- Management Board report
Management Board report
55 / Chief Executive Officer
Year of first appointment 2001
Term of office 2013 - 2017
Other positions None
Former positions and Education Harold began his career with a venture capital firm. In 1989, Harold founded and led Psion Netherlands BV, a joint venture with Psion PLC. He also served on the board of Psion PLC. In 1991, he co-founded TomTom together with Corinne Vigreux, Peter-Frans Pauwels and Pieter Geelen. Since 2001, Harold serves as the CEO of TomTom. Harold holds a Master's degree in Economics from the University of Amsterdam.
44 / Chief Financial Officer
Year of first appointment 2015
Term of office 2015 - 2019
Other positions None
Former positions and Education Taco joined TomTom in 2005 and held various senior management positions in Group Control, Treasury and Investor Relations before his appointment as CFO in 2015. Before joining TomTom, Taco spent eight years with KPN. During this period he held various management roles in Finance and Investor Relations. Taco holds a Master’s degree in Business Economics from the University of Groningen.
58 / Member of the Management Board
Year of first appointment 2008
Term of office 2012 - 2016
Other positions Non-Executive Director of Cyient Ltd
Former positions and Education Alain founded Informatics & Management Consultants (I&M) where, next to IT Consultancy, he continued his research work on digital map databases and routing. In 1989, I&M was integrated into the Dutch Tele Atlas Group. As of 1990, Alain headed Tele Atlas, which was acquired by TomTom in 2008. Alain became a member of the Management Board of TomTom in 2008. Alain graduated as an engineer-architect from the University of Gent.
• Extract value from the PND category
• Establish a multi-product consumer business
In 2015, we continued to strengthen our leading position in the world of navigation, whilst successfully expanding our presence in the world of sports, fitness and action cameras.
We have introduced TomTom MyDrive, a website and mobile app designed to seamlessly connect the car to the digital world. Drivers can use their smartphone, tablet or PC to review real-time TomTom traffic information, plan routes and send destinations to their TomTom GO, before they get in the car. The MyDrive platform is open to developers and third parties; innovative driving concepts and applications can be developed and implemented in the future, benefiting drivers all over the world.
At the end of the first quarter, we launched the Go Mobile app for Android. Sharing the same user interface as the TomTom GO device, the mobile app now helps drivers get to their destinations faster every day. With offline Maps, TomTom Traffic, superior routing and Speed Camera warnings in countries where available, the app is the ideal travel companion for mobile users.
The new app features a global map license so drivers can use it all over the world even without a network connection.
Lifetime World Maps and Lifetime Speed Cameras were introduced to the GO range in the second quarter of the year. Lifetime World Maps allows people to drive with maps from around the world at no extra cost, for the lifetime of their TomTom GO device. Lifetime Speed Cameras lets drivers know the locations of all speed cameras – both fixed and mobile, also for the lifetime of the device.
In the second half of the year, we introduced the TomTom TRUCKER 5000 and 6000, a portable navigation device specifically designed for large vehicles. The TomTom TRUCKER ensures that drivers are on the right road with customised routes for the user’s specific vehicle type, size, weight, cargo and speed. Through TomTom Traffic and advanced routing technology, drivers get a realistic ETA based on vehicle profile and real-time traffic information.
Sports and Fitness
In 2015, we completely refreshed our Running product range and introduced an action camera and a fitness watch with 24/7 activity tracking.
We made our range of TomTom Runner and Multi-Sport GPS Sport Watches compatible with Nike+. Users can track their progress, challenge their friends and share their successes with the Nike+ running community and earn NikeFuel. This was a next step in a partnership with Nike that began in 2011 with the launch of the Nike+ Sportwatch, which was powered by TomTom.
In the second quarter, we introduced our action camera. The TomTom Bandit is the first ever camera to come with a built-in media server, eliminating the need to download footage before being able to edit it. The camera works with a companion app, making it possible to create and share videos in a matter of minutes instead of hours. With the Bandit, which automatically selects movie highlights with the use of multiple built-in sensors, we have solved the biggest frustration people have with action cameras today: the time and effort it takes to edit and share their movies.
Following the successful innovation of heart-rate monitoring on the wrist in 2014, we introduced music on the wrist at the end of the third quarter in 2015. The next generation TomTom GPS sport watches with integrated music player, make it easier for fitness enthusiasts to boost their training. Now users no longer have to strap a phone to their arm or worry about wires getting in the way during their workout. The sport watch streams music to a wide range of Bluetooth® headphones and Playlists can be easily downloaded to the TomTom GPS sport watch.
The unique combination of an integrated music player, built-in heart-rate monitor, 24/7 activity tracking, multi-sport functionality and GPS, makes it easier than ever for people to get more from their workout, and improve their overall fitness level.
Total Consumer revenue for the year was €624 million, an increase of 1% compared with last year (2014: €619 million). The year on year growth was mainly driven by a strong growth in our Sports category and a modestly higher Automotive hardware revenue, partially offset by lower PND revenue.
The biggest revenue contributor remains the PND category, including the related traffic and maps revenue. The European PND market volumes declined by 8% in 2015 (2014: -11%). The North American PND market declined by 22% in 2015 (2014: -23%).
Our PND business developed better than the market. We maintained our leading market position in Europe, improved our market share in North America and we strengthened our average selling price (ASP), which resulted in value share growth and a modest decline of our PND revenue in 2015.
Sports revenue amounted to €69 million in 2015, an increase of 40% compared with last year (2014: €50 million), fuelled by the launch of our new range GPS sport watches and our action camera.
Table_1 Key Figures Consumer
|(€ in millions, unless stated otherwise)||2015||2014||y.o.y. change1|
|EBITDA margin (%)||2%||9%|
|EBIT margin (%)||0%||6%|
|KEY PND MARKET DATA|
|Market size Europe (# units sold in millions)2||6.8||7.4||-8%|
|TomTom market share (%)||52%||52%|
|Market size North America (# units sold in millions)||3.2||4.0||-22%|
|TomTom market share (%)||17%||15%|
|1. Change percentages are based on non-rounded figures.|
|2. Europe refers to EMEA17: AT, CH, DE, BE, NL, FR, IT, GB, ES, PT, TR, CZ, PL, DK, SE, FI, ZA.|
Consumer generated EBITDA of €14 million in 2015 (2014: €55 million). The EBIT for the year was €3 million compared with €36 million last year. This translates into a break-even EBIT margin in 2015, compared with 6% in 2014. Consumer operating result in 2015 was significantly negatively impacted by the weakening of the euro against the US dollar and additional investments in marketing to support new product introductions, partly offset by a gain following a legal settlement.
In 2016, we will bring new features to the Mydrive app and to our GO range of products to improve the overall user experience and drive preference for replacement buyers in the market.
