Annual Report 2006
Annual Report 2006
Royal Boskalis W
A n n u a l R e p o r t 2 0 0 6
This annual report contains forward-looking statements. These statements are based on current expectations, estimates and projections of Boskalis’ management and information currently available to the company. These forecasts are not certain and contain elements of risk that are difficult to predict and therefore Boskalis does not guarantee that its expectations will be realized. Boskalis has no obligation to update the statements contained in this annual report.
B o s k a l i s : “ T h e r e ’s n o s u c h t h i n g a s c a n ’ t ”
A milestone for Boskalis: the company acquired two major projects in Russia in 2006. In Saint Petersburg, Boskalis is dredging a new access channel. In Varandey, the crew of the hopper Oranje braved the brutal weather conditions in the Barents Sea and installed two pipelines in the seabed.
Table of contents
Ta b l e o f c o n t e n t s
Key developments in 2006 4
Message to the shareholders 5
Company profile 7
The Boskalis markets 8
Maritime Infrastructure Segment: Archirodon 12
Maritime and Terminal Services Segment: Lamnalco 14
Ten years Boskalis 17
Mission, strategy and financial objectives 20
Strategy in execution 22
Sustainable business 26
Basic principles of the corporate strategy 28
Investor Relations 34
Report of the Supervisory Board on 2006 36
Report of the Board of Management on 2006 42
Corporate Governance 54
Application at Boskalis 55
Risk management 55
Financial statements 2006 62
Consolidated profit and loss account 65
Consolidated statement of recognized income and expense 66
Consolidated balance sheet 67
Consolidated statement of changes in equity 68
Consolidated cash flow statement 69
Explanatory notes to the consolidated financial statements 70
Company profit and loss account 100
Company balance sheet before profit appropriation 101
Statement of changes in equity 102
Explanatory notes to the company financial statements 103
Other information 105
Stichting Continuïteit KBW 107
Announcements pursuant to Article 10 of the EU Directive on takeover bids 108
Pioneering Green Innovation: Ecology and Hydraulic Engineering 10
Working for Boskalis: “Make a world of difference” 18
Reconstruction of Vilufushi after the tsunami 32 Large-scale land reclamation in Bahrein 52
Building a global fleet 60
Legal structure 110
The world of Boskalis 111
Organization 112
Offices around the world 114
Glossary 119
Equipment 123
Unless stated otherwise, all amounts in this annual report are in euros (€). Some of the projects referred to in this report were carried out in joint venture or in a sub-contractor role. This is a translation of the prevailing official Annual Report in the Dutch language.
Key developments in 2006
K e y d e v e l o p m e n t s i n 2 0 0 6
Large number of new orders, orderbook at historical high
New orders worth € 1,470 million were acquired in 2006. The orderbook expanded to a record € 2,543 million (year end 2005: € 2,427 million).
Record turnover and profit
Growth in turnover of +17%
Turnover rose last year by 17% to € 1,354 million.
Net profit + 86%
Net profit increased by 86% to € 116.6 million; earnings per share went up from € 2.21 to € 4.08.
Large amounts of work in energy-driven markets
Approximately 45% of turnover was related directly or indirectly to the expansion of the energy markets.
Increased dividend
The dividend policy includes a pay-out ratio of 40% to 50%. The proposal is to pay out a cash dividend of€ 2.04 per share from the 2006 result (2005: € 1.10 per share).
Increase in share price of 33%
The Boskalis share price rose in 2006 by 33% to € 75.00. On March 2, 2006, Boskalis returned to the Amsterdam AMX index.
Composition of the Board of Management
In May 2006, Mr R. van Gelder stepped down as chairman of the board since he was to reach the age of retirement later in the year. He was succeeded by dr. P.A.M. Berdowski, who had already served as the vice-chairman of the Board of Management for a number of years. In addition, with effect from January 1, 2006, Mr J.H. Kamps was appointed to the Board of Management as Chief Financial Officer.
Composition of the Supervisory Board
During the course of the year under review, there were changes to the composition of the Supervisory Board. After the resignation on March 13, 2006 of three of the five members of the Supervisory Board, Mr R.M.F. van Loon succeeded Mr M. Minderhoud as chairman. Subsequently, on July 1 and August 30 respectively, Mr H. Heemskerk and Mr M. Niggebrugge joined the Supervisory Board. In addition, the Supervisory Board will nominate Mr C. van Woudenberg for appointment to the Supervisory Board during the General Meeting of Shareholders on May 9, 2007. His appointment will return the Supervisory Board to the original number of members.
dr. P.A.M. Berdowski, chairman of the Board of
Management
M e s s a g e t o t h e s h a r e h o l d e r s
Dear shareholders,
The upturn in the global dredging market, that began in the latter half of 2005, continued in 2006. The market picked up first in the Middle East, with large land reclamation and harbor expansion projects. The tendering of new projects in other areas followed.
Driven by the continuing sharp rise in container and bulk transportation by sea, deepening and extension operations took place at harbors throughout the world. This is a feature of both exports, such as bulk transport from Australia and containers from China, and imports, such as containers moving to Europe and the Middle East.
The high oil price and the sharp increase in demand for oil and gas are leading to the development of numerous projects. An important development for Boskalis is the enormous increase in LNG (Liquefied Natural Gas) flows worldwide. Boskalis benefits from this trend in two ways. On the one hand, the company is involved in land reclamation for LNG plants and the construction of LNG harbors. On the other, through its 50% participating interest in Lamnalco, Boskalis provides services for handling LNG tankers.
In 2006, the early indications of climate change made themselves more keenly felt. We are seeing increasing interest in new forms of sustainable coastal defenses and are being challenged to take the initiative in developing alternative designs and contracts.
A characteristic feature of the global dredging market at present is the very broad spread of demand. The main market areas are:
• the Middle East, with large-scale infrastructure projects; • Europe, with major harbor expansion activities;
• new activities in Brazil, Russia, India and China; • large energy-related offshore projects.
The spread of our operations around the world means that we are in an excellent position to respond to this broad demand. This allowed us to acquire orders in 2006 in all the market areas listed above. Particularly noteworthy are the first projects in Russia (Saint Petersburg and Varandey), as well as in Sepetiba (Brazil), Taiwan, Tjianjin Port (China) and a LNG harbor in Angola.
2006 was a record year in several respects. Turnover increased by 17% to a historical high of € 1,354 million. This was also reflected in the high utilization rates for the fleet. The orderbook was maintained at the record level of € 2.5 billion.
Once again in 2006, Boskalis was still working on various projects that had been acquired at highly competitive prices during difficult times in the dredging market. However, the strong increase in demand for dredging services in 2006 increasingly allowed for improvements in pricing. In order to respond to this development as well as possible, the company followed a selective contracting policy. This policy was one of the factors underlying the 86% increase in net profit this year to a record level of€ 116.6 million.
