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ANNUAL REPORT 2008 (23
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KEY FIGURES
Amounts in DKK million (unless otherwise stated) 2008 2007 2006 i 2005 =
Revenue ” 68,829 63,922 55,772 31,741
Operating profit before other items : ' 4,061 3,835 3,234 1,932
Operating margin before other items, % 5,9 6.0 5,8 6.1
EBITDA ” - 4,622 4,484 3,764 1,979
Adjusted EBITDA ”:2 4,930 4,680 3,979 2,383
Operating profit d 3,753 3,639 3,019 1,528
Net finance costs (2,731) (3,017) (2,351) (1,721)
Profit before goodwill impairment/amortisation of brands and customer contracts 494 376 226 (410)
Net t profit/(Ioss) for the year » 9 (631) (442) (809) (945)
Additions to property, plant and equipment, gross 964 938 907 |
Cash flow from operating activities 4,334 3,713 3,195
Investment i: in intangible a assets, S, property plant and "equipment, n ne (718) (715) (843) ll
Total assets 53,605 55,348 52,253
Goodwill 27,259 27,593 26,178
Carrying. amount of net debt ” …29,385..…29,245 26,271 Ål.
Total equity ” hl kl 333 ME 8 3 ;280
Financial ratios ”
Interest coverage 1.8 1.6 1.7
Cash conversion, % 103 99 102
Employees on full-time, % 69 68 66
Number of employees at 31 December 472,800. 438,100 391,400 i 310,800 &
Growth
Organic growth, % . 5.3 6.0 5.5
Acquisitions, net, % 6 9 15
Total revenue, % 8 15 20k
Currency adjustments, w (3) (0) Og
Other Financial Measures (unaudited) 5)
Pro Forma Adjusted EBITDA 5,064 4,866 4,203
Pro Forma Net Debt 29,978 29,981 27,714
Pro Forma Net Debt / Pro Forma EBITDA 5.92x 6.16x 6.59x &
Note: Except for the key figures that can be directly derived from the consolidated financial statements on pages 51-110 of this report, the key figures and ratios above are not measures
of financial performance under Danish GAAP or IFRS. The Group includes these financial measures because it believes that they are appropriate measures of the Group's financial perform-
ance. Other companies, including those in ISS's industry, may calculate similarly titled financial measures differently.
+ ISS Holding A/S was founded on 11 March 2005, while the activities of ISS were acquired on 9 May 2005. Consequently, the 2005 figures do not represent full year figures and it is therefore
not possible to conduct a proper comparison with the 2005 figures.
The applied accounting principles are described in note 1, Significant accounting policies in the consolidated financial statements.
1 See page 131 for definitions.
2 Adjusted EBITDA, as calculated by the Group, represents Operating profit before other items plus Depreciation and amortisation. By using Operating profit before other items for the
calculation of adjusted EBITDA instead of Operating profit, the Group excludes from the calculation of adjusted EBITDA integration costs relating to acquisitions and those items recorded
under Other income and expenses, net, in which the Group includes income and expenses that it believes do not form part of the Group's normal ordinary operations, such as gains and
losses arising from divestments, the winding up of operations, disposals of property, restructuring and certain acquisition related costs. Some of the items that the Group records under
the line item Other income and expenses, net, are recurring and some are non-recurring in nature.
3 Excluding Goodwill impairment and write-down and Amortisation of brands and customer contratcs.
9 including minority interests.
5 The Pro Forma adjusted financial information is for informational purposes only. See page 132, Capital Structure, for further information on Other Financial Measures.
ISS AT A GLANCE
Banen RR
ERHVERVS- OG SELSKANSSTYRELSEN
20 APR, 2009
ISS IS ONE OF THE WORLD'S LARGEST COMMERCIAL PROVIDERS OF FACILITY SERVICES WITH SEVERAL
HUNDRED THOUSAND BUSINESS-TO-BUSINESS CUSTOMERS ACROSS THE WORLD. THE COMPANY HAS
OPERATIONS IN OVER 50 COUNTRIES IN EUROPE, ASIA, PACIFIC, LATIN AMERICA AND NORTH AMERICA.
ISS is among the world's largest private employers,
the vastmajority of its more than :472,000 employees
are in the front-line delivery of services.
Through a network of local operations, ISS offers
Facility Services on an international scale, leveraging
knowledge and experience between countries to
the benefit of its customers. it is ISS's ambition to
develop partnerships with its customers, enabling
them to focus attention and resources on their core
business by outsourcing a broad range of support
services to ISS.
