved, but working capital changes were negative compared to Q4 2018, offsetting some of that improvement. The main change to free cash flow Q4 2019 is that payment of income taxes in 2019 has been timed according to performance. And hence, the tax payment in Q4 was DKK 44 million compared to DKK 120 million in Q4 2018. Looking at free cash flow for the full year, it underlines the strong performance of Netcompany for 2019 with an improvement to free cash flow of more than DKK 272 million to DKK 435 million for 2019. The improvement is driven by better operating results, but also a significant reduction of changes to working capital, which was mainly driven by reduction in days of sales outstanding and payment of some of the older work in progress balances that has gradually been moved to accounts receivables and subsequently cash during the year. Cash conversion ratio consequently increased from 60.3% in 2018 to 93.2% in 2019. At the beginning of 2020, we had visibility of more than DKK 1.8 billion of revenue as shown here. This is an increase of close to 16% compared to the same period last year. The highest amount of contractually committed revenue is within public segment as has been the case historically. However, we have seen improvement in the visibility in the private segment following major wins in both Denmark and in Norway earlier in the year. Overall, the quality of the visibility is better this year as more than 80% of the total revenue visibility is contractually committed compared to around 40% in 2019. The markets that we are operating in had a total value for the addressable part in 2019 of DKK 183 billion, which means that our market share was around 1.4%. The highest market share in 2019 is in Denmark, where we have a market share of 8.7%. For 2020, the core addressable markets are expected to have a value of more than DKK 190 billion, which means that despite rapid growth over the last 20 years, there is still growth opportunities for Netcompany to be had. And given our current revenue visibility and the pipeline of projects we are looking into, we expect organic revenue growth of around 18% to 20% for 2020. The uncertainty to the lower end of the range is mainly related to the implementation of IR35 legislation in the U.K., and we expect margins of around 26% and all in constant currencies. Now that concludes the walk-through and presentation of the annual report for 2019. And later on, the Chairman will go through the proposal to approve the Annual Report and also to approve that no dividend is paid for 2019 in accordance with our capital and dividend policy. I'll now hand the word to our Chairman of the Board, Bo Rygaard, who will go through the governance part of the presentation.

Thank you, Thomas. Corporate governance is very much in focus in Netcompany. And what we would like to share with you is some of the parameters around it, which we have listed here on this slide, which are very important to us, and which we would like to address to you as well. As previously mentioned in my introductory comments, transparency and constructive stakeholder dialogue is key to the group. Corporate governance is also important as it sets the guidance for the management. Netcompany observes the recommendations on corporate governance and fully complies with all 47 recommendations. And last but not least, the Board will continue to evaluate corporate governance in the light of the corporate governance recommendations. So that was what we had to say in terms of corporate governance. Then some few words about our Board evaluation process. During Q4 last year, we had an internal Board evaluation. And the reasons to why we choose to make it internal was that the year before, we had it as an external exercise together with external consultants. But we had a very good process, and you see here in the middle of the slide, the different parameters that we went through, and we really had an in-depth discussion around it in the Board of Directors. And on the right-hand side, you see the conclusions. And from an overall perspective, it is an effective Board with the right competencies. The quality of the material that we get is very high, and the cooperation between the Board and the executive management is very satisfactory. So this was the Board evaluation and then we come to yet another focus area within the group being diversity, and it goes both for the Board of Directors as well as for the executive management. Diversity is an important factor, and Netcompany recognizes the value of diversity. In our management levels, the number of females has increased from 8.8% in '17 to 12% in '19. A new target of at least 2 women in the Board was set in '19. The target has unfortunately not been met in '19. However, a search for 2 new Board members is ongoing, and the preferred candidates are women amongst others due to the fact that Pernille Fabricius is not up for election at this meeting. Yet another very important area that we work with within the group, and that is ESG. It is the first year when Netcompany as a group has chosen to prepare a full ESG report. We believe that all 3 areas are equally important, but also realize that especially the social area is where we can make the biggest difference. And within the social area, we would like to highlight the following items: we ensure equal opportunities for men and women; we promote and offer a strong learning platform for all; we provide more focus on lack of women in the tech industry, and we do that amongst others via partnerships; and we encourage young people to get involved in the digital world and seek employment within the industry. All very, very important areas for us. And finally, we have as well a transparent tax disclosure policy.

Very good. So pursuant to the 3 items, they have now been presented. And my role now is to guide the assembly through questions and comments, and shareholders are more than welcome to come up and ask questions. We have the shareholder ATP, has announced that they would like to come up and say or comment. So if ATP, and if you please introduce yourself at stand.