Message to the shareholders
In 2006, Boskalis was also working hard on the implementation of its strategy for growth. For example, the company acquired the Finnish dredging company Wasa Dredging, together with barges and two backhoes. In the Netherlands, the acquisition of the dredging company Blankevoort included three hoppers.
The major fleet overhaul plan for 2006-2010 was also launched. This included the extension of the hopper Queen of the Netherlands and the rebuilding of the cutter Phoenix (the former Oranje). We also ordered two new 5,600 m3 hoppers from IHC. And orders also went out for the main engines for two 10,000 m3 hoppers and a fallpipe vessel. Finally, Lamnalco invested € 23 million in
equipment for oil and gas terminal services.
Our policy is targeted towards providing safe, healthy and environment-friendly working conditions for all our employees. In that respect, it is important that Boskalis acquired ISO14001 and OHSAS 18001 certification in late 2006. These are the internationally accepted standards for working conditions and the environment.
There is, quite rightly, increasing interest in the interaction between our activities and the locations where they take place, as well as for the direct and indirect impact on the environment. Boskalis accepts its responsibility in this area and this is why we have taken the initiative in getting together with the industry to launch a research program, ‘Building with Nature’.
In the past year, we once again made considerable investments in staff development and promotion. A wide range of instruments were used here, focusing on professionalism and leadership.
The upturn in the global dredging market and the way Boskalis is responding has inspired a favorable response from the financial markets, with the Boskalis share price moving upwards since early 2005. The Boskalis share price rose in 2006 by 33% to € 75. Intensive and transparent communications through the media and with analysts and investors have contributed here. In 2007, Boskalis shares will continue to be listed on the Amsterdam Midcap Index. The share price has more than doubled in the last two years. A proposal will therefore be submitted to split the Boskalis share in a ratio of 1:3.
We expect the positive trend to continue in the year to come. We anticipate rising turnover in 2007 and maintenance of the high utilization rates for the equipment. We will continue with our selective contracting policy in order to make the most of the opportunities provided by the market.
In line with last year, we propose to distribute 50% of the profit as dividend. In concrete terms, we are therefore proposing a dividend of € 2.04 per share for 2006 (2005: € 1.10).
On behalf of the Board of Management Acquisition of Wasa Dredging
and the Blankevoort dredging company
Launch of large-scale fleet innovation plan
Important quality certification awarded
Start of pioneering innovative program Sizeable investments in workforce Positive development of Boskalis share Further growth in 2007
Boskalis, a leading international company with a unique market position
Royal Boskalis Westminster nv is an international group with a leading position in the world market for dredging services. Its core activities are the construction and maintenance of ports and waterways, land reclamation, coastal defense and riverbank protection. The company holds important home market positions in and outside Europe and targets all market segments in the dredging industry.
It also has strategic partnerships in maritime infrastructure (Archirodon) and in maritime and terminal services (Lamnalco). Boskalis has a versatile fleet of over 300 units and operates in over 50 countries across five continents. Including its share in partnerships, Boskalis has approximately 8,000 employees.
Boskalis has three business segments: ‘Dredging and Earthmoving’, ‘Maritime Infrastructure’ and ‘Maritime and Terminal Services’ (Lamnalco).
United States
of America The Netherlands
Mexico Nigeria
Head office/Home market Home markets Boskalis offices
Archirodon Lamnalco United
Kingdom Germany Nordic
Dredging and Earthmoving 87% of turnover
• Construction and maintenance of harbors and waterways
• Creation of land in water
• Coastal defense and riverbank protection
• Offshore services for the oil and gas industry
• Sand and gravel trading
• Environmental activities
• Underwater rock fragmentation
Maritime Infrastructure 10% of turnover
• Maritime construction including quay walls, jetties, oil and gas terminals, breakwaters, riverbank protection
• Construction of infrastructure including water purification systems, sewerage systems, dams, bridges
• Industrial construction
including power stations, desalination plants, pumping stations
Maritime and Terminal Services 3% of turnover
• Mooring of tankers
• Management of oil and gas terminals
• Pilot services
• Underwater vessel maintenance
• Offshore logistic services
C o m p a n y p r o f i l e
The Boskalis markets
T h e B o s k a l i s m a r k e t s
The global dredging market consists of numerous segments with individual development patterns. This means that the market as a whole is heterogeneous, with varied patterns of market dynamics. In the last few years the annual volume of sales on the global market has expanded rapidly to approximately € 8-10 billion. Half of these sales (approximately € 4-5 billion) are generated in open markets. Four large Western European dredging companies account for approximately 60% of operations in these open markets, with roughly 40% of the ‘free sales’ going to many different smaller regional and local players. With a share of approximately 20%, Boskalis is an important player in the open market segment. In the less open markets, dredging work is generally done by local private companies or state companies and there are limited openings for private international dredging companies like Boskalis.
The past decade has seen extensive deregulation of global trade and economic development in traditionally closed markets. As a result, the free market has expanded in favor of professional dredging companies, which can provide economies of scale and a high degree of efficiency. Major factors affecting access to the global dredging market are scale, professional staff, innovative ability, a flexible fleet, cost leadership, and financial strength.
Its broad geographical spread means that a global player like Boskalis can achieve balanced growth. The main Boskalis clients are governments (national, regional, and local), harbor operators, international project developers, oil companies, mining companies, and other contractors. Boskalis offers its clients high-quality products and services at competitive prices.
The Boskalis markets are driven by long-term growth factors...
Macro-growth factors will drive the global dredging market in the coming years
Influence of global trends on the dredging industry
The Boskalis markets
...Energy supply is playing an increasing role in this regard...
...and this encourages the construction of LNG terminals. Boskalis is involved through dredging work and its partnerships in Archirodon and Lamnalco.
International positioning is very important. 0 100 200 300 400 500 600 700 800 2030 2025 2020 2015 2010 2005 2000 1990 1985 1980 722 665 613 563 510 421 366 347 309 283 0 20 40 60 80 100 120 140 160 180 2025 2020 2015 2010 2002 1990 1980 156 142 128 111 92 73 53 Figure 1: Global energy
consumption in btu 1015
Figure 2: Global LNG production in cft 1012
Global energy consumption is expected to increase...
...with major growth in LNG consumption
Source: US Department of Energy, EIA Source: US Department of Energy, EIA
• 39% Home markets
Permanent basis with own infrastructure
• Also smaller, dredging-related projects
• Stable flow of contracts
• 31% Middle East
Dredging, maritime infra, terminal services
• 23% International projects market
Mainly larger projects
• Varying amount of work
• Many competitors
• 7% Niche markets
Specialist offshore activities
Broad market spreads provides stability
Around 45% of group turnover is energy-driven.
Figure 1 Figure 2
Home markets
International projects market Middle East
Niche markets
39%
31%
23%
7%
Boskalis is the initiator of a pioneering innovative research program, ‘Building with Nature’. This program will build up a knowledge base about the ecological impact of hydraulic engineering projects. That will allow us to determine more precisely what effects hydraulic engineering has on the environment, making it possible to take targeted action and prevent negative effects.