Facility Services
ISS's core business is to manage and deliver Facility
Services, covering a range of business support ser-
vices within Cleaning, Office Support, Property Ser-
vices, Catering, Security and Facility Management.
The services are delivered as Single Services, Multi
Services or as an Integrated Facility Services (IFS)
solution with on-site management through a single
point of contact with the customer.
Organisation
ISS's head office is located in Copenhagen, Den-
mark. The business is managed through a regional
and country-based organisation with corporate
excellence centres. This structure enables the Group
to customise its service offerings to meet local de-
mands while at the same time offering cross-border
solutions.
Ownership
ISS-Equity A/S, a company indirectly- owned by
funds advised by EQT Partners and Goldman Sachs
Capital Partners, is the owner and single share-
holder of ISS Holding A/S.
Management
Decisions regarding ISS's strategy and financing
are the responsibility of the Board of Directors and
Executive Group Management. Jørgen Lindegaard
is Group Chief Executive Officer.
History
The history of iSS starts more than a hundred years
ago. The ISS Group was founded as a small Danish
security company in 1901. Selected key milestones
of the Group's history are listed opposite.
Vision
ISS has a strong position in the global Facility Ser-
vices market. To maintain this position, ISS continues
to focus on following the ISS vision:
Lead
globally
by leading
Facility Services
locally
Facility Services
ISS MILESTONES
1901
1934
1946
1968
1973
1975
1977
1989
1997
1999
ISS was founded in Copenhagen, Denmark as a small
security company with 20 night watchmen named
Kjøbenhavn-Frederiksberg Nattevagt (Copenhagen-
Frederiksberg Night Watch)
ISS entered the cleaning business with the establishment
of Det Danske Rengørings Selskab A/S (The Danish
Cleaning Company) as an independent subsidiary of
the security company
The first geographical expansion outside Denmark:
Swedish subsidiary established
The company adopted the ISS name
Overseas expansion started
Group revenue reached DKK 1 billion
ISS shares listed on the Copenhagen Stock Exchange
The total number of employees in the Group reached
100,000
Strategy aim2002 launched. This strategy focused on
multi services — selling a number of services to the same
customer
ISS acquired Abilis, the second largest European provider
of cleaning and specialised services, in a DKK 3.6 billion
acquisition, the Group's largest ever. Abilis had about
50,000 employees and annual revenues of DKK 5.2 billion
in 1998. The total number of employees in the Group
reached 200,000
REVENUE BY SERVICE 2008
CLEANING 53%
CATERING 8%
PROPERTY SERVICES 23%
OFFICE SUPPORT 6%
SECURITY 6%
Bu & & BOM &
FACILITY MANAGEMENT 4%
2000
2003
2005
2006
2007
2008
A new five-year strategy, create2005, launched, intro-
ducing the Facility Services concept
ISS's first major pan-European Integrated Facility Services
contract signed
A new strategy was introduced aiming at a continuous
transformation of ISS towards an Integrated Facility
Services company. ISS A/S-was acquired-by. funds-advised
by EQT Partners and Goldman Sachs Capital Partners, and
de-listed from the Copenhagen Stock Exchange. The total
number of employees in the Group reached 300,000
Group revenue passed DKK 50 billion. ISS made the
second-largest acquisition in company history, when
acquiring the outstanding 51% of the shares in Tempo
Services Ltd. in Australia
Group revenue passed DKK 60 billion. ISS entered the US
market through the acquisition of Sanitors Inc. The total
number of employees in the Group reached 400,000
Introduction of ISS's strategy plan ”The ISS Way”, which
focuses on further aligning the business model and
strengthening knowledge-sharing abilities. 155's largest
ever international Integrated Facility Services contract
was signed
ANNUAL REPORT 2008
ISS HOLDING A/S
ARTE ENDE TEE HEE SUE NNE
CONTENTS
KEY FIGURES
ISS AT A GLANCE
LETTER TO OUR STAKEHOLDERS
COMPANY REPORT
COUNTRY OVERVIEW
— FINANCIAL REVIEW
STRATEGY — THE ISS WAY
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
MANAGEMENT
MANAGEMENT STATEMENT
INDEPENDENT AUDITOR'S REPORT
CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
DEFINITIONS
CAPITAL STRUCTURE
PHOTO CREDITS
COVER
COVER
17
18
25
36
42
44
47
48
51
112
131
132
136
LOUISE AGGER
livers an Integrated Facility Services solution to Fritz Hansen
rand herisScolleagues provide; Cleaning, Catering,
Property Services and Office Support to Fritz Hansen's production
location and their headquarters in Denmark. Fritz Hansen A/S pro-
exclusive modern Danish furniture designed and
ous Danish architects.