We will continue expanding our range of products in the Sports and Fitness category and establish ourselves as a credible sports and fitness consumer electronics brand.
• Take advantage of the new mapmaking platform to deliver real-time maps
• Effectively market our modular NDS-based components for Connected Navigation Systems to OEMs and Tier1s
• Pursue new growth opportunities in ADAS and Autonomous Driving
Our Automotive business delivers class-leading maps, software components and services to OEMs and Tier 1 head unit vendors.
Although we previously also developed in-dash hardware, which we will continue to deliver to existing OEM customers as part of previous projects, our focus has shifted towards software, maps and services. This shift has broadened our customer base such that we are now a strong, recognised partner to both OEMs and Tier 1 vendors.
OEM expectations for embedded systems are evolving quickly, driven by innovation in consumer electronic devices such as smartphones and tablets and by advances in Autonomous Driving. The challenge for car makers is to offer embedded navigation systems that match the expectations of their customers, while keeping them affordable; navigation products must therefore be scalable, customisable, global and able to cover their vehicle range.
Car makers increasingly demand future-proof solutions that are open, modular and upgradeable. Given the complexity of building state-of-the-art infotainment systems, they are looking for suppliers who can help create competitive, low-risk products that have a fast time-to-market. TomTom automotive connected navigation components can easily be integrated to create location and navigation functions for connected cars. In addition, we are the only automotive quality map provider with a transactional mapmaking platform. We believe this state-of-the-art platform represents a perfect match for car makers’ need for future-proof solutions and enables them to offer Advanced Driver Assistance Systems (ADAS) and Autonomous Driving.
We believe that navigation will remain essential to the future of in-vehicle infotainment systems. This will include knowing where you are and how to get to your destination, but the navigation function will evolve to span the entire journey, from beginning to end, inside and outside the car.
The best end user experience is achieved when the embedded navigation system, with an embedded map, is augmented with connected real-time navigation services. This hybrid navigation approach maximises the use of connected services, while ensuring critical functionality will work even with no connectivity. Our move to the NDS industry standard format in 2015 has been another significant step for TomTom.
We also believe that embedded maps represent an essential component for ADAS and Autonomous Driving, as self-driving cars need up-to-date, high quality maps to properly position themselves on the road. Our transactional mapmaking platform enables TomTom to deliver real-time map updates to customers, also enabling OEMs to offer safe, accurate and competitive ADAS and Autonomous Driving solutions. In line with this vision, in 2015, TomTom released the industry’s first commercial HD map for a complete country. TomTom’s HD Map of Germany, covering the complete Autobahn network, provides a 3D lane map for 24,000 kilometres of roads. By delivering this highly accurate border-to-border model of the road, TomTom’s HD Map enables a vehicle to see beyond its sensors.
Our Automotive strategy has been well received by automotive OEMs and Tier 1 head unit vendors, reflected in a record level of bookings for 2015 of over €300 million. This will continue to support our top-line growth in Automotive business from 2016 onwards.
We made good progress in delivering a complete set of leading connected navigation components to our existing customers as well as securing new deals and partnerships. TomTom provides real-time traffic services, turn-by-turn navigation and maps for the new Jeep Renegade, the new Alfa Romeo Giulia and the entire Fiat 500 family for Europe. Our real-time traffic service is also provided to most Hyundai and Kia models in Europe. TomTom traffic was also chosen by Volkswagen Group for its cars across Europe, beginning with Audi and Volkswagen. In addition, TomTom provides turn-by-turn navigation and maps to SsangYong in Europe, as well as for the Fiat Bravo, Punto and Linea for Latin America. Finally, Daimler chose TomTom’s navigation services for its Mercedes me app.
In 2015, we partnered with Tech Mahindra to showcase their full line-up of Advanced Driver Assistance Systems services, creating an innovative portfolio for the Connected Car market. In addition, we continued to strengthen and build on existing partnerships with Bosch SoftTec and Volkswagen Research. The latter partnership also resulted in TomTom maps powering Audi’s 550-mile automated test drive from the west coast of California to Las Vegas leading up to CES 2015 in January.
Revenue for the year was €106 million, compared with €109 million in 2014. The modest year on year decline was mainly the result of the phasing out of certain legacy contracts in combination with a higher share of deferred revenue compared with 2014. Deferred revenue in Automotive relates to map and traffic services from recent contract wins that will be delivered over time.
Table_2 Key Figures Automotive
|(€ in millions, unless stated otherwise)||2015||2014||y.o.y. change1|
|EBITDA margin (%)||25%||18%|
|EBIT margin (%)||-32%||-26%|
|1. Change percentages are based on non-rounded figures.|
|2. Automotive D&A costs mainly include amortisation related to our map asset (including acquisition-related amortisation) and our navigation software development.|
Automotive generated EBITDA of €26 million in 2015, which compares to €20 million in 2014. The EBITDA margin was 25% in 2015 (2014: 18%). The maps cost are shared between the business units based upon certain allocation keys, of which one of them is revenue. As Automotive revenue modestly declined and Licensing revenue strongly grew in 2015, Automotive was allocated relatively less maps cost in 2015 compared with last year. This explains the year on year improvement of Automotive EBITDA and EBITDA margin.
EBIT amounted to -€34 million in 2015 (2014: -€29 million). This year on year decline is mainly as a result of a €11 million impairment charge on a certain customer specific technology partly offset by the above-mentioned relatively lower allocated maps cost and lower navigation software cost.
In 2016, we will continue expanding the footprint of our maps, software components and services to more automotive OEM and Tier 1 customers, seizing new ADAS and Autonomous Driving opportunities.
Building on our strategic partnerships with Tech Mahindra, Volkswagen Research and Bosch SoftTec, we will reaffirm our position as a key partner in the automotive industry with the mapping, navigation and traffic expertise necessary for the future of Autonomous Driving.
• Take advantage of the new mapmaking platform to deliver real-time maps
• Maximise Licensing revenue via existing and new customers
• Broaden product portfolio by new map feature offerings and by stronger location-based services delivering online maps
In 2015, we have seen an increased interest in our strengthening product portfolio, especially as a result of the development and launch of our new mapmaking platform. In addition, recent developments within the mapmaking landscape and competition led to an increased number of existing and new customer discussions. As a result, our sales channels, Consumer Licensing, TomTom Geospatial and Expansion Markets, grew and diversified their global customer base during the year.
We signed several new partnerships, such as Uber, who will be using our global maps and traffic products for the Uber driver application. We have also renewed and extended many existing partnerships, including with Apple, which renewed its global agreement with TomTom for maps and related information.
The partnership announced with Mozilla to bring our Maps and Navigation online apps to the Firefox OS smartphone devices is a good example of the ongoing diversification in our product portfolio, which now also contains online maps. By using our maps online, consumers have the benefit of not having to download the full map content to their device.