And knowledge is needed.
Throughout the world, hydraulic engineering projects are scrutinized closely during the development stage to determine their environmental impact. By definition, hydraulic engineering means working with nature, and we want to look after the natural world. It is, however, sometimes simply assumed that changes to nature are always bad, that they cause irreparable harm. Even though changes can be neutral, or even positive and sustainable. All too often, conclusions are arrived at without any proper grounding in knowledge or facts. Stakeholders come into conflict in difficult proceedings. All because of a lack of knowledge and objective criteria. The result is that infrastructure developments are often severely delayed for no good reason.
Ultimately, this results in economic stagnation because an adequate infrastructure is not in place.
So there is every reason to launch an ambitious program for the establishment of a unique knowledge base that can help clients worldwide and that will improve the competitive position of Boskalis.
The objective of the research program is to develop:
• knowledge about how aquatic ecosystems respond to challenges; • a generally accepted set of measurement instruments;
• objective predictions of the impact of hydraulic engineering projects; • environmental monitoring and evaluation strategies.
The results will be available for design and implementation, as well as for policy- and decision-making. This will lead to a proper balance between ecological, economic and social sustainability. Ultimately, this will accelerate the launch of hydraulic engineering projects.
The five-year research program will take place in close collaboration between the corporate sector, the relevant government institutions*, universities and knowledge institutions.
*For the corporate sector: Boskalis, Van Oord, Shell, IHC and major engineering bureaus. On the government side: the Ministry of Transport, Public Works and Water Management, the Construction Department of the Directorate General for Public Works and Water Management, the Ministry of Agriculture, Nature and Food Quality and the Ministry of Housing, Spatial Planning and the Environment.
M a r i t i m e I n f r a s t r u c t u r e S e g m e n t : A r c h i r o d o n
Boskalis has a 40% holding in Archirodon. This company has been a leading contractor in the maritime infrastructure segment for decades, focusing in particular on the Middle East. The company has extensive expertise in the area of engineering and construction, and an excellent track record in the implementation of complex, multidisciplinary projects.
The Middle East market will be characterized by high volumes of work in the years to come. As a result of visionary and strong leadership, the countries in the Gulf region have made major investments in large-scale infrastructure and energy projects. Clients also want fast completion at a time characterized by shortages of labor and some building materials. In these unique market conditions, Archirodon has followed Boskalis in adopting a selective contracting policy. Archirodon also focuses specifically on techniques in which it specializes and on clients with whom it has enduring relationships.
Alongside its operations in the maritime and offshore sectors, Archirodon is also an all-round player in the markets for civil infrastructure and industrial plants. Like Boskalis, Archirodon has renowned in-house engineering capabilities that contribute to innovative solutions for customer needs.
Fueled by the Middle East boom, Archirodon’s turnover grew from US$ 200 million in 2001 to approximately US$ 450 million last year. The company’s financial status is healthy. Archirodon’s core activities are engineering, procurement and construction, and the company currently employs approximately 10,000 people.
Although Archirodon and Boskalis operate independently from each other in the market, there are many examples of successful cooperation in complex infrastructure projects, where their combined, complementary maritime strengths provided a competitive edge. Boskalis holds a 40% stake in Archirodon; the other shares are owned by the management and a limited number of private parties.
Maritime Infrastructure Segment: Archirodon
Civil infrastructure: construction of three main pumping stations with all associated equipment for irrigating the desert from the Nile River in Egypt
Civil infrastructure: Dubai Maritime City Project - design and construction of 3,430 m of breakwaters with access roads
a broad-based position in the Middle Eastern growth market
Archirodon provides the following services:Marine & Offshore
• Ports and harbors
• Jetties, terminals and offshore structures
• Breakwaters and shore protection
• Offshore pipelines, intakes, outfalls
• Dredging and reclamation
Civil infrastructure
• Bridges, roads and railroads
• Water, sewerage, dams and irrigation
• Airports
Industrial plants
• Power and desalination plants
• Oil and gas facilities
• Pumping stations
Industrial plants: turnkey project for design, construction and commissioning of a 8 x 350 mW steam power plant in Saudi Arabia Marine & Offshore: construction of marine facilities for a grass-root LNG plant including dredging of a 4-km-long approach channel, 2.5-km-long jetty, 800 m breakwater, topside works and process-insulated piping in Egypt
Civil infrastructure: construction of the Sheikh Zayed Bridge in Abu Dhabi Marine & Offshore: Oman. In addition to a 1,070-m-long jetty
the project included an approach trestle, loading platforms and topsides as well as the installation of seawater intake and outfall pipelines measuring 2,700 m in total.
M a r i t i m e a n d Te r m i n a l S e r v i c e s S e g m e n t : L a m n a l c o
Maritime and Terminal Services Segment: LamnalcoOCEAN TRANSPORTATION CYCLE
LNG Tank Gas Fields Gas processing facilities LNG liquefaction plant LNG tank LNG loading terminal LNG receiving terminal
Boskalis has a 50% holding in Lamnalco. The company has a leading position in the global market for oil- and gas-terminal services. This is a market characterized by strong growth, primarily driven by the rise in global demand for energy, and in particular liquid gas (LNG). Exporting countries such as Russia, Iran, Qatar, Saudi Arabia and Angola are planning new export terminals (onshore and offshore) and expanding their harbors. Importing countries in Asia, Europe and on the American continent have plans for the construction of import terminals and harbors. All this has been accompanied by an unprecedented boom in the construction of LNG tankers that, once they are operational, will generate large amounts of work for Lamnalco in the years to come.
Strict quality requirements and extremely high performance standards with specialized equipment, as well as a track record, are needed to operate on this growing market.
Lamnalco has built up its unique position through specialization. To meet its customers’ specific requirements, Lamnalco invests not only in the training and development of its own workforce, but also in innovative vessels that the company designs itself and that are used for long-term service contracts (5-20 years).
The company’s head office is located in Sharjah (United Arab Emirates) and there are currently branches in twelve countries; Lamnalco has a particularly strong presence in the Middle East and Western Africa. In accordance with its corporate philosophy, Lamnalco collaborates with a range of local companies.
At present, the company handles more than 3,500 tanker movements a year in 26 terminals and harbors, with 55 berths. It owns a fleet of 120 vessels with the lowest average age in the industry. Lamnalco generates an annual turnover of almost US$ 100 million, with a healthy operating margin and cash flow.
Boskalis and Lamnalco share their market intelligence and business networks, opening up early leads for business opportunities in new locations and regions. In addition, both companies occupy complementary positions in similar maritime supply chains, especially in the energy sector: Boskalis and its ally Archirodon with dredging and civil engineering capabilities, Lamnalco with long-term contracts servicing oil and gas terminals.