LETTER TO OUR STAKEHOLDERS
The I$S Group achieved a number of milestones in 2008 that
moved the company towards the Group's vision to ”Lead
Facility Services globally — by leading Facility Services locally”,
and continued the transition towards becoming a true global
Integrated Facility Services provider.
ISS introduced ”The ISS Way” strategy plan, which builds
on previous strategy plans, but takes new steps towards im-
proving the ISS value propositions towards customers, align-
ing the 1$S business model and strengthening knowledge
sharing across the Group. The ISS Way focuses on continuing
to develop single-service excellence concepts and Integrated
Facility Services capabilities, regional and global knowledge
and best-practice sharing, as well as focusing on cross-bor-
der sales.
ISS continued to develop its service mix to broaden the
Group's service offering by building up critical mass of ser-
vices in selected countries, and expanding further both or-
ganically and through acquisitions, particularly in growth
regions.
As a direct result of establishing a global Corporate Client
organisation in 2007, ISS won its single largest contract in the
company's history, with HP, a leading international techno-
logy solutions company. This international Integrated Facility
Services contract covers more than 45 countries in Europe,
the Middle East, Asia and Africa and is a significant mile-
stone in ISS's pursuit of the Group's vision of being the lead-
ing global Facility Services provider.
Considering the turmoil in the financial markets and the se-
vere economic challenges experienced in the global economy
in the second half of 2008, ISS maintained a satisfactory per-
formance. We sustained our key focus on cash flow and this
resulted in a strong cash conversion of 103% and a reduction
in debtor days of almost 2 days compared with 2007.
Total Group revenue reached just under DKK 69 billion, an in-
crease of 11% from 2007 excluding foreign exchange adjust-
ments that reduced revenue by 3%. ISS passed another new
milestone in October 2008, when monthly revenue exceed-
ed DKK 6 billion for the first time in the company's history.
In line with broadening the Group's service offering, reve-
nue from Catering and Security increased by 36% and 28%,
respectively, in 2008. IFS solutions accounted for more than
16% of total Group revenue in 2008, illustrating our strate-
gic development towards becoming the leading provider of
Integrated Facility Services
ISS delivered an organic growth rate of 5.3% in 2008, fuelled
by growth in all regions and almost all countries, with Asia
and Latin America once again delivering double-digit or-
ganic growth rates.
ISS maintained its focus on operational efficiency and profit-
ability while growth continued across the Group. This re-
sulted in an operating margin before other items of 5.9%
in 2008, achieved in more challenging market conditions
than in previous years. Operating profit before other items
amounted to DKK 4.1 billion, up by 6% compared with 2007.
Net finance costs, income taxes and non-cash charges re-
lated to goodwill impairment and amortisation of customer
contracts led to a net loss for the year of DKK 631 million.
The net cash in-flow from operating activities increased by
16% to DKK 4.3 billion in 2008.
The Chairman of the Board of Directors Sir Francis Mackay,
decided to step down from the Board in December 2008 and
was succeeded by Ole Andersen. We wish to thank Sir Francis
for his important contribution to ISS over the years and wish
him the very best for the future.
ISS is one of the world's largest private employers and con-
tinued to grow in 2008, when almost 35,000 new employees
joined the Group. By the end of the year, ISS had more than
472,000 employees in over 50 countries serving more than
200,000 business-to-business customers every day. On be-
half of the management of ISS, we would like to welcome
the many new employees who joined the company during
2008, and to express our gratitude to all our employees for
their dedicated work. They are the primary reason for the
successful performance of ISS.
Yours faithfully,
Ole Andersen
Chairman
Jørgen Lindegaard
Group Chief Executive Officer
ANNUAL REPORT 2003 -5
LEUNG WAIN YEE
aq
vi
z
«
w
5
CHEUNG KA LAM AND CHC Ni
COMPANY REPORT
BUSINESS HIGHLIGHTS OF THE YEAR
2008 was characterised by the continued focus on cash
flow, profitability and growth. During 2008, ISS achieved a
number of milestones that moved the company towards the
Group's vision to ”Lead Facility Services globally - by leading
Facility Services locally.”
