Letter from the Managing PartnerThe transitional year behind us was very demanding. The dedication and hard work shown by our people, bringing value to our clients, day in day out, under challenging circumstances make me feel very proud. On July 1, 2016 I took over the position of Country Managing Partner from Marcel van Loo, who guided the organization through a period of transition with enormous drive. In 2013 we were on the eve of mandatory audit rotation, coinciding with the launch of a sweeping program to further improve our quality and change our culture. We were also embarking upon our global Vision 2020 journey with the purpose of building a better working world and the ambition of making EY a distinctive professional services organization by 2020. Marcel left an organization behind with motivated people and a balanced client portfolio. I have a great deal of respect and gratitude for Marcel’s achievements.
Balanced client portfolio in audit and non-audit services
Mandatory audit rotation was a challenging, far-reaching process that affected our entire organization and entailed a fundamental reconfiguration of all our service lines’ client portfolios. In the end, it produced many rewarding new engagements for both our audit and non-audit (tax, advisory and transaction advisory services) practices. We owe this to thorough preparation, to being connective, responsive and insightful to our clients, to our use of highly engaged teams and to being a true global multidisciplinary professional services organization.
In this transitional year, we focused on the meticulous transfer of final-year audits and the start and consolidation of new engagements.
We also invested a great deal in forging solid long-term relationships centering on exceptional client service and quality.
Year of transition reflected in the results
In line with our expectations, next to having one production week less than in FY 2014/2015, this year of transition is reflected in our results. The audits we had to hand over to other firms and the non-audit restrictions due to audit gains and strict independence regulations impacted negatively on the results and newly-won accounts have so far been unable to provide full compensation.
Our revenue grew by 2%, from €710 million to €727 million in FY 2015/2016, behind our objectives. Assurance saw its revenue increase by
€6 million to €303 million. Tax reported a €2 million increase to €255 million. Advisory saw its revenue grow by €1 million to
€98 million. In a strong market, Transaction Advisory Services increased its revenue by €2 million to €39 million. The hiring of – on balance – more than 300 professionals and higher investments in quality, training, technology and workplaces accounted for higher operating expenses. Profit fell by 8% to €135 million.
Innovation, digitization and strategic relationships
We live in a highly complex, interconnected world. Many trends have influenced our business over the past few years. One in particular is on our mind these days: digitization is continuing to reshape the way we lead our lives and do business. The development of new digital services for our clients, the adaptation and future-proofing of existing services and the strengthening of our innovative power will have high priority in the years ahead.
During FY 2015/2016 we acquired Integrc, i3 and Montesquieu. They enrich our strategy, as do our support for startups, the creation of a more innovative culture and alliances in the fields of technology and innovation. In this report, you can read what the innovative EY professionals and young entrepreneurs we support think of these developments and how technology helps us improve our processes.
Setting the new standard
With a balanced portfolio in place and stronger foundations underpinning our organization, we need to take the next step in our ambition to be a leading distinctive professional services firm. We need to increase our investments and our focus on further quality improvements, cultural change and stakeholder dialogue.
Governance, accountability, quality, risk management and, increasingly, ethics are defining our field of operations. Not only in audit but in all our professional services. Rules, working agreements and protocols are key factors underpinning our desired quality level. But they are not everything. Real quality calls for more. It needs the right culture and behavior. Systems, supports and structures only provide the necessary framework. What really makes us distinctive are our people having a mindset of thinking critically, objectively and independently, and asking better questions – because better questions lead to better answers. These better answers help our clients to be successful and inspire confidence among our other stakeholders which will, ultimately, lead to a better working world.
To achieve this, our standards must be crystal clear. We are accordingly working on new norms that we believe the auditors and advisers of the future must live up to.
Norms that guide their behavior and that highlight the role our people play in their professional relationships. Our people must understand our clients, appreciate the way we work with each other, the way we understand society and the way we work in partnership.
We must also be willing and able to account for the choices we make. The quality of our services is at the heart of everything we do. Innovation can help us in this area, too. Smart technology will let us work more efficiently and improve our understanding of the risks. But it must not be allowed to compromise our effectiveness or entrepreneurship. We must give our people the space they need as entrepreneurs. This is the way to remain an attractive employer. Being a partner organization has benefits: we are professionals with the spirit of partnership. This promotes entrepreneurship, innovation and personal freedom.
The year ahead will be at least as challenging as the year behind us. But I have every confidence that we will rise to the challenges. I can see how committed and resilient our people are. How creative and enthusiastic they are, too. In recent years, we have created the right setting for quality. We are now going a step further by introducing a recognizable standard based on the principle: be better than yesterday, every day. That is how we build a better working world.
On behalf of the Board of Directors I want to thank everyone for their hard work and dedication in the past year.
Country Managing Partner, EY the Netherlands