Strong growth driven by rising demand for energy
Lamnalco supplies specialized marine support services to gas and oil terminals and ports worldwide:
• Berthing/unberthing of LNG/LPG, crude and product tankers calling at jetties, CALM buoys and FPSOs/FSOs
• Marine Terminal Management services and traffic scheduling
• Provision of specialist personnel: pilots, mooring masters, dive maintenance teams and site superintendents
• Surface and subsurface maintenance operations at jetties and CALM buoys
• Provision of logistics and supply bases to support offshore operations in remote terminal locations
Continuous maintenance and upkeep on board the jumbo hopper dredger W.D. Fairway. Demands on dredging material are tough. The Boskalis fleet has committed, professional crews who are prepared to brave any waves; pride in the ship, and the will to win, make the difference time and again.
Ten years Boskalis
( amounts x€1 million, unless stated otherwise) 2006 2005 2004 2003(2) 2002 2001 2000 1999 1998 1997
Turnover (work done) 1,354 1,156 1,020 1,046 1,035 1,083 960 851 801 697
Orderbook (work to be done) (3) 2,543 2,427 1,244 1,202 1,273 1,224 1,214 820 785 661
EBIT (4) 150.3 82.3 47.5 69.6 99.6 97.7 84.4 73.9 56.8 41.4 EBITDA (5) 236.8 162.5 136.5 148.9 166.2 159.9 139.6 127.9 102.3 89.2 Net result 116.6 62.7 33.9 70.9 82.1 77.7 67.2 57.5 47.1 37.3 Depreciation 86.6 80.2 89.0 79.3 66.6 62.2 55.2 54.0 45.5 47.8 Cash flow 203.6 143.5 123.1 150.2 148.7 139.9 122.4 111.5 92.6 85.1 Shareholders’ equity (3) 618.6 542.9 467.9 455.2 413.0 376.0 327.4 288.8 253.5 225.3
Average number of outstanding shares
(x 1,000) (9) 28,600 28,418 27,769 26,630 25,949 25,900 25,784 25,902 25,941 25,788
Number of outstanding shares (x 1,000) (10) 28,600 28,600 28,174 27,256 25,970 25,917 25,881 25,902 25,941 25,788 Personnel (number of persons) (3) 8,151 7,029 7,033 3,186 3,285 3,119 3,295 3,186 3,115 3,075
Ratios( percentages)
Operating result as % of the turnover 11.1 7.1 4.7 6.7 8.9 9.0 9.6 9.4 7.3 6.5 Return on capital employed (6) 19.1 12.0 7.0 16.0 20.3 21.4 21.0 20.8 18.3 15.2 Return on equity (7) 20.1 12.4 7.2 16.3 20.8 22.1 21.8 21.2 19.7 17.4
Solvency (3/8) 39.4 41.3 38.1 42.5 41.6 38.4 37.5 39.6 18.7 16.6
Figures per share( x€1.00)
Profit (9/11) 4.08 2.21 1.22 2.66 3.16 3.00 2.61 2.22 1.82 1.45
Cash flow (9) 7.12 5.05 4.43 5.64 5.73 5.40 4.75 4.30 3.57 3.30
Dividend 2.04 1.10 0.75 1.04 1.26 1.20 1.05 0.90 0.73 0.57
Share price range( x€1.00)
(Depositary receipts of) ordinary shares 44.00 25.75 18.05 16.51 17.80 25.15 16.50 10.50 8.85 13.93 76.45 56.25 25.00 23.15 35.55 37.15 30.50 18.40 18.38 20.42
(1) Figures taken from the financial statements. As from 2004 all amounts are in accordance with IFRS.
(2) Results on work in progress from 2003 onwards based on work done and up to and including 2002 based on completed contracts. (3) As at December 31, 2003 amended for IFRS (number of personnel: December 31, 2004).
(4) Consists of earnings before result associated companies, interest and taxation.
(5) Consists of earnings before result associated companies, interest, taxation, depreciation and amortization.
(6) Net result + interest paid on long-term loans as % of the average capital employed (shareholders’ equity + long-term loans). (7) Net result as % of the average shareholders’ equity.
(8) Group equity as % of the balance sheet total (fixed assets + current assets).
(9) Weighted average number of outstanding shares less the number of shares owned by the company. (10) Number of outstanding ordinary shares less the number of shares owned by the company as at December 31. (11) The dilution effect was practically nil up to the financial year 2006.
What makes a company distinctive? For its clients, business partners, workforce and suppliers? Being distinctive is above all a question of the will to make a difference. That will is engrained in the people, the culture and the objectives of the company.
Boskalis is a company of people who want to win, in the broadest sense. Because we have to fight hard to bring in the right results, whether that means winning a contract, dealing with a technical problem or negotiating for a good commercial position. The market game is a hard one.
The people at Boskalis are deeply committed to their work. They are enterprising, solution-minded and always willing to take on a challenge. The maxim ‘there’s no such thing as can’t’ is put into practice with enthusiasm, creativity, and a strong dose of perseverance. At Boskalis, the focus is on practical solutions that benefit the customer.
Boskalis gives its people room. They do the job, far from home and often under difficult conditions. Independence and decisiveness are indispensable, as part of a team and using high-tech equipment. Entrepreneurship, cooperation, and expertise are the core values of the Boskalis culture.
And inventiveness is part of our genetic makeup. As are the capacity to assume responsibility, to intervene on time, and to manage risks.
When it comes to career development, Boskalis does not have an established pattern. Every member of the workforce is given the opportunity to take his own destiny in hand. And there is a broad-based internal network to provide support. That implies a structured human resources policy. A wide range of courses and training. Competence management. A continuous dialogue about Personal Development Plans. And, above all, a wide variety of activities allowing people to acquire on-the-job experience.
Mission, strategy and financial objectives
M i s s i o n , s t r a t e g y a n d f i n a n c i a l o b j e c t i v e s
Mission, Vision, Values
Strategy
In order to realize the above ambition against a background of markets that grow in the long term but can also fluctuate from time to time, Boskalis has a growth strategy with two cornerstones:
Optimization of existing operational activities
This means focusing on growth by improving the quality of activities and making full use of the opportunities in existing markets. The world of Boskalis is constantly in motion and the company is continuously developing. Boskalis is always looking for the best possible approaches to technical and commercial innovations, or clients’ changing needs. This involves the continuous development of people, technology and systems, and also effective responses to special market developments such as public-private partnerships and changing environmental requirements. At the same time, the company must maintain the sharpness and creativity to make the most of growth opportunities.
Focus on growing with the market and on expanding activities
The market is growing in the longer term and Boskalis is growing with it. The company can achieve organic growth of this kind by regularly adding new, modern capacity to its fleet and through sophisticated market positioning to make the most of growth opportunities in the market. Boskalis also sees promising opportunities for achieving growth in areas alongside the traditional core activities.