In 2008, ISS introduced ”The ISS Way” strategy plan, which
continued to focus on the needs of the customers and to
drive Integrated Facility Services (IFS) solutions and efficien-
cies. Furthermore, the strategy takes new steps towards
aligning the ISS business model and strengthening know-
ledge sharing across the Group. The ISS Way focuses on con-
tinuing the development of single-service excellence con-
cepts and Integrated Facility Services capabilities, regional
and global knowledge and best-practice sharing, as well as
increased focus on cross-border sales.
In 2008, total Group revenue amounted to DKK 68.8 billion,
an increase of 8% from 2007. ISS passed another new mile-
stone in October 2008, when monthly revenue surpassed
DKK 6 billion for the first time in the company's history.
During the year, ISS continued to develop its service mix to
broaden the Group's service offerings, by building up criti-
cal mass of services in selected countries, and expanding
further both organically and through acquisitions, particu-
PERFORMANCE HIGHLIGHTS
> Revenue growth in the continuing business was 13% at constant
exchange rates. Adverse foreign exchange adjustments and
divestments reduced the growth to 8%
> Operating margin before other items was 5.9% in 2008
> … Cash conversion increased from 99% in 2007 to 103% in 2008
> … Cash flow from operations increased from DKK 3.7 billion in
2007 to DKK 4.3 billion in 2008
> Financial deleveraging continued with decrease from 6.16x pro
forma EBITDA in 2007 to 5.92x pro forma EBITDA in 2008
ANNUAL REPORT 2008 -7
larly in growth regions. The transition towards becoming a
true global Integrated Facility Services provider continued.
Integrated Facility Services sales accounted for 16% of total
Group revenue in 2008.
In order to strengthen our service offerings and pursue
opportunities in countries with high growth potential, ISS
acquired more businesses. By the end of the year, ISS had
completed a total of 66 acquisitions with total annual reve-
nue estimated at approximately DKK 3.9 billion.
In line with strategy, ISS focused on acquisitions within Ca-
tering and Security services, which accounted for 25% and
22% of total acquired revenue, respectively. ISS continued
investing in Cleaning services through acquisitions, which
-—- -accounted for-26-% ofthetotalaequired revenue.
Considering the turmoil in the financial markets and the se-
vere economic challenges experienced by the global econo-
my in the second half of 2008, ISS maintained a satisfactory
performance.
The organic growth for the year was 5.3%, slightly lower
than in 2007. All regions and almost all countries added to
the organic growth with Asia and Latin America once again
achieving double-digit organic growth rates.
Throughout the year, ISS remained focused on operational
efficiency. Operating profit before other items amounted to
DKK 4.1 billion, up by 6% compared with 2007, ISS maintained
a solid operating margin before other items of 5.9% in 2008.
2008 REVENUE BY REGIONS
ISS generated positive cash flow and increased the net in-
flow from operating activities from DKK 3.7 billion in 2007
to DKK 4.3 billion, due to a combination of an improved ope-
rational result and a strong cash conversion.
In 2007, ISS implemented a global Corporate Client organi-
sation in order to win IFS contracts with large multinational
or global clients. As a direct result, in March 2008, ISS en-
tered into an international Integrated Facility Services con-
tract with HP, a leading international technology solutions
company. This contract covers more than 45 countries in
Europe, the Middle East, Asia and Africa and is the largest
contract in ISS history as well as a significant milestone in
ISS's pursuit of the corporate vision of being the leading
global Facility Services provider.
At the end of the year, ISS had more than 472,000 employ-
ees worldwide. Hence since year-end 2007, a net increase of
roughly 35,000 employees joined the company as a result of
either organic growth or through acquisitions.
REGIONAL DEVELOPMENT
The "ISS world" consists of seven regions: Nordic, West-
ern Europe, Eastern Europe, Asia, Latin America, the USA
and Pacific. The key principle for grouping countries is that
countries share market conditions and culture to the largest
possible extent. The grouping also reflects the differences
between mature regions and growth regions.
NORDIC 25%
WESTERN EUROPE 57%
EASTERN EUROPE 2%
ASIA 5%
LATIN AMERICA 3%
USA 3%
HH MM ES BE SS E E&
PACIFIC 5%
8 - ANNUAL REPORT 2008 | COMPANY REPORT
In the fourth quarter of 2008 and the beginning of 2009,
those countries in Europe most exposed to the industry seg-
ments experienced a slow down, including France, Belgium,
Spain and a number of Eastern European countries.
Nordic
The Nordic region comprises Denmark, the Faroe Islands,
Finland, Greenland, Iceland, Norway and Sweden.
The Nordic market is one of the more mature markets in the
ISS Group, and ISS is the leader within the facility services
market throughout the region.