My name is [ Hannes Valmor, ] and I represent ATP. Thank you to the Chairman of the Board and the management for the presentation. Today, I will keep it short with a couple of questions. 2019 was a strong year for Netcompany with an organic growth of 18% and an adjusted operating profit margin at 25%. This was a tad below your guidance on growth, but with stable margins, this was certainly enough to satisfy the stock market who sent the stock up with 44%. Since the IPO in July, in 2018, the Netcompany share has almost doubled, and it is a pleasure for us to see new companies enter the Danish Stock Exchange with such success. The delivery of IT project has been very robust since the IPO, including critical projects to the Danish public sector. Netcompany has been branded as a high-quality company by investors and customers, and we have great confidence that you will be able to continue to outperform the 6 in the future. 2019 organic growth of 18% is a high number compared to the sector, but it is 2% short of the bottom of the guidance range for the year and below the midterm guidance. With that in mind, does a short-term bonus payout of 80% of the maximum seemed quite high. In our view, should a maximum bonus payout be achieved by reaching quite ambitious targets, I would like -- therefore, like to ask the Board, what is the required financial performance needed to reach the maximum payout? In 2020, you are guiding between 18% and 20% organic growth, which is also below the midterm guidance. This leads me to my follow-up questions. How should we think of your midterm guidance of organic growth of 20% to 25%? We find that a strong Board of Directors is a vital part for companies like Netcompany to supervise the activities and ensure good governance. The Deputy Chairman of the Board of Directors, Pernille Fabricius has informed the Board that she will step down, which leaves the Board of Directors narrower and down to 4 members. It also leaves the Board of Directors with no female members. We are, therefore, satisfied to hear that this is a focus area for the Board to find new candidates to complement the remaining competencies. With that, I just want to wish Netcompany and the employees all the best for 2020. Thank you.

So I'll pass on the word to management and the Board to provide answers.

Yes. First of all, thank you, [ Hannes, ] very much for your questions. I can take the first one, at least, and that is a question about how do we get the maximum bonus for the executive management. That was the question. And just as an example, taking 2019's very strong financial performance into consideration, it's correct what you say that management got 80% of the maximum. And the reasons to why they didn't get the 100% was that we didn't reach the organical growth target. So the question is -- and the answer is, what do you -- how do you get the 100%? And the 100% is if you fulfill the targets, which are communicated to the market.

All right. And I'll answer the second question, and thank you for that, [ Hannes, ] and that was on the midterm financial targets. And as for the midterm financial targets, we have not changed the ambitions that were originally set out in the prospectus, which is where these targets come from. However, to reflect the inherent uncertainty at the beginning of any year and to better align expectations to growth in the market, we have for 2020 changed our guidance to be within a tighter spend, and given the uncertainty that I have already discussed, particular pertaining to the U.K., we expect the organic revenue growth for 2020 to be between 18% and 20%.

Very well. No other shareholder has reported to the desk for comments and questions. So -- there is a shareholder there. You're most welcome to come up.

My name is [ Pere William Cook ]. I fell over a note here in the -- in this very extensive report that says that we have a subsidiary called NC TopCo and it doesn't state what it does. But further down, it says that it is an independent cash-generating entity. Then it is very strange that it has a loss of DKK 6.5 million.

All right. Thank you for that question, [ Pere. ] And the NC TopCo is a old entity, which was put in place before the IPO and part of the company structure that was put in place with the original transaction with FSN. The activity that is in NC TopCo is mainly management fees for part of the executive management, which is part of the full group. So when you look at the NC TopCo alone, you have an entity where you don't really have anything from an income perspective. But as we look at the Netcompany Group, and when we also talk about how we tax, we tax the entire company, then you need to add that to all the other subsidiaries, if you so will. So it's a technical legacy from before the IPO.

Any further questions or comments? All right. If you look here, these are agenda items 1 to 3, and you have the proposals there from the Board. It is taking note of the Board of Directors report; the company's annual report be approved; and the net profit for financial year '19 be allocated and returned -- to retained earnings with no dividend paid. So unless anybody objects, I will consider the proposals, the report, acknowledged and the proposals under 2 and 3 as approved by the general meeting. Thank you for that. With that, we move on in the agenda. We move into item #4, approval of the remuneration for the Board of Directors for the current financial year 2020 and pass on the word to Bo Rygaard.