The company has achieved good results in recent years with related maritime activities (with its partners Archirodon and Lamnalco, for example) and is definitely open to further developments, including those involving third parties.
Acquisitions and alliances provide extra opportunities for growth. Boskalis is always ready to cooperate with third parties and to extend the scope of business activities anywhere in the world. The policy of home markets with local partners, regional cooperation as with Lamnalco and Archirodon, and the acquisition of players in adjacent sectors will also continue in the years to come.
Potential acquisitions must not only generate increased turnover; they must above all make a positive contribution to the value of the company. Long-term growth is important to achieve long-term value creation for shareholders. And that remains one of Boskalis’ main objectives.
Financial objectives
Boskalis is aiming for structural growth in turnover of 5-10% per year and a return on equity of 12%. These are average values that the company wishes to achieve over a longer period.
Mission, strategy and financial objectives
Strategic
Objectives
Strategy in execution
S t r a t e g y i n e x e c u t i o n
B r o a d - b a s e d o r g a n i c g r o w t h i n 2 0 0 6 ; i n v e s t m e n t s i n s t r u c t u r a l g r o w t h
Broad-based organic growth achieved in 2006
In 2006, Boskalis was well on target in financial terms, with turnover increasing by 17% (target: 5-10%) and a return on equity of 20% (target: at least 12%). Growth was characterized by a broad geographical spread and was primarily organic, as a result of favorable market conditions in the core activities of dredging and earthmoving.
The company also strengthened its market position through the acquisition of two dredging companies (Blankevoort in the Netherlands and Wasa in Finland). The equipment of these companies has now been deployed in international locations.
In addition, Boskalis improved its position in the soilimprovement market with the acquisition of the remaining 49% of shares in its subsidiary, Cofra.
Investments in structural growth
The international dredging market is expanding strongly and utilization rates for Boskalis equipment will be high in the years to come. In the next three years, the company aims to achieve organic growth of 5-10% annually, strengthening its market position where possible. This ambition, combined with the age of a few ships, will require investments in the expansion and replacement of dredging equipment in the years to come. During this process, we will be looking carefully at the capacity required in various market segments, as well as at costs and timing. The investments must make the best possible contribution to returns and to the structural competitive strength of the company.
Given this background, Boskalis launched an ambitious five-year investment program in early 2006, involving approximately € 800 million at the consolidated group level, including subsidiaries and participations. This program is now in full swing in a shipbuilding market dominated by shortages in shipyard capacity, components and engineering capacity. Boskalis secured critical parts in time – including engines – and signed contracts during the course of 2006 for the construction and refurbishing of a number of important ships that will go into service on time. In addition, good progress was made on the design of other ships in the program. They will be commissioned in the near future. The progress of the program is described below.
The 2,500 m3 hopper Coronaut from
Blankevoort, the dredging company Boskalis acquired in 2006.
Strategy in execution
Trailing suction hopper dredgers
Further market growth is expected in the top segment of the hopper fleet – the jumbo hoppers and mega hoppers.
The jumbo hopper Queen of the Netherlands will be extended in response to this growth. Like her sister vessel W.D. Fairway, which was lengthened in 2003, the Queen of the Netherlands will have a capacity of 35,500 m3, an increase of approximately 50%. The extension of the Queen will secure Boskalis’ position as the leading player in the market for large-scale dredging projects, a market characterized by large volumes, long sailing distances and deep dredging depths.
In the large hopper segment, Boskalis works with a number of older vessels such as the Barent Zanen and the Cornelis Zanen. These 8,000 m3 vessels are over 20 years old and are due for replacement in the medium term. Two hoppers with a capacity of about 10,000 m3 each will therefore be commissioned.
In the medium-sized hopper segment, where work is mainly in home markets on harbor maintenance and beach suppletion, Boskalis wants to strengthen its market position and also replace a number of obsolete vessels. Two hopper dredgers have therefore been commissioned, each with a capacity of 5,600 m3. One will become available in late 2008, the other in late 2009.
Lengthening of the jumbo hopper Queen of the Netherlands to 35,500 m
3Replacement of two large hoppers (approximately 10,000 m
3)
Replacement of two medium-sized hoppers (5,600 m
3)
Artist’s impression of the new 5,600 m3 hopper
Cutter dredgers
Boskalis is a leading player in the market for jumbo cutter dredgers. These vessels are used to dredge hard beds and rock, particularly when constructing and extending harbors, waterways and trenches in the seabed for oil and gas pipelines.
The top segment of this market is expanding rapidly in various parts of the world. In 2007, Boskalis will be increasing its capacity in this segment by approximately 30% with the reconstruction of the former jumbo cutter Oranje. This will be the fourth jumbo cutter (sailing as the Phoenix) in the Boskalis fleet, for a relatively low investment cost. Boskalis has also made good progress with its study of a new generation of jumbo cutters that can handle very hard rock.
Fleet in energy-driven markets
Boskalis activities in the energy-driven offshore markets include the construction and protection of oil and gas pipelines located on or in the seabed. In order to protect the pipelines and level the seabed, widespread use is made of stone dumped into the
sea from special vessels. This is preci-sion work that is often carried out at great depths.
Strategy in execution
Reconstruction of the former jumbo cutter Oranje
Replacement of 1-2 medium-size cutters
Continuation of the study into new-generation jumbo cutters
Replacement of the stone-dumping vessel Cetus
Replacement of the fallpipe vessel Sandpiper
Artist’s impressionof a jumbo cutter
Artist’s impression of a fallpipe vessel
Design work on the successor to the fallpipe vessel Sandpiper will be completed during the course of 2007, after which the tendering procedure will start for the building of the ship. The design work on the successor to the stone-dumping vessel Cetus, which is used not only for offshore work but also on coastal defense and riverbank protection projects, has been outsourced.
Lamnalco fleet
The market for terminal services is expanding rapidly and Lamnalco is accelerating its investments in specialized tugs that will allow it to supply services to new clients. 2006 saw the completion of two new tugs and approximately nine ships are expected in 2007.
Strategy in execution
Expansion of the fleet
of specialist tugs
Stone-dumping vessel CetusS u s t a i n a b l e b u s i n e s s
Boskalis has a clear view of its role in society and its responsibilities towards the global community
Code of conduct
Boskalis has a Statement of General Business Principles that applies to all the relationships it maintains throughout the world.
This document is the guide for the company in the area of sustainable activities and is freely available from the company website. The basic idea behind ‘Sustainable business’ is that Boskalis is a decent company where respect for people and the community is an accepted value. Boskalis accepts responsibility for matters that it can influence. However, the world is large and Boskalis is only one of many actors. Boskalis respects local rules and customs: ‘so many countries, so many customs’. How those rules and customs evolve is a matter for governments and the people, and Boskalis plays only a very minor role in that respect.
The responsibility of Boskalis
Boskalis has its own standards for its organization.
The company has a direct responsibility for, among other things, its own workforce, suppliers and sub-contractors, safety and the environment.