The strategy for the Nordic region continues to focus on
mainly organic growth and on developing Single Services
and Integrated Facility Services concurrently. A cornerstone
for continuous success in the Nordic markets is to provide
the best service within each of the single-service markets.
Consequently, in 2008, great efforts were made to further
develop not only Integrated Facility Services, but also each
of the Single Services.
In 2008, revenue in the Nordic region increased by 4%
from DKK 16,488 million in 2007 to DKK 17,071 million.
The increase was driven by positive organic growth of 5%
throughout the region. The main contributors were Norway,
Sweden and Finland. Growth from acquisitions contributed
1% growth while currency adjustments decreased revenue
by approximately 2% for the region.
Operating profit before other items in the Nordic region
2008 REVENUE NORDIC
amounted to DKK 1,189 million compared with DKK 1,162
million in 2007. The operating margin in the region was
7.0% in 2008, in line with the margin realised in 2007. This
was due to an operating margin increase in Denmark, offset
by slight margin decreases in the other countries. In Norway,
the 2008 performance was negatively impacted by below
average margin projects in the building maintenance activi-
ties and was positively impacted by a recognised curtailment
gain of DKK 30 million related to defined benefit pension
plans. The operating margin in 2007 was impacted by cur-
tailment gains on defined benefit schemes of DKK 32 million
and DKK 13 million in Sweden and Norway, respectively.
Western Europe
The Western European region comprises Austria, Belgium &
Luxembourg, France, Germany, Greece, Ireland, Israel, Italy,
the Netherlands, Portugal, Spain, Switzerland, Turkey and
the United Kingdom.
The Western European market is a generally mature market
characterised by a high level of single-service outsourcing.
The market is becoming increasingly professional and is
gradually moving towards Multi Services and Integrated
Facility Services driven by customers constantly searching for
efficiency and cost reductions while focusing on their own
core businesses.
In 2008, revenue in the Western European region increased
by 4% from DKK 37,709 million in 2007 to DKK 39,337 mil-
lion. Organic growth was 4% and growth from acquisi-
tions was 6%, while divestments and currency adjustments
2008 REVENUE WESTERN EUROPE
EH DENMARK 22%
HE FINLAND 21%
Em NORWAY 33%
M SWEDEN 23%
HE OTHER 1%
AUSTRIA 4%
BELGIUM 7%
FRANCE 24%
GERMANY 6%
ISRAEL 4%
NETHERLANDS 9%
SPAIN 12%
SWITZERLAND 6%
UNITED KINGDOM 19%
OTHER 9%
GR RERERSR ES NN UEE
COMPANY REPORT | ANNUAL REPORT 2003 -9
each reduced revenue for the region by approximately 3%.
With the exception of the Netherlands and France, orga-
nic growth was positive in all countries in the region with
Greece, Turkey and Israel delivering double-digit organic
growth rates. In France, the largest ISS country, revenue de-
creased as a result of the divestment of the non-core energy
activities, which generated revenue of DKK 909 million in
2007. Adjusted for this effect, revenue in France increased
by 1% in 2008.
Operating profit before other items in Western Europe
amounted to DKK 2,356 million in 2008, the same as in 2007.
The operating margin of 6.0% was 0.2 percentage points
lower compared with 2007, which was due to the Nether-
lands, where operational challenges, mainly in three busi-
-ness units, resulted in losses and-a margin -reduction from
6.0% in 2007 to 2.9% in 2008. Turnaround plans are being
implemented, including changes in management teams,
organisational set ups and business processes. The margin
is positively impacted by one-off income, net of DKK 45
million related mainly to settlement of a dispute on social
charge contributions for prior years. Furthermore, Germany,
Switzerland and France realised slightly lower margins than
in 2007. The margin decreases were partly offset by margin
increases in Ireland and Turkey. In Ireland the increase was
due to the successful restructuring of the business activi-
ties following the divestment of the landscaping division in
August 2007.
Eastern Europe
The Eastern European region comprises Croatia, the Czech
Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia
and Slovenia.
The Eastern European region remained a growth region for
ISS in 2008. While continuing to increase critical mass in all
countries within Cleaning as the core business platform, the
service transformations continued in 2008, within Property
Services and Catering in particular, as a result of compe-
tence-enhancing acquisitions in 2007 and 2008.
In line with the focus on growth regions, revenue in Eastern
Europe increased by 36% from DKK 1,226 million in 2007 to
DKK 1,663 million in 2008. The increase was driven by ac-
quisition growth of 19% and organic growth of 9%. The or-
ganic growth was positive in all countries in the region with
the exception of Slovakia. Currency adjustments increased
revenue by 8% compared with 2007.