With the growing crowd-source reports and expanding sensor input (e.g. probes) received via our customer partnerships we continue to improve our real-time map products with high levels of efficiency. Through these partnerships we were also able to further improve and expand our traffic product.
Licensing revenue in 2015 was €142 million, 27% higher compared with last year (2014: €112 million). The increase in revenue was driven by the renewal and increased scope of existing contracts, addition of new customers in the B2BC segment as well as good progress made in the Geospatial segment.
Table_3 Key Figures Licensing
|(€ in millions, unless stated otherwise)||2015||2014||y.o.y. change1|
|EBITDA margin (%)||30%||27%|
|EBIT margin (%)||0%||-10%|
|1. Change percentages are based on non-rounded figures.|
|2. Licensing D&A costs mainly relate to our map asset (including acquisition-related amortisation).|
Licensing generated EBITDA of €42 million in 2015, 41% higher compared with last year (2014: €30 million). This translates into an EBITDA margin of 30% (2014: 27%). Licensing EBIT amounted to nil in 2015 (2014: -€11 million). The year on year increase in Licensing profitability is the result of a higher revenue and improved gross margin partly offset by higher investments in our maps.
We believe that the trend of growing location awareness will provide a wealth of future opportunities. As TomTom is a truly independent content and service provider that has developed the technology of the future, we are well positioned to play an important role.
The new mapmaking platform will enable us to create fresh and more detailed maps with high quality that takes full advantage of the growing sensor data offered through connected devices. These maps, combined with our leading traffic products and online delivery platform, give us a very competitive and complete product portfolio.
In 2016, we will focus on growing our online maps and traffic business. We aim to achieve this by further broadening the customer base and with new product
• Continue to expand the WEBFLEET installed base
• Continue to expand the eco-system of software and hardware partners
• Diversify into the aftermarket Connected Car opportunity using our Telematics capability
Our Telematics business continued to perform strongly in 2015. We saw strong growth in our subscriber base reaching 605,000 subscriptions at the end of 2015, a 30% growth compared with last year. Telematics now serves more than 40,000 customers worldwide.
Our strong growth was achieved through a combination of organic growth and the acquisition of Finder S.A., the leading Polish fleet management service provider. This acquisition added over 60,000 subscriptions to our active installed base and enables us to further strengthen our market position in one of the fastest growing telematics markets in Europe.
In December, WEBFLEET was launched in Mexico and Chile in order to capitalise on two emerging South American markets. This launch is built on the infrastructure previously owned by Coordina, which was acquired by TomTom in 2013. It will allow operators in these countries, particularly medium-sized companies, to use WEBFLEET to improve operational efficiency.
In 2015, Telematics has been recognised as Europe’s largest and fastest-growing provider of fleet management solutions by Berg Insight. A strong product portfolio, with WEBFLEET at its centre, has been key to our market-leading success. Continuous innovation ensures customers benefit from a market-leading fleet management software that is adaptable and future-proof.
The market-leading position of WEBFLEET has been recognised with a series of awards, including Best Commercial Vehicle Systems Integrator at the global TU-Automotive Awards and the Safety Innovation Award from UK charity Brake. Availability and confidentiality are essential. WEBFLEET complies with ISO 27001 certified standards of information confidentiality, integrity and availability.
This year, we launched OptiDrive 360 following extensive research conducted by the academically-led European Union ecoDriver project. OptiDrive 360 combines pre-trip, real-time and post-trip advice to provide a complete approach to driver improvement. The real-time element uses vehicle and map data to provide fleet drivers with predictive real-time driving advice. The success of the product has also resulted in the creation of partnerships with a number of European eco-driving and road safety organisations, including DEKRA, RACC and Prévention Routière. OptiDrive 360 has also been recognised by the industry, winning the Brake Fleet Safety Product Award, the Deutschen Telematik Preis and a fleet innovation award from Link2Fleet.
WEBFLEET technology platform
The open WEBFLEET platform, made possible through stable open APIs and SDKs, was showcased at the 2015 .connect Developer Conference. This has led to increased integration possibilities for customers and development of further connected, third-party applications. An ecosystem of more than 350 software and hardware application developer partners includes key partnerships with Esri and PTV. The PRO 8 series driver terminals have extended the WEBFLEET platform by integrating real-time information captured in the field into back-end systems. We announced a partnership with Shell this year to integrate euroShell Card data with the WEBFLEET platform, making fuel transactions and fuel management information available for customers in one system.
Aftermarket Connected Car
Further expansion of our WEBFLEET technology has been achieved by creating opportunities in markets where Connected Car technology has great future potential. This includes usage-based insurance (UBI), where new products have been created with Allianz in France, Woop and Towergate in the UK and Signal Iduna in Germany. Our CURFER product, underpinned by LINK 100, was launched to showcase the insurance solution, using a smartphone app to provide feedback on driving style. Pon, the largest importer of cars in the Netherlands, adopted the Connected Car technology from Telematics to offer dealerships and customers real-time information into their vehicles’ status and performance.
Telematics revenue in 2015 was €135 million, a 22% growth year on year (2014: €110 million). The recurring subscription revenue for the year was €98 million compared with €76 million in 2014, an increase of 29% year on year. This strong increase was driven by the ongoing growth of the subscriber installed base. Hardware revenue and other services increased by 7% year on year, which is lower than in previous years as a result of a higher proportion of hardware rental in our new subscriber sales mix.
Table_4 Key Figures Telematics
|(€ in millions,unless stated otherwise)||20151||2014||y.o.y. change2|
|Hardware and other services revenue3||37.2||34.6||7%|
|EBITDA margin (%)||36%||35%|
|EBIT margin (%)||29%||31%|
|Monthly subscription ARPU||15.9||16.2||-2%|
|Subscriber installed base (# in thousands)||605||464||30%|
|1. 2015 financial metrics and YoY change percentages exclude Finder S.A.; the acquisition is effective as of the end of December 2015.|
|2. Change percentages are based on non-rounded figures.|
|3. Other services revenue comprises installation services and separately purchased traffic service and/or map content.|
Telematics EBITDA increased by 25% year on year to €49 million in 2015 (2014: €39 million), which led to an EBITDA margin of 36% in 2015, slightly higher compared with last year. EBIT amounted to €40 million in 2015, a 17% increase compared with last year (2014: €34 million). In 2015, Telematics saw a strong gross margin slightly offset by higher operating expenses. Telematics increased its sales and marketing cost in 2015 to support further organic growth. Operating expenses were also impacted by the integration cost related to our recent acquisitions. Monthly subscription ARPU was 2% lower year on year.