It is a responsible member of society and it acts decently and properly. That means complying with local legislation, being a good employer for the workforce and working on enduring relationships with suppliers and sub-contractors.
Boskalis does its utmost to meet quality, safety and environmental standards for dredging and other company activities. Initially, clients (often governments) set these standards but Boskalis also brings its professional know-how and commitment to their implementation. The company also assumes responsibility for the proper disposal of the work spoils, such as waste and contaminated material.
Boskalis in the world
National laws and rules apply in countries where Boskalis works. The company does not make cultural judgments. Boskalis acts as a responsible member of society or a good guest.
National laws and rules are the guidelines for Boskalis activities, in combination with Dutch standards for international dealings.
Boskalis does not get involved in national politics, nor does it state opinions about political issues. These things are the responsibility of national government. Boskalis also follows the guidelines of the United Nations, WHO and the Dutch government for travel to, or business dealings with, certain countries.
Contributing to sustainable development
The nature of the services supplied by Boskalis means that the company is closely involved in sustainable developments in society. Maritime infrastructure is for many countries a precondition for structural economic development and increasing prosperity. Because Boskalis works on the basic infrastructure, the company is involved directly and positively in the social benefits of its services.
Sometimes, economic interests can clash with other community interests. It is the responsibility of local governments to make the appropriate choices. It is up to Boskalis to work as professionally as possible within the resulting framework.
Westminster Dredging Co., the British Boskalis operating company, was involved in the Wallasea Wetland Creation Project in the United Kingdom. The project will create 115 hectares of wetland, including seven islands and various lagoons. Wallasea will provide a habitat for rare birds, plants, insects and fish. This project has achieved a good balance between natural values, recreation and coastal protection.
An important aspect of dredging is the impact it has on the ecology. Boskalis has the expertise to advise clients how to measure environmental impact and keep it to a minimum. The company also makes its own assessments to determine which approach is best for the environment.
Boskalis develops its own systems for precise monitoring of the dredging work. In that way, clients under-stand the environmental impact of the work; working methods can also be adapted if there is a possibility of tolerances being exceeded.
Other information about this area can be found in ‘Pioneering Green Innovation: Ecology and hydraulic engineering’ on pages 10 and 11.
Basic principles of the corporate strategy
B a s i c p r i n c i p l e s o f t h e c o r p o r a t e s t r a t e g y
The key success factors for a leading international service company in the area of maritime infrastructure are:
• Entrepreneurship and risk management;
• A broad market spread;
• Employee efficiency;
• A large and versatile fleet;
• A sound financial policy;
• Transparency in corporate governance;
• Professional expertise and skills;
• Safe, healthy and environmental working practices;
• Quality assurance systems;
• State-of-the-art ICT.
Entrepreneurship and risk management
Doing business means working on a daily basis with uncertainties, opportunities, and risks. Pages 55-59 of the ‘Corporate Governance’ chapter of this report discuss the risk management and internal control systems used at Boskalis.
A broad market spread
Boskalis wants balanced growth with maximum use of the connections and synergy between the group activities and the three business segments. The company’s broad spread across the world, both geographically and across the different economic sectors, gives plenty of opportunities for growth. This spread also significantly reduces the risks from any fluctuations in markets or market segments.
Employee efficiency
At Boskalis, the workforce is central. They are the critical success factor of the company. They are the people who, in day-to-day operations, deal with changing circumstances and challenging operational situations. The company has world-wide operations, and uses high-grade technical production resources in widely varying physical and cultural conditions. There are many other nationalities involved alongside the Dutch, both onshore and offshore. It is vitally important in a complex environment of this kind for people to collaborate and develop.
Boskalis aims to provide an attractive working environment in which employees can make the most of their abilities. To this end the company has an active human resources policy in which the personal development of employees takes priority. For example, the company runs the International Dredging Academy, a vocational program specially developed by Boskalis where people with nautical training from the Netherlands and from other countries are trained for a job on the Boskalis fleet. Other examples are Dredging in Practice – a practical training program for Dutch and non-Dutch superintendents –, the Boskalis Leadership Development Program and the Boskalis Operational Development Program that was launched in 2006 for managers working on the projects. The last two programs enable Boskalis to fill a significant number of its management positions from among the people with potential in its own ranks. The policy is based on the continuous matching of the requirements of the company and the quality of the workforce. This takes the shape of a coordinated program for Human Resources Development consisting of long-range forecasts, planning, development, training and rewards.
Basic principles of the corporate strategy
A large and versatile fleet
Boskalis has a large and versatile fleet. It includes every variety of dredging equipment so that the right tool can be used at all times. Innovations in the fleet and modifications to existing units keep the fleet in line with modern requirements. Fleet automation is a highly-developed area, and this means that productivity during dredging work is high. Meticulous maintenance work is carried out on the fleet and auxiliary equipment, with modernization and improvements where necessary. With the exception of the basic equipment in the home markets, all Boskalis equipment is managed centrally by the Central Technical Department in Papendrecht. The Central Technical Department makes its units available for operating companies in the Netherlands and abroad. A lot of attention is paid to the quality of the services provided by the department. The organization is ISM-certified. A Plant Management System creates the conditions for the optimal deployment and structured management of the ships. In fleet management, an important element alongside safety and the environment is the safety of the ships and the crews.
A sound financial policy
Boskalis has the room for investments and acquisitions, thanks to its stable, sound financial policy with sharp monitoring of exchange rate and payment risks, a robust financing structure and a strong operational cash flow.
Transparency in Corporate Governance
The topic of Corporate Governance is covered in a separate chapter in this annual report.
Professional expertise and skills
Innovation. Every project is a source of creativity and innovation. The client’s needs and preferences are translated into a technical design, using the best possible working methods and optimizing equipment utilization. Due consideration is given to local conditions, such as the weather, tidal movements,
environmental factors, and safety and security issues. Special equipment is often developed; new techniques are regularly created during actual projects. Clients increasingly look for innovative approaches to
tendering, where the knowledge and creativity Boskalis offers can play a greater role. Examples include Design & Construct tenders, public-private partnerships, or even alliance contracts, in which Boskalis and its clients act as partners in a project.
Research and development (not project-specific). Unremitting work on new techniques and greater in-depth knowledge is of crucial strategic importance. For many years now, Boskalis has also been engaged in research that is not linked to specific projects, in part on its own and in part in joint projects with other industry operators, universities, and knowledge institutes. The Research & Development department at Boskalis has experienced staff, simulation and calculation models, and laboratory facilities. The R&D staff are regularly to be found taking measurements at projects and on board ships, both in the Netherlands and abroad. A steering group, with representatives from the Board of Management, the business units, and the technical staff departments, sets the priorities and evaluates the long-term planning of most of the R&D work.