The operating profit before other items in Eastern Europe
increased by 35% to DKK 124 million in 2008. The operating
margin was 7.4% in 2008, the same as in 2007. In addition to
10 - ANNUAL REPORT 2008 | COMPANY REPORT
the significant 2008 revenue growth in the region all coun-
tries, apart from Slovenia, Slovakia and Croatia, increased
their operating margin in 2008 compared with 2007.
Asia
The Asian region comprises Brunei, China, Hong Kong, India,
Indonesia, Malaysia, the Philippines, Singapore, Sri Lanka,
Taiwan and Thailand.
The service transformation from predominantly Cleaning to
the current service split with which Cleaning only accounts
for 51% of revenue is well under way in the region. The key
transformational moves have been a number of acquisitions
within Office Support, Property Services and Catering, in
particular. The latest of these acquisitions is Golden Mind
Services in. Thailand, aamanpower.company. that.-added ap.
proximately DKK 204 million annual revenue and 9,000 em-
ployees to ISS in Thailand.
Revenue in Asia increased by 31% from DKK 2,409 million in
2007 to DKK 3,147 million in 2008. The increase was driven
by 20% organic growth and 18% growth from acquisitions,
partly offset by a 7% decrease from adverse currency adjust-
ments. The organic growth was driven mainly by India and
Indonesia, and organic growth rates were double-digit in all
countries in the region except Brunei and Taiwan.
The operating profit before other items in Asia increased by
33% to DKK 210 million in 2008 compared with DKK 158 mil-
lion in 2007. The operating margin increased to 6.7% compared
with 6.6% in 2007. This was due primarily to operating margin
increases in Malaysia, India, Taiwan and Singapore, partly off-
set by margin decreases in the Philippines and Thailand.
Latin America
The Latin American region comprises Argentina, Brazil,
Chile, Mexico and Uruguay.
The current regional geographical footprint places ISS in a
unique position to exploit the growth potential that catego-
rises Latin America as one of the world's emerging markets.
ISS continued to refine its single-service and multi-service
delivery model in 2008. Furthermore, as the IFS market in
Latin America has a rather low maturity level, ISS has con-
tinued to focus on consolidating and expanding the service
mix and capabilities to drive the request for service delivery
through IFS. During 2008, ISS acquired strategically impor-
tant catering companies in Mexico and Uruguay, which have
significantly strengthened our catering offering in the re-
gion. ISS also entered the security market in Chile through
an acquisition.
Revenue in Latin America increased by 27% from DKK 1,484
million in 2007 to DKK 1,890 million in 2008. Organic growth
was 17% and all countries delivered double-digit growth rates.
Growth from acquisitions was 14%, and currency adjustments
reduced the revenue for the region by approximately 4%.
The operating profit before other items in Latin America in-
creased by 27% to DKK 109 million in 2008. The operating
margin was 5.8%, the same as in 2007. All countries in the
region except Brazil increased their operating margin in 2008.
USA
ISS entered the USA in June 2007 through the acquisition of
the cleaning company Sanitors, Inc. In April 2008, ISS further
strengthened its presence in the USA through the acquisi-
tion of BGM Industries, adding DKK 510 million in estimated
annual revenue. BGM Industries is primarily a cleaning com-
pany with a strong position in the Midwest and a special
expertise in airport cleaning. More than 70% of US revenue
originates from cleaning, which makes ISS the eighth-largest
provider in the US cleaning market.
Outsourcing of Facility Services and Facility Management are
already well accepted by US corporations — however only a
few providers offer IFS. This represents a significant oppor-
tunity for ISS and we will focus on building IFS capabilities
suitable for the US market.
Revenue in the USA amounted to DKK 2,131 million in 2008,
with organic growth contributing 6%.
The operating profit before other items in the USA amount-
ed to DKK 128 million in 2008 compared with DKK 62 million
in 2007, which included only seven months of operations.
The operating margin in 2008 was 6.0% compared with
5.6% in 2007.
Pacific
The Pacific region comprises Australia, which ISS entered in
2002 and New Zealand, which ISS entered in 2005. ISS Austra-
lia delivers more than 90% of the revenue in the region.
2008 was a year of consolidation with focus on integration
and margins in the Pacific region. Furthermore, ISS New
Zealand consolidated its position within the security market
through the acquisition of the manned guarding and mobile
patrolling activities from Chubb, an international security
provider in New Zealand, in December.