With our ongoing commitment to innovation, sustained investment in R&D and capacity to leverage economies of scale, we are in a strong position to capitalise on favourable market opportunities. We expect to see continued strong growth in our Telematics business in 2016 and we are committed to continued investment in innovation to build on the strength, reliability and performance of our WEBFLEET platform.
The growth potential for aftermarket Connected Car services offers opportunities for increased adoption of WEBFLEET and wider TomTom Telematics technologies, for both consumer and business solutions. Telematics aims to capitalise on these opportunities and develop further partnerships with
industries such as insurance and automotive.
Table_5 Key Figures Group
|(€ in millions, unless stated otherwise)||2015||2014||y.o.y. change1|
|Gross margin (%)||52%||55%|
|EBIT margin (%)||0%||2%|
|Adjusted net result3||49.6||60.3||-18%|
|EPS - fully diluted (€)||0.08||0.10||-22%|
|Adjusted EPS - fully diluted (€)4||0.21||0.27||-20%|
|Depreciation & amortisation2||123.1||114.7||7%|
|of which acquisition-related||52.1||50.3||3%|
|EBITDA margin %||12%||14%|
|Cash flows from operating activities||118.8||118.6||0%|
|Cash flows from investing activities||-154.2||-106.5||45%|
|1. Change percentages are based on non-rounded figures.|
|2. 2015 includes a €11 million impairment charge on customer specific technology.|
|3. Net result adjusted for acquisition-related amortisation & gain on a post-tax basis.|
|4. Earnings per fully diluted share count adjusted for acquisition-related amortisation & gain on a post-tax basis.|
In 2015, we generated revenue of €1,007 million, a growth of 6% compared with €950 million in 2014. PND revenue remained the biggest revenue contributor for the group. This revenue growth, which is the first time since 2010, is driven by the growth in Licensing, Telematics and Consumer while Automotive showed a modest year on year decline. Revenue growth in our Consumer Sports business and in Content & Services revenue in Telematics and Licensing more than offset the marginal decline in the PND category. 77% of our 2015 revenue was generated in Europe (2014: 76%), 18% in North America (2014: 17%) and the remaining 5% in the rest of the world (2014: 7%).
Our gross result for 2015 was €519 million (2014: €523 million), which represents a gross margin of 52% compared with 55% in 2014. Our gross margin in 2015 was negatively impacted by the weakening of the euro against the US dollar, especially in the first half of the year, and a €11 million impairment charge of certain Automotive customer specific technology recorded as part of cost of sales. At constant currency rates and excluding this impairment charge, our gross margin would have been 57% in 2015.
Operating expenses for the year were €518 million compared with €502 million in 2014. The increase in our operating expenses was mainly driven by higher personnel expenses and marketing expenses, partly offset by a decrease in depreciation and amortisation and a one-off gain from a settlement of a litigation case.
From a categorical perspective, research and development (R&D) expenses increased by €11 million year on year. Total R&D cash spending during the year, including capital expenditures, amounted to €268 million compared with €246 million last year. We also invested more in marketing to support the launches of our new products this year, which resulted in a €14 million increase of marketing expenses compared with 2014. Selling, general and administrative (SG&A) expenses increased by €2 million year on year to €172 million, mainly due to higher sales expenses in Telematics, which was the result of a combination of more FTE and higher amortisation related to acquisitions.
Total depreciation, amortisation and impairment for the year was €123 million (2014: €115 million) which includes a €11 million impairment charge recorded in cost of sales. Amortisation of technology and databases decreased by €11 million year on year, partly driven by lower amortisation due to change in useful life of certain navigation technologies. Acquisition-related amortisation increased to €52 million from €50 million in 2014, mainly reflecting additional amortisation from acquisitions that took place at the end of 2014 and early 2015, partly offset by lower amortisation on mapmaking tools.
As a result of the above-mentioned increase in operating expenses and the decrease in our gross margin, our EBIT for the year was at break-even compared with €21 million last year.
The net interest expense for the year was €0.9 million versus €3.1 million in 2014, mainly due to lower interest rates applied against lower outstanding borrowings during the year. The other financial result consisted mainly of a foreign currency loss of €7.4 million compared with a loss of €3.8 million in 2014.
The income tax for the year was a gain of €26 million, mainly as a result of remeasuring certain deferred tax assets and liabilities to a lower rate due to the application of the innovation box facility in the Netherlands, as well as some other one-off releases of provisions.
The net result for the year was €18 million (2014: €23 million). The net result adjusted for acquisition-related amortisation & gain on a post-tax basis was €50 million compared with €60 million in 2014. The adjusted EPS for the year was €0.21 (2014: €0.27).
Total cash used in investing activities in 2015 was €154 million, an increase of €48 million compared with €106 million in 2014, reflecting increased investments in our technology platforms and acquisitions. We continued investing in our core technologies such as our transactional mapmaking platform and the NDS based navigation system and expanded our global map footprint through acquisition of an Australian mapping company. We also further expanded our Telematics business by acquiring Finder S.A., the leading fleet management service provider in Poland.
Net cash from operating activities for the year was €119 million, flat compared with 2014, despite the lower operating result in 2015.
Net cash from financing activities for the year was a net cash inflow of €29 million compared with a net cash outflow of €118 million in 2014, the latter mainly related to a loan repayment of €125 million in December 2014. The net cash inflow for 2015 mainly came from €34 million cash inflow from the exercise of 6.9 million options related to our long-term employee incentive programmes, partly offset by a €5 million repayment of our loan facility during the year.
At the end of 2015, our net cash position was €98 million (2014: €103 million). Our outstanding borrowings comprised of €45 million that we utilised from our revolving credit facility of €250 million and some external borrowings from the recently acquired Polish subsidiary amounting to €4 million.
In 2016, we plan for revenue and earnings growth. We expect revenue of around €1,050 million. Adjusted EPS is expected to grow by around 10% to €0.23.
We expect the level of investment (both CAPEX and OPEX) in our core technologies to be higher than last year. In particular, we are investing in advanced content and software for the automotive industry (e.g. to enable Autonomous Driving) and in our new mapmaking platform.
The number of employees in 2016 is expected to be higher compared with 2015.
The true value of our business lies in our people. We need to attract the best people, invest in their development and give them the opportunity to grow and achieve more every day. Entrepreneurialism is valued in our company and we believe that organisational flexibility will allow for people to make their own choices and thrive.
TomTom attracts agile and adaptable people, capable of effectively dealing with and responding rapidly to changing circumstances. Having the best people enables us to deliver the greatest and most innovative products and services to our customers.
To deliver on this ambition, HR has positioned itself as a strategic partner to work with the organisation to deliver against our business objectives for growth. This position allows us to better prepare for the changing landscape of the future of work as well as the changing needs of our business.