The jumbo hopper Queen of the Netherlands sails into the port of Melbourne for a trial dredging run. On the basis of the environmental requirements and the local geological requirements, Boskalis developed a special draghead for deepening the entrance channel. Boskalis is working on the development of this project in an alliance with the Port of Melbourne Corporation.
Engineering capacity (usually project-specific). Major infrastructure projects such as Design & Construct projects are increasingly put out to tender. The engineering capacity Boskalis can offer and its own engineering consultancy Hydronamic are very important here. By taking working methods and options for available equipment into account in the design phase, efficient solutions for cost price and implementation timelines can be proposed.
The Boskalis engineering capacity can also be deployed during the implementation phase of the projects.
Safe, healthy and environmental working practices
The Boskalis policy is to provide the entire workforce with healthy, safe and environment-friendly working conditions. The prevention of hazardous and/or unhealthy working conditions is a major objective for all workers, including those from sub-contractors and suppliers. This principle is expressed in the Boskalis slogan: ‘Safety matters’.
In order to raise safety awareness and improve the understanding of safety risks, Boskalis organizes training courses and information meetings, both at offices and on projects. In addition, safety audits are carried out as the first step towards reducing risks.
Concern for environmental protection is a component of quality control, and of day-to-day thinking and working at Boskalis. The ongoing development of environment-friendly dredging techniques is an important aspect of policy. Internal expertise in this field is maintained and translated into continuous improvements of working methods. Clients regularly ask Boskalis for practical advice about designing dredging projects along environment-friendly lines. This leads to the use of environmental monitoring systems that Boskalis develops. Thanks to the efforts of its environmental experts, Boskalis is able to advise its clients properly about biological issues relating to the aquatic environment during the design of dredging projects. These activities result in a structural, systematic and transparent approach in the area of health, safety and the environment. Healthy, safe and environmentally acceptable working methods require cooperation and communications, not only within the company but also with third parties such as partners and service providers.
The safety and environmental systems in place are structured around the Boskalis core business: contracting and executing dredging and dredging-related work. With the exception of a few local entities, these systems have received ISO 14001 and OHSAS 18001 certification.
Quality assurance systems
One of the basic principles of quality assurance at Boskalis is the wish to meet customer requirements efficiently and as planned. Another is the continued professionalization of the internal organization. A lot of work goes into continuous improvements in the quality of the preparation, execution and evaluation of the projects. The same applies to the availability of equipment, as well as staff planning and supervision: they are all critical success factors.
The quality systems in place are also structured around the core business. These systems have received ISO 9001 certification.
State-of-the-art ICT
Boskalis sees information and communications technology as an instrument for improving efficiency and management information. But ICT is also a way to make work easier and, above all, to operate more effectively in the market. Boskalis has an integrated ICT concept which covers the entire business process worldwide, at all levels of the organization: from projects, through country organizations, to the head office in Papendrecht. The use of modern standardized software, hardware and communications technology is vital here.
Boskalis reconstructs Vilufushi
On 26 December 2004, the tsunami struck the Maldives. The island of Vilufushi was devastated, with the survivors being evacuated to neighboring islands.
Boskalis specialists contributed their financial expertise to the reconstruction work. Their work led to financing from the Dutch Ministry of Overseas Development.
Vilufushi shortly after the tsunami
Once these resources were in place, Boskalis was able to get to work on the spot. Our people found an isolated and uninhabited island with wrecked homes, sewers and drinking water supplies that had been put out of action, and a ruined infrastructure. A camp was quickly established, and clearing up activities began.
Over a period of ten months, the sixteen hectares of the island were raised and extended fourfold. A new harbor and coastal defenses were also built. Vilufushi is now one of the islands that the Maldives government has designated as a ‘safe island’ in the case of disasters.
Boskalis values good communications with its existing and potential shareholders, institutional investors and financial analysts. The key objective is to provide transparency about value creation within the company, so that the valuation of Boskalis shares reflects as accurately as possible the developments and prospects in the relevant markets and the company’s performance in those markets.
Intensive communications with media and investors
Boskalis has an active investor relations policy which involves open communications with analysts, share-holders, investors and the media. A steady flow of information provides a picture of day-to-day matters and strategy, business drivers and the company’s critical success factors. Boskalis communications primarily target investors interested in the long-term potential of mid and small cap stocks. New contacts are established regularly with investors in Europe, the United States and Canada. There is a strong emphasis on private investors as well as institutional investors. The Boskalis share is monitored with great interest internationally.
Boskalis has its own website (www.boskalis.com), providing financial information, general company information, information about vacancies, the fleet, projects and the latest press releases. Presentations for analysts are also published on the site. The website is maintained and improved continuously.
Increase in share price of 33%
Once again there was considerable interest in Boskalis shares from analysts and investors. This was particularly true of investors with a longer-term investment view. The Boskalis share price rose in 2006 by 33% from€ 56.25 to€ 75.00.
Share price in euros, closing prices (January 1, 2002 to December 31, 2006).
2006 2005 2004 2003 2002 2002-2006
Boskalis share price: +33% +126% +19% +8% -36% + 149%
AEX index: +13% +25% +3% +8% - 36% - 2%
AMX index: +30% +27% +15 % +15% -35% - 42%
On the basis of the price as at May 15, 2006, the dividend yield for Boskalis shares in the past year was 1.9% (€ 1.10 per share).
I n v e s t o r R e l a t i o n s
Investor RelationsLarge shareholders
As at March 14, 2007, the following shareholders are known to have a holding of at least 5% in Boskalis:
HAL Holding N.V. 31%
Sprucegrove Investment Management Limited 5 .6%
Delta Lloyd N.V. 5 %
In addition to the holdings of these ‘longer-term’ shareholders, most Boskalis shares are in foreign hands. An estimated 25% are held in the United States and Canada, with 20% being held in the United Kingdom and Ireland, and the remainder in some ten European countries.
Dividend policy
The main principle underlying the Boskalis dividend policy is to distribute 40% to 50% of the net result from normal operations in the form of a dividend. Within the limits imposed by this basic principle for the longer term, Boskalis aims to achieve a stable development of the payout to its shareholders.
The choice of dividend form (in cash and/or entirely or partly in shares) takes into account the company’s desired balance-sheet structure and the interests of shareholders. It is expected that payment of dividend will be proposed in the form of cash in the coming years.
A proposal will be submitted to the General Meeting of Shareholders on May 9, 2007 for a cash dividend of€ 2.04 per share. The dividend will be payable as of May 21, 2007.
Euronext listing
Royal Boskalis Westminster nv shares are listed on the Euronext Exchange and are traded there continuously. The share is listed on the Next 150 Index and on the AMX index in Amsterdam.
Share split
The Boskalis share price has more than doubled in the last two years. In order to facilitate trading, a proposal will therefore be submitted to the Annual General Meeting of Shareholders on May 9, 2007 to split the share in a ratio of 1:3.