Thank you, Thomas. Yes. We think it was relevant, just to give you a brief background information in terms of remuneration in Netcompany as a group, why we have made these few bullet points. Remuneration packages were put in place in connection with the IPO, which was in June 2018, and they are in line with Danish as well as International Corporate Governance guidelines. The key points of the policy are: it's fixed remuneration; it's market-based salary level; and it's a clear link to creation and maximization of shareholder value. Here, you have an overview of the various elements, which you can see from this slide. And in terms of remuneration of the executive management in 2019, it goes for: Andre Rogaczewski, our CEO; it also goes for Claus Jorgensen, our COO; and Thomas Johansen, our CFO. You see the numbers from this slide. And part of it is what we discussed before with you, [ Hannes, ] that is the bonus. Then we come to the remuneration of the members of the Board of Directors. And what is important to underline here is that the Board of Directors' fee was determined in connection with the IPO in June 2018, and we have so far no proposal to change that. And that's also the reason as to why we stick to the structure, we stick to the amounts, which means that there is a base fee, there is Chairman fee and the Chairman fee is corresponding to 3x the base fee for the extended duties, and we have a Deputy Chairman fee corresponding to 2x the base fee for the extended duties. We also have committee work, and we are working within Netcompany with 3 different committees: The first one, our Audit Committee; second one, our Remuneration Committee; and the third one is our Nomination Committee. And you see here the numbers for -- and the fees for each and every of these committees. So in essence, what we are proposing here is that we stick to what we have had since we were listed. But despite that fact, we're, of course, pleased to take any questions from the shareholders in relation to this proposal.

Any questions? Okay? As stated by Bo, the Board proposes to describe remuneration level to the Board of Directors for '20 to be approved by the general meeting. Any objections? [Voting]

All right, well, happily resolved. And we will proceed to the next item on the agenda Item #5, election of members to the Board of Directors, again, presented by the Chairman.

Yes. And this is our proposal for reelection for the following members of the Board of Directors. First of all, Mr. Juha Christensen, sitting down here. We have Scanes Bentley, also sitting down here, as well as Robbert Kuppens sitting here, and then myself, Bo Rygaard. And a thorough description of our CVs has been sent out on beforehand. So I guess that there are no further questions to our candidates. And it is also a question about reelection. But I would very much like, again, to emphasize and underline that on top of these reelections, we have 2 searches ongoing right now with the primary focus on getting female candidates on board. And amongst others, the future Chairman of the Audit Committee is one of the candidates that we are right now searching for.

First of all, comments are, of course, welcome. And secondly, it is important that we manage to get our resolutions done. So with the proposal of reelection of the existing Board, the 4 members presented. No comments? [Voting]

With that, the Board has been reelected, and we will proceed to Item #6 on the agenda, which is election of Auditor and has been set out in the notice as well. The Board of Directors recommend reelection of Deloitte, in accordance with the Audit Committee's recommendation with a thank you for last year and a recommendation to continue the cooperation. Any questions for the Auditor selection? [Voting]

No? So with that, I will consider that to be approved and Deloitte to be reelected as Auditor. From there, we move to Item #7 on the agenda. This is proposals that are submitted by the Board regarding authorization to acquire treasury shares. There has been no such proposal from the Board, so no authorization granted. And we will proceed to Item #8. These are the proposals, which are submitted by the Board of Directors or by shareholders, and we have 2 proposals here that we will deal with this year. The first is Item 8a, proposal to approve the company's remuneration policy and with the changes that has been made public with the notice.

Yes. And then we come to the next point, and that is the Board of Directors where we propose an update of the remuneration policy as a consequence of the implementation of the Shareholders Rights Directive. And I will just briefly elaborate on what consequences do that have. And you see that on the right-hand side of the slide up here, this means that we will continue the main terms of the existing remuneration policy. We will get more in-depth explanation of the KPIs. We will get more in-depth explanation of the types of remuneration components, and we will ensure that the remuneration policy is clear, understandable and contribute to the company's business strategy, long-term interest and sustainability. So in essence, and if we boil it down, this is a question about an update, which should bring us more clarity. It should be much better for the reader offered. And in essence, the content, the main part of the content is the same.

Yes. As very clearly stated there, the Board of Directors proposes the update of the remuneration policy. And any comments or questions? [Voting]

Then I would allow that to be considered as approved. And we move on to Item #8b, and this is where the Board of Directors have proposed an amendment to the Articles of Association. The amendment has been made public. It is a simple update of the standard agenda for next year's Annual General Meeting and also flows from the Shareholder Rights Directive. That's a rather formal amendment. So any comments or questions? [Voting]

And I think we can say that, that is approved by the general meeting. With that, we have come to any other business where shareholders are welcome to come with a final comment. And without that, we pass back the word to Bo, and thank you very much.

Thank you, Thomas. Yes. I will just end this annual group meeting 2020 by saying thank you very much to all of the shareholders for coming and others on participating and just say that we think it has been a very constructive meeting. And I do hope that you think it was well spent time in these -- to come here in these corona days, which is a little bit turbulent around in the world. Once again, we thank you very much and take care out there.