Our HR strategy focuses on three key areas that help set the foundation to better shape our workforce needs. These areas are: People, Management Capabilities and Employer Brand. Each of these areas is important to growth. We have made significant investments in understanding exactly what our employees need and want so that we can offer customised experiences, in having the right managers in place to manage our increasingly agile and talented workforce and in ensuring that we have the right employer brand strategy in place to attract and retain the talent we need to further grow.
At TomTom, our people are our greatest asset and we employ the best people. Our employees have unique skill sets that are in high demand by other companies in different industries.
Our strategy to attract, develop, and retain the right people is about creating the conditions for our employees to achieve more, faster, than at any other company. We do this through a segmented and targeted approach, creating an employee experience that is customised to the needs of our employees with respect to their compensation and benefits, learning, communication, level of empowerment, and even the management style.
We aim to be the most attractive employer for our employees, standing out from competition, with an understanding of what drives them to be their best and enable them to achieve more than they could anywhere else.
TomTom is committed to the advancement and career development of our employees. This is exemplified by our policy to first recruit from within the company, which supports our 'Achieve More' proposition. In support of this policy, we are strongly promoting internal hires for leadership and management roles before recruiting externally.
We continue to develop and improve our career track programmes in Finance, Customer Care, Map Operations and Software Development. The World Class Software Development Programme has continued to deliver value to the company in its third year of existence. These results have included further refining the way TomTom scales its Agile development, sharing best practices across product units, organising events such as Agile Summits and an external speaker series.
Our World Class Product Management Programme continued to make progress with strategies and roadmaps continually improving. Through our external engagements TomTom is increasingly visible as a leader in Agile organisations and this visibility has contributed to our recruitment and talent development. Finally, our product units have further refined and documented the different software development frameworks in place and made further improvements in the use of software development key performance indicators.
In 2015, TomTom ran a 'Path to Excellence' World Class Graduate Programme. Its aim is to attract graduates from the best universities worldwide. The programme focus this year was Product Management. We attracted over 650 graduates from around the world (up by 30% from 2014). Graduates came from top tier universities: MIT, ESSEC, HEC, LSE, and Imperial College London. Fifty-four strong candidates were invited to our rigorous assessment days, of which seven were hired. Three of the seven graduate hires were female, which shows that we continue our support of a diverse workforce.
This programme continues to recruit the strongest performing employees who deliver significant results for the business. Our ambition is to continuously raise the level of this programme and to create a competitive engineering track that is a highly sought after placement for those who qualify.
To be the employer of choice in technology, TomTom needs the best talent. In 2015, our global headcount grew by 12% to more than 4,600 people. As the market continues to change and accelerate, we are transforming how we attract, develop and retain the right talent for our business – now and for the future. We source actively for all roles. We organise hackathons, use social media, work with our Fellows for thought leadership, and engage and involve our leadership.
Enabling our people’s development and growth is key to delivering our Achieve More promise to employees. Our people are learning all the time and they are learning from each other. To expand these support structures, we are building a network for people to find each other and build valuable mentoring relationships. Our learning and development platforms have content that is meaningful and relevant.
In 2015, learning and development provided employees with the opportunity to enhance their engineering skills through various online and offline events, such as webinars, classroom courses and external presentations.
Our remuneration strategy is key for attracting and retaining talent. We aim to provide fair, competitive and responsible compensation for each of our employees. However, we recognise that the workforce is changing and markets are becoming highly competitive with respect to benefits, compensation and perks. A one-size-fits-all policy does not make sense for the workforce of the future.
Given the changes in the market, especially in the technology sector, we have initiated a project to understand the individual needs of our employees so that we can create customised, personalised programmes for different segments of our employee population. This will lead to a unique attraction and retention approach and will enable us to compete effectively against other benefit and perk-driven employers.
In terms of employee benefits, TomTom is committed to offering all employees market competitive benefits such as pension and health care according to each country’s unique context. Next to these important benefits, we also offer a product discount programme to encourage ownership of TomTom products.
Long-term incentives for senior management and key individuals are part of our remuneration policy. These incentives are intended to attract and retain talent to the company. Our long-term incentive programme includes phantom stock and stock options, along with restricted stock, which are offered to key talents. All of our long-term incentive programmes are conditional to continued employment of the employee only and have a vesting period of three years.
Our performance-related bonus plan is in line with TomTom's vision, which is that success for our business should also mean success for the individual employee. The bonuses paid as a percentage of base salary vary according to the job grade and reflect the level of influence that each role has in the execution of TomTom's strategy.
In 2015, we redesigned our Management Development Programme to address the needs of our current and future workforce. With 54% of our global employee population born between 1980 and 2000, we are operating in a millennials world and we recognise that the ‘future of work’, and how younger generations perceive their employer and workplace, will shift dramatically in the coming decade. Their expectations towards people managers as facilitators of personal growth have great impact on the manager profiles.
We want our managers to act as multipliers, coaching their teams to achieve more every single day. With this in mind we have designed two levels within the programme. The first level supports people who are transitioning from individual contributors to managers, and the second level is an advanced programme for senior managers who lead large teams or other managers.
We are bringing our employees to the forefront of the business and celebrating who we are, our talent, and what we have accomplished at TomTom. Our unique culture is what sets us apart from other technology companies and we are actively communicating what it is like to work at TomTom to the outside world. We have re-launched and re-branded our career site (tomtom.com/careers) to reflect our new Achieve More proposition. The site is a platform for candidates to discover new job openings as well as an opportunity to lift the lid on what it is like to work at TomTom.
We work closely with all organisational units on targeted recruitment and retention tactics that will contribute to our goal to be the employer of choice in technology. This includes encouraging all employees to be part of the recruitment and hiring process. It is everyone’s responsibility to bring the best people on board.
To amplify these initiatives, we support all global offices with recruitment activities such as hackathons, events and brand awareness campaigns that support their recruitment plans.
In addition to our segmentation exercise, we continue to engage and get-to-know our employees on a daily basis. In 2015, we created several internal initiatives to build bridges and further relationships across the globe and bring employees together.
These include 'Behind the Launch', a programme to celebrate employees who worked behind the scenes of product creation; 'Beyond the Code: Women in Technology', a programme nurturing our female employees in technology and reinforcing our support of gender diversity at TomTom; and an internal crowd funding platform called 'TomTom Crowdrise', a programme that supports our Corporate Social Responsibility initiatives and employees who volunteer and raise money for charitable activities. All of these programmes enable us to create strong employee stories to share internally and externally to further position TomTom as a company of choice.
We have been recognised as A Great Place to Work® in Pune, India, our second largest site with approximately 800 employees.
In 2015, we launched our Achieve More Proposition – 'At TomTom you can achieve more in less time than at any other company'. This employee value proposition not only reflects the general consensus about what makes working at TomTom a unique experience, but also has been substantiated and validated by numerous employees from many of our 58 locations worldwide.