Financial agenda
Agenda in 2007
March 15 Publication of annual figures for 2006 late March Publication of annual report for 2006 May 9 Annual General Meeting of Shareholders May 11 Shares go ex-dividend
May 15 Record date for dividend entitlement (after stock exchange closure) May 21 Dividend payment for 2006
August 23 Publication of 2007 half-year results
Information Investor Relations R.T. Berends Telephone +31 (0)78 69 69 822 Telefax +31 (0)78 69 69 805 E-mail ir @ boskalis.nl Internet www.boskalis.com Investor Relations
Members of the Supervisory Board
R.M.F. van Loon (1942), chairman
• date of first appointment: February 1, 2005, current term: May 2009
• former vice-president of Shell Chemicals Ltd.
• chairman of the Supervisory Board of Synbra Group B.V.
• member of the Supervisory Board of Koninklijke Vopak N.V.
H. Heemskerk (1943)
• date of first appointment: July 1, 2006, current term: May 2009
• chairman of the Board of Management of Rabobank Nederland
• member of the Supervisory Board of VADO Beheer B.V.
• member of the Board of Stichting Vereniging voor de Effectenhandel
• chairman of the Board of Stichting Geld- en Bankmuseum
M. Niggebrugge (1950)
• date of first appointment: August 30, 2006, current term: May 2009
• director of finance and member of the Board of Management of Nederlandse Spoorwegen N.V.
• chairman of the Supervisory Board of Strukton Groep N.V.
• member of the Executive Board of Vereniging VNO-NCW
M. van der Vorm (1958)
• date of first appointment: May 18, 1993, current term: May 2007
• chairman of the Board of Management of HAL Holding N.V.
• member of the Supervisory Board of Anthony Veder Group N.V./ Koninklijke Vopak N.V.
All members of the Supervisory Board are Dutch.
They do not hold shares or associated option rights in Royal Boskalis Westminster nv.
Secretary
S.P. van Woensel (1969)
The above information is valid as at March 14, 2007. Report of the Supervisory Board
Financial statements
In accordance with Article 27 of the Articles of Association of Royal Boskalis Westminster nv, the Supervisory Board presents the Annual Report for 2006 to the Annual General Meeting of Shareholders. The Annual Report for 2006, including the financial statements for the same year, was compiled by the Board of Management. The financial statements are accompanied by the audit report of the company’s external auditors, KPMG Accountants N.V. On the day on which the call for the Annual General Meeting of Shareholders was issued, the Board of Management sent the financial statements to the Boskalis Works Council for its information.
We recommend to the Annual General Meeting of Shareholders:
• the adoption of the financial statements, including the proposed profit appropriation;
• the discharge of the members of the Board of Management in respect of their management activities;
• the discharge of the members of the Supervisory Board for their supervision of management during the year 2006;
• the distribution of a dividend to shareholders of € 2.04 per share.
Composition of the Board of Management
There was a change to the Board of Management in the year under review. The Supervisory Board appointed Mr J.H. Kamps to the Board of Management and to the position of Chief Financial Officer after the shareholders approved this appointment at an Extraordinary General Meeting of Shareholders on January 13.
With effect from the end of the General Meeting of Shareholders on May 8, 2006, Mr R. van Gelder, the chairman of the Board of Management, stepped down since he was to reach the age of retirement later in the year.
The vice-chairman of the Board of Management, dr. P.A.M. Berdowski, succeeded Mr Van Gelder as the chairman of the Board of Management with effect from the same date.
Composition of the Supervisory Board
During the course of the year under review, there were significant changes to the composition of the Supervisory Board. On March 13, 2006, the company announced that three of the five members of the Supervisory Board had resigned with immediate effect. The members in question were Mr M. Minderhoud, Mr H. Benjamins and Mr A.A. Westerlaken. The underlying reason was a difference between the views of the Board of Management and the Supervisory Board with respect to the way in which the chairman of the Board of Management was to be appointed in the future. During the General Meeting of Shareholders, there were extensive discussions about this difference, and about the departure of the members of the Supervisory Board in question. Mr R.M.F. van Loon succeeded Mr Minderhoud as the chairman of the Supervisory Board.
In order to fill the resulting vacancies, in consultation with the Works Council, and in accordance with the Profile Description for the Supervisory Board, Mr H. Heemskerk and Mr M. Niggebrugge were nominated as new members of the Supervisory Board. Both nominees were subsequently appointed by the shareholders during two Extraordinary Meetings of Shareholders and joined the Supervisory Board on July 1, 2006 and August 30, 2006 respectively.
It was announced in a press release dated December 15, 2006 that the Supervisory Board wishes to nominate Mr C. van Woudenberg for appointment to the Supervisory Board during the General Meeting of Shareholders on May 9, 2007. His appointment will return the Supervisory Board to the original number of members. At the same meeting, the agenda will also include the proposal to reappoint Mr Van der Vorm with effect from the same date in accordance with the nomination from the Supervisory Board. Report of the Supervisory Board
Report of the Supervisory Board
Mr Van der Vorm has been nominated for reappointment because of his extensive experience as a Supervisory Board member with the company and the excellent way in which he has performed his duties. The Board is therefore pleased that Mr Van der Vorm has expressed his willingness to serve on the Board for another term.
Activities of the Supervisory Board
With both the old and new members, the Supervisory Board engaged in a range of activities during the past year. It had seven meetings with the Board of Management. All members of the Supervisory Board were present at five of those meetings. Preparations for the meetings were made by the chairman of the Supervisory Board and the chairman of the Board of Management.
Permanent items on the agenda were the development of the results, the balance sheet, and industry and market developments. Other subjects discussed included the corporate budget, liquidity, continuity, acquisition and investment proposals, organizational structure, internal control and risk management, as well as the personnel policy, and health, safety and the environment.
Corporate strategy was discussed at two meetings. The implementation of the shipbuilding program was also covered.
Unusual items on the agenda were the composition of the Supervisory Board, the remuneration policy, the amendment of the company’s articles of association, and the change to the company’s dividend policy. The last two items were also submitted to the General Meeting of Shareholders, where they were approved. The regulations relating to ‘principles and best practices for the Supervisory Board’ were also revised and posted on the company website.
Introductory meetings were organized during the year under review for the new members of the Supervisory Board, with the focus being on general, financial and legal affairs, financial reporting by the company, and the specific factors particular to Boskalis and its corporate activities.
The Supervisory Board has three core committees, namely the Audit Committee, the Remuneration Committee, and the Selection and Appointment Committee.
The core committees performed their assigned tasks as described below.
Audit Committee
The Audit Committee met twice during the year under review to discuss issues including the financial reporting for the 2005 financial year, subjects such as IFRS, risk management, internal control, financial accounting and control systems, and relevant legislation and regulations.
The chairman of the Board of Management and the chief financial officer attended all meetings of the Audit Committee, as did the external auditor from KPMG. The meetings also covered KPMG’s audit approach and activities. The full Supervisory Board was supplied with reports on the meetings and the findings.