Revenue in the Pacificregion increased by 3% from DKK 3,519
million in 2007 to DKK 3,614 million in 2008. The growth was
driven primarily by organic growth of 4% stemming from
positive organic growth in both Australia and New Zealand.
Acquisitions increased revenue by 5%, while currency ad-
justments reduced revenue by approximately 6%.
The operating profit before other items in the Pacific region
amounted to DKK 230 million in 2008 compared with DKK
225 million in 2007. The operating margin in the region
amounted to 6.4% in 2008, the same as in 2007. This was ne-
gatively impacted by a decrease in income related to work-
ers compensation incentives received from the Australian
government, which decreased from DKK 34 million in 2007
to DKK 20 million in 2008.
BUSINESS DEVELOPMENT IN 2008
In line with The ISS Way strategy, we continue to strengthen
the services we offer to the clients. During 2008, country ope-
rations continued their ongoing effort to improve single-
service offerings and the way in which services are delivered
while continuing to develop their Integrated Facility Services
capabilities.
SERVICES
Cleaning
ISS's Cleaning offering encompasses a range of services
within daily office cleaning, hospital cleaning, food hygiene,
industrial cleaning, cleaning in transport systems, dust con-
trol, washroom services and specialised cleaning e.g. of win-
dows, communication equipment etc.
In 2008, Cleaning remained ISS's largest business area, re-
presenting 53% of total Group revenue, or DKK 36.5 billion
compared with 54% in 2007. Measured by revenue, Cleaning
grew by 5% from 2007. During 2008, ISS acquired 14 compa-
nies specialised completely or primarily in cleaning in 13 dif-
ferent countries. In total, these acquisitions added approxi-
mately DKK 1.0 billion to the Group's annual revenue.
Property Services
ISS's Property Services offering encompasses building main-
tenance, landscaping, pest control and damage control.
In 2008, revenue in Property Services amounted to DKK 15.4
billion representing 22% of total Group revenue compared
with 24% in 2007. Revenue was reduced in 2008 following
the divestment of the energy activities in France, which gen-
erated revenue of DKK 0.9 biliion in 2007, as this specialised
technical service did not match the strategic fit with the re-
maining property services offering in France.
COMPANY REPORT | ANNUAL REPORT 2008 - 11
During the year, ISS expanded its offering of property ser-
vices to new geographies and increased density in other mar-
kets where the services were already available. The offer-
ing of building maintenance and technical services was
strengthened through acquisitions in several countries, in-
cluding acquisitions in Singapore and Hong Kong. The posi-
tion in landscaping was further consolidated through acqui-
sitions in France and Spain. Finally, several smaller acquisi-
tions of pest control activities were completed throughout
the Group in 2008.
Office Support
ISS's Office Support offering encompasses the operation of
receptions, internal mail handling, scanning and other office
logistics, call centres, manpower supply, and out-placement
- services:
In 2008, Office Support accounted for approximately 6% of
total Group revenue, the same as in 2007. In absolute figures,
revenue in Office Support increased from DKK 3.9 billion in
2007 to DKK 4.1 billion in 2008. ISS's service offering within
Office Support was strengthened through nine acquisitions
spanning several countries mainly within the manpower and
temporary staffing activities, which alone added approxi-
mately DKK 0.5 billion in annual revenue.
Catering
ISS's Catering offering includes in-house restaurants, cater-
ing services e.g. for meetings and events, executive dining
and coffee solutions.
DEVELOPMENT IN REVENUE BY SERVICE
Catering accounted for about 8% of total Group revenue in
2008, or DKK 5.7 billion, up by DKK 1.5 billion compared with
last year. ISS made strategically important catering acquisi-
tions in several countries, the most significant being Sardunya
in Turkey, Topic Catering in Australia, Gastronomia Mediter-
ranea in Spain and Servicoin in Mexico. All in all, the 11 acqui-
sitions of catering companies completed in 2008 added ap-
proximately DKK 1.0 billion in annual revenue.
Security
ISS's Security offering includes primarily manned guarding,
access control and patrolling.
Annual revenue amounted to DKK 4.3 billion, equivalent to
6% of total revenue in 2008, one percentage point up from
2007. During-2008,1SS's-offering. of Security.-was significantly.
expanded through eight acquisitions of security companies
and capabilities in Chile, Finland, Greece, Hong Kong, Israel,
New Zealand, Norway, and the United Kingdom, which add-
ed approximately DKK 0.9 billion in annual revenue.