In 2015, we further optimised our organisational structure to suit the needs of the evolving workforce. This includes levelling our corporate hierarchies to become less layered and more agile. We believe a flatter organisation leads to better performance, innovation and 'Intrapreneurialism', our internal employee 'Entrepreneurs'. We have reduced layers of management and continue to look at ways to bring more cross-functional collaboration and equality for our employees across the business.
INVESTMENT IN TECHNOLOGY
At TomTom we use analytics to help in decision-making. We understand the necessity of talent management tools that leverage big data and hidden metrics tied to employee value. In 2016, we will replace our Human Capital Management system, HR analytics and all other HR applications. The expected benefits from this are to provide a best-in-class user experience to employees and managers and to unify all employee data in one system. This will allow us to provide more robust analytics to better understand our workforce. By acquiring state-of-the-art HR tools we will bring HR processes in line with TomTom’s brand values – allowing ease, movement and smarter decisions for managers, employees and HR alike.
This new generation of technology will streamline the talent acquisition process and provide full visibility from planning to sourcing, selection and on-boarding. Pipeline management analytics will provide the hiring team with complete insights into internal and external hiring pools. The Human Capital Management system will become a single source for recruiting, and talent management, so managers can analyse their talent supply & demand and take immediate action - all from one application.
To ensure we deliver a seamless candidate experience across all touch-points, our new solution also makes it easy for candidates to search and apply for jobs from any device and import relevant information from social profiles, such as LinkedIn, giving TomTom a competitive edge in the War for Talent.
In 2015, we appointed Pontoon Solutions as the global Managed Service Provider for External Temporary Workers (ETW). The partnership is designed to drive quality processes related to management of the ETW workforce, and ensure that TomTom is optimally equipped to deliver on company goals across the countries we operate in.
In 2016, we will begin to implement our new technology platform that will not only deliver a better user experience but will underpin everything we do in HR.
We will continue to focus on management capabilities, ensuring that we have the right people to lead us into growth for the future. Finally, we will continue to invest in our employer brand, embedding the employee value proposition, and communicating that to the outside world.
At TomTom we are committed to having a strong, positive social impact. In 2015, we continued to focus our CSR activities on supporting causes across the world through financial contributions, donations of TomTom products & services, and by getting kids active through our 'Be Active' programme. Taking an active role and giving back to our local communities has always been an important part of our working culture. In 2015, we launched Be Active, a new CSR programme where we partnered with local charities that are focused on getting kids fit and active. This effort was carried out after research showed that on average, 74% of kids today do not get the recommended 60 minutes of daily exercise. This is a troubling statistic given that our research highlighted that 98% of parents believe active lifestyles at an early age is important for their children’s physical and mental development. As a result, this year we launched Be Active in three key markets: the Netherlands, the UK and the United States. These markets were identified as they are key markets for TomTom where we have a large market presence and therefore can make the most impact.
In the UK, we partnered with 'Kids Run Free' a charity that creates opportunities for children to run relay races in and out of school. TomTom supported them with funding for 10 races and provided our GPS watches and coaching for the young runners. In the Netherlands, we partnered with the 'Richard Krajicek Foundation'. This organisation was founded by Dutch Wimbledon Champion Richard Krajicek and gives underprivileged youth the opportunity to participate in sports. The programme supports these kids by building playgrounds, organising sport activities and even providing academic scholarships to those who continue to mentor other kids in the programme. Our employees have hosted a number of fundraisers throughout the year to directly support these efforts. In the United States, we sponsored the American 'Heart Association’s Hoops for Heart Campaign'. Their mission is to teach kids how to stay healthy and make a difference in the lives of others, whilst having fun. In 2015, we were involved in 'Hoops for Heart’s' events at North Attleboro Middle School in Massachusetts and at Excel Academy of East Boston, Massachusetts. Students from North Attleboro raised an amazing $108,000 this year for the American Heart Association. In addition, we sponsored local initiatives in Amsterdam such as Girls Day, Amsterdam City Swim, EU Code Week, the Dam tot Dam Loop and World Solar Challenge.
In April 2015, a 7.8 magnitude earthquake struck Nepal, killing over 8,500 people, leaving thousands injured and badly damaging roads and infrastructure. To support the rescue efforts, we partnered with Digital Globe and Open StreetMap to combine our mapping technology and re-map devastated areas of the country. Together we were able to revise 30,000 road edges and our overall contributions resulted in 321,726 map updates. The updates allowed various agencies such as USAID, the Red Cross, the Canadian Armed Forces and the Nepal army to carry out relief efforts throughout Nepal.
Our aim for 2016 is to continue to expand our Be Active programme and continue encouraging our employees to get involved in local initiatives and community giving.
As a global business we are committed to continuously improving our supply management practices. TomTom uses its full membership of the Electronic Industry Citizenship Coalition (EICC), to achieve these objectives.
We have adopted and implemented the EICC Code of Conduct in our business processes and operations. This code sets out the electronics supply chain standards and practices for business conduct that we expect from our employees and our suppliers.
A management system has been established to ensure compliance with applicable laws, regulations, customer requirements and the EICC Code of Conduct. This framework also enables us to identify and mitigate operational risks and facilitates continual improvement in our supply management practices.
We expect our suppliers to comply with the EICC Code of Conduct and to share our commitment to corporate social responsibility and continuous improvement in social and environmental performance. Not only in the development and manufacturing of products but also in the way they conduct their businesses.
The EICC Code of Conduct is embedded in our vendor selection process and is signed by all our major tier one suppliers. We continue to believe that a risk management approach enables us to spend our resources efficiently by identifying areas of high risk. The risk profile, self-assessments and audits are all based on EICC industry developed tools and practices, which we continue to believe are the most appropriate and relevant to our business and our supply chain.
Using EICC tools is not only efficient for TomTom but it also sends a consistent message to our suppliers, and minimises the duplication of their effort between different customer requirements.
In 2015, we completed facility risk assessments for 100% of our tier one major suppliers using EICC developed tools. This includes electronics assembly suppliers for the PND, in-dash navigation systems and sports products. These suppliers accounted for almost 88% of TomTom’s total supply chain spend. It also included 50% of our logistics suppliers, accounting for a further 6.5% of total supply chain spend. We found that the majority of the supplier facility risk assessments had a low-risk profile and there were no high-risk findings. As a result, we did not conduct any independent supplier audits in 2015.
In 2016, we shall maintain our efforts to improve internal processes for the management of our product compliance programme.
TomTom can be adversely affected by a variety of business risks and economic developments. A structured risk management process helps management to better understand how risks might impact the company and to take appropriate risk mitigation initiatives that provide reasonable, but not absolute assurance regarding the achievement of the strategic, operational and financial objectives, reliability of the financial statements and compliance with laws and regulations.
Senior management together agree on the risk management priorities for the group. The group risk profile is discussed and agreed with the Management Board. A single owner is assigned responsibility for each risk, which helps to ensure clear accountability for the mitigating actions. The Business Assurance department facilitates the annual assessment of business risks to achieve an appropriate level of objectivity in our assessment of risks. We update our group risk profile every year in order to manage our most important risks. Over the year, we monitor the mitigating actions in relation to each risk and the trend for each risk. The business risk profile is taken into account when establishing our strategy, annual business plans and budgets.
Risk management is a process that we are committed to continuously improve. In 2015, we strengthened our control environment with the Internal Control Department driving risk and control ownership by business process owners. We will continue to focus on this in 2016. The key features of the systems of internal control are described in the In Control and Responsibility Statement section. We also increased the alignment between risk management efforts and our internal audit roadmap to gain more value from our internal audits. The result has been a more responsive and relevant internal audit planning from which we will benefit in 2016 onwards.
Our willingness to assume risks and uncertainties (the risk appetite) differ for each risk category. The level of the company’s risk appetite gives guidance as to whether TomTom would take measures to control such uncertainties. The risk overview table shows the risk appetite and the expected impact on the group's achievement of its strategic, financial and operational objectives if one or more of the main risks and uncertainties were to materialise. The likelihood of the risk taking place is also disclosed. The risks are shown net. This means that the risks are described after taking the risk response into consideration.
Below is an overview of the risks that we believe are most relevant to the achievement of our strategy. The sequence of risks below does not reflect an order of importance, vulnerability or materiality. This overview is not exhaustive and should be considered in connection with forward-looking statements. There may be risks not yet known to us or which are currently not deemed to be material.
Although the PND market shows a declining trend, a significant part of our revenue is still derived from PNDs and we expect this to remain a meaningful category in its own right for the foreseeable future. If we are unable to successfully launch new Consumer products and fail to adapt our organisation to remain competitive this could have a material adverse effect on our business and TomTom's financial condition, results of operations and liquidity.
Many of our current competitors are large, well-known organisations with greater financial, technical and human resources than ours. They may have greater ability to fund product research and development and capitalise on potential market opportunities. New competitors interested in the same markets and products may also emerge. Industry consolidation may also result in increased competition.
We aim to establish a multi-product Consumer business while maximising the value from the PND category. We continuously develop new innovative products in the navigation area as well as in sports. When opportunities arise we enter into carefully selected strategic partnerships to bring competitive products and service offerings to the market.
We might be unable to pursue new automotive opportunities and lose market share versus competition. Also, new map and navigation providers may choose to enter the automotive market, which could significantly increase the level of competition we face. There could be additional operational and technical challenges in growing our Automotive business and maintaining profitability over the longer term in such a rapidly evolving environment. If we are unsuccessful in maintaining and growing a profitable Automotive business, our financial condition, results of operations and liquidity may be materially adversely affected.
In 2015, one of TomTom’s global competitors in mapping (HERE) was acquired from Nokia Corporation by a consortium comprised of AUDI AG, BMW Group and Daimler AG. This change in ownership to a consortium of automotive companies significantly impacts a substantial market in which TomTom operates, creating both risks as well as opportunities.
We believe TomTom is well positioned to address the future needs of our customers and to successfully pursue Automotive opportunities. With our technological innovation we continuously develop new product and service offerings in the area of navigation, traffic and maps (such as our easy to integrate NDS-based Connected Navigation System and RoadDNA). We believe these and other innovations will allow us to remain competitive in the automotive market.
All our products and services are brought to market under one brand. This leads to brand concentration risk. Brand value can be severely damaged, even by isolated incidents affecting the reputation of our business or our products and services. Some of these incidents may be beyond our ability to control and can erode customer confidence in our products or services.
Factors that negatively affect our reputation or brand image, such as adverse consumer publicity, inferior product quality or poor service, could have a material adverse effect on our financial condition and results of operation.
TomTom employs a rigorous continuous quality management process for its products and services before they are entered into the market. Additionally, TomTom’s Customer Care department aims to provide quality, fast-response customer service and proactively monitors various digital platforms for customer feedback and issues. Furthermore, internal policies and our Code of Conduct are designed to further mitigate the risk of incidents that could result in reputation or brand damage.
The competitive environment requires continuous investment in new technology for creating and updating map databases. Maps need to be continuously updated for changes in the environment and we are continuously adding new geographies and attributes to our map database to enable us to meet the needs of existing and new customers, bring out new products and expand into new markets. If we are unable to invest sufficiently to compete with other global map providers in terms of both the quality and coverage and to modernise our map delivery platforms, our business, our financial condition, results of operations and liquidity may be materially adversely affected.
Over the last few years, we have invested significantly in developing a new Content Production Platform (CPP) which went into production in the fourth quarter of 2015. This transactional mapmaking platform revolutionises mapmaking and we believe will strengthen TomTom’s competitive positioning by moving away from traditional batch processing towards a continuously releasable real-time map. Additionally, we have set up partnerships to develop technologies to support Autonomous Driving.
Our markets are characterised by rapid technological change, which challenges us to deliver highly competitive products and services on an ongoing basis. In order to be a market leader in our industry, we need to have the most talented people working effectively together.
We aim to employ highly talented people in our organisation. Having the best people enables us to create and deliver highly innovative products and services to our customers. If we are unable to attract, develop and retain the right people, our ability to operate our business successfully could be significantly impaired.
In our ambition to be the employer of choice in technology, our rigorous recruitment process aims to attract the best talents. We monitor the organisational health of the company and have programmes in place to retain and keep key employees engaged. Ongoing significant investments are made in understanding what our employees need and want so we can offer customised experiences. We invest in our increasingly agile and talented workforce and in ensuring that we have the right employer brand strategy in place to attract and retain the talent we need. For example, we continuously invest in and develop our software engineering and product management capabilities through initiatives such as our World Class Software Development Programme.
We provide a variety customer-facing online services on a 24/7 basis. These include fleet management services, live traffic information, location-based services and sales via our website. To provide these services to our customers we rely on our own, as well as outsourced, information technology, tele- communications and other infrastructure systems. A significant disruption to the availability of these systems could cause interruptions in our service to customers that may cause reputational damage for TomTom and could trigger contractual penalties, which could have a material adverse effect on our financial condition and results of operations.
We have established a process in relation to Business Continuity for internal infrastructure including full redundancy for key services such as fleet management, location-based services and some traffic delivery platforms. We also agreed minimum service levels with relevant outsourced service providers. Continuous monitoring of system availability is in place.
Unforeseen business disruptions could affect our service to customers and cause loss of, or delays in TomTom's critical business systems, our research and development work and/or product shipments. Any permanent or temporary loss of these systems would result in reputational damage, loss of revenue and liabilities to our clients. In the case of a catastrophic disaster, our company's success rests on our ability to restore our critical data and rebuild our IT business systems.
We have business continuity and disaster recovery planning in place for business critical systems and various eventualities. However, we are unable to plan for every possible disaster or incident. A major failure of a business critical system from which we are not able to quickly recover, could have a material adverse effect on our financial condition, results of operations and liquidity.
We rely on a combination of trademarks, trade names, patents, confidentiality and non-disclosure agreements, copyrights and design rights, to defend and protect our trade secrets and the intellectual property in our expanding range of products. We may be faced with claims that we have infringed the intellectual property rights or patents of others, which if asserted against us may result in us being ordered to pay substantial damages or forced to stop or delay the development, manufacturing or sale of infringing products. Any such outcome could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, even if we were to prevail, any litigation could be costly and time-consuming.
We have a dedicated Intellectual Property team responsible for the protection of TomTom's products and services against unauthorised use by third parties. By obtaining and enforcing intellectual property rights, such as patents and trademarks, TomTom can prevent the competition from reproducing our unique products. TomTom has built a substantial prior art portfolio and has a reputation for strongly defending its position in all intellectual property litigation, including against non-practicing entities (NPE).
We provide location-based and fitness products and services to individual customers and as there is growing public awareness and increased scrutiny by regulatory authorities, this means that compliance with privacy regulations and customer expectations is increasingly important in maintaining our competitive position. Next to this, various governments across the globe are implementing legislation allowing law enforcement and intelligence services bodies direct access to data held by businesses. Depending on country and cultural background, this could raise additional concerns regarding the use of our products and services. Our reputation and brand may suffer and regulatory sanctions may be imposed if we fail to comply with privacy laws and regulations or otherwise fail to meet our customers' expectations in relation to privacy matters.
Inherent in the design and operations of our products and services we apply 'privacy-by-design' to ensure that TomTom's own Privacy Principles as well as obligations from applicable privacy laws and regulations are structurally adhered to in the design of our products and services and throughout our operations.
Our business operations and reputation are substantially dependent on our ability to maintain confidentiality, integrity and availability of information regarding customers, employees, suppliers, proprietary technologies, intellectual property and business processes. Additionally, the volume and sophistication of information security ('cybersecurity') threats continue to grow. The inadvertent disclosure of confidential information, unauthorised access to our systems and networks, defective products and sanctions potentially imposed by regulators could adversely affect our business, our reputation and could have a material adverse effect on our financial conditions, results of operations and liquidity.
We structurally deploy and maintain information security governance, controls, processes and tools in our engineering, operations and products using a risk-based approach, based on ISO information security standards.
The financial risk relevant to the risk section is foreign currency risk. Other risks related to financial instruments are credit, liquidity and loan covenants, interest rates and capital risk management. These are presented in note 28 in the consolidated financial statements.
The group operates internationally and conducts business in multiple currencies. Revenues are earned in euro, pound sterling, the US dollar and other currencies, and do not necessarily match cost of sales and other costs which are largely in euro and the US dollar and to a lesser extent in other currencies. Foreign currency exposures on commercial transactions relate mainly to estimated purchases and sales transactions that are denominated in currencies other than reporting currency - the euro (€). Unfavourable foreign currency movements such as a strengthening of the US dollar will have a negative impact on our profitability.
We manage foreign currency transaction risk through options and forward contracts to cover forecasted net exposures. All such transactions are carried out within the guidelines set by our Corporate Treasury Policy. Furthermore we try to temper any negative foreign currency effect by conscious and calculated pricing of TomTom products and services to combat the negative impact of the exchange rate movement. For additional information, see note 28 to the consolidated financial statements.
The Management Board is responsible for TomTom's risk management and internal control systems. The Management Board believes that the company maintains an adequate and effective system of risk management and internal control that complies with the requirements of the Dutch Corporate Governance Code (the Code).
The internal control systems are designed to manage, rather than eliminate, the risk that we fail to achieve our business objectives and can provide reasonable, but not absolute, assurance against financial loss or material misstatements in the financial statements. The Management Board reviews the effectiveness of TomTom's systems of internal control relative to strategic, financial, operational and compliance risks and discusses risk management and internal controls with the Audit Committee on at least a quarterly basis.
TomTom embeds risk management in its strategic business planning. A top-down approach is followed in which management identifies the major risks that could affect the company's business objectives - and assesses the effectiveness of the processes and internal controls in place to manage and mitigate these risks. For an overview of our most important business risks, please refer to the Business Risks section. Assurance on the effectiveness of controls is obtained through management reviews, monitoring control dashboards, control self-assessments, internal audits and testing of certain aspects of our internal financial control systems by the external auditors during their annual audit. This, however, does not imply that certainty as to the realisation of our business and financial objectives can be provided, nor can the approach of the company to control its financial reporting be expected to prevent or detect all misstatements, errors, fraud or violation of law or regulations.
The key features of the systems of internal control are as follows:
- Clearly defined lines of accountability and delegation of authority are in place, together with comprehensive reporting and analysis against approved budgets;
- Operating risk is minimised by ensuring that the appropriate infrastructure, controls, policies, systems and people are in place throughout the business;
- An organisational design is in place that supports business objectives and a culture that encourages open and transparent communication;
- A financial shared service centre with a centralised ERP environment which allows us to monitor our business throughout all regions and apply a consistent level of control;
- Centralised Treasury operations manage cash balances and exposure to credit default and currency risks through treasury policies, risk limits and monitoring procedures; and
- A Code of Conduct is accessible to all staff via the intranet, which includes whistleblowing facilities.
The key controls over financial reporting policies and procedures include controls to ensure that:
- Commitments and expenditures are appropriately authorised by the Management Board;
- Records are maintained which accurately and fairly reflect transactions;
- Any unauthorised acquisition, use or disposal of the company's assets that could have a material effect on the Financial Statements are detected on a timely basis;
- Transactions are recorded as required to permit the preparation of financial statements; and
- Reporting of the financial statements is done in compliance with IFRS.
The Management Board believes, based on the activities performed in 2015 and in accordance with best practice provision II.1.5 of the Code, that the risk management and control systems with regard to the financial reporting risks have functioned effectively in 2015, and that the risk management and control systems provide a reasonable assurance that the 2015 financial statements do not contain any errors of material importance. With reference to the statement within the meaning of Article 5:25 (2c) of the Financial Supervision Act, the Management Board states that, to the best of its knowledge:
- The annual financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and that
- The Management Board Report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the company faces.
Amsterdam, 9 February 2016
The Management Board
Harold Goddijn / Chief Executive Officer
Taco Titulaer / Chief Financial Officer
Alain De Taeye / Member of the Management Board