Facility Management (FM)
ISS's offering within Facility Management includes on-site
management of facility services, change management, space
management and consulting.
In 2008, Facility Management generated revenue of DKK 2.7
billion, equivalent to 4% of total revenue, the same relative
share as the year before but equal to growth of almost DKK
0.2 billion in revenue.
2008
CLEANING 53%
CATERING 8%
PROPERTY SERVICES 23%
is OFFICE SUPPORT 6%
SECURITY 6%
12 - ANNUAL REPORT 2008 | COMPANY REPORT
Mi FACILITY MANAGEMENT 4%
2007
CLEANING 54%
CATERING 7%
PROPERTY SERVICES 24%
OFFICE SUPPORT 6%
SECURITY 5%
FACILITY MANAGEMENT 4%
HH MM & MM EM MM
ACQUISITIONS
During 2008, ISS completed 66 acquisitions spanning 28
countries. Twelve of these acquisitions had annualised reve-
nue of more than DKK 100 million, see table below. With
the acquisitions, ISS gained annualised revenue of approxi-
mately DKK 3.9 billion and almost 40,000 employees.
In 2008, ISS completed the following strategic acquisitions:
Adams Secuforce — Hong Kong
In January, ISS acquired Adams Secuforce in Hong Kong.
Adams Secuforce has more than 13 years of experience with
security and guarding in both the private and public sectors,
and more than 1,600 employees.
— Security is a vital component of ISS's Integrated Facility Ser-
vices strategy in Asia, and the investment in Adams Secu-
force adds further depth to iSS's Hong Kong operations. This
acquisition firmly establishes ISS as the leading provider of
ACQUISITIONS IN 2008
fully integrated property and facility services in Hong Kong
and Greater China. The acquisition added approximately
DKK 111 million in annual revenue.
Kfir — Israel
In March, ISS acquired Kfir, the fourth largest provider of
facility services in Israel. Kfir's position has been achieved
primarily through a very good reputation for delivering
professional high-quality services resulting in long-term re-
lationships with key customers. Kfir, which is based in Haifa
in the northern part of israel, had approximately 4,500 em-
ployees and is a nationwide provider of cleaning services,
manned guarding and manpower services for a wide range
of public and B2B customers.
Kfir was acquired to expand the range of services offered. by
ISS Israel through entering the security segment and gaining
immediate critical mass. In addition, Kfir adds further critical
mass within cleaning and manpower services. The acquisition
added approximately DKK 268 million in annual revenue.
Company
Annual revenue
in DKK million ” JE
Service type
BGM Industries USA
Sardunya Turkey
Kfir Israel
Aspis Greece
Golden Mind Thailand
Topic Catering Australia
Grupo Limpul Spain
Strata United Kingdom
Chubb New Zealand
Adams Secuforce Hong Kong
Loghis Logistica Brazil
Gastronomia Mediterranea Spain
Security, Cleaning 510
Catering 298
Security, Office Support 268
Security 216
Office Support 204
Catering 184
Cleaning 159
Security 152
Security 132
Security 111
Office Support 108
Catering
12 acquisitions with more than DKK 100 million in revenue
54 acquisitions with less than DKK 100 million in revenue
” Unaudited approximate figures based on information available at the time of acquisition.
2,442
COMPANY REPORT | ANNUAL REPORT 2008 - 13
Aspis — Greece
in April, ISS acquired Aspis Security S.A., the third-largest
security provider in Greece. Aspis Security has 17 years of ex-
perience within security and manned guarding in both the
private and public sectors and a workforce in excess of 1,400
employees.
This acquisition significantly increases ISS Greece's size and
nation-wide presence. Furthermore, the acquisition provi-
des ISS Greece with a solid platform in the security services
market while serving as a major step in the strategic trans-
formation of ISS Greece into a leading nation-wide facility
services provider. The acquisition added approximately DKK
216 million in annual revenue.
BGM-— USA .
In April, ISS acquired BGM Industries in the USA, a Midwest
facility services provider. BGM has over 30 years of experi-
ence in the USA in property services and security, but has
expanded its service offering over recent years, and clean-
ing services is now the company's largest business area.
ISS gained an important presence in the US market when
acquiring Sanitors Inc. in 2007 as part of the strategy to be
a global leader in facility services, The acquisition of BGM is
consistent with ISS's strategic goal of expanding its presence
and geographical coverage and strengthening ISS's service
offering and market position in the USA. The acquisition
added approximately DKK 510 million in annual revenue
and 3,800 employees.
Topic Catering - Australia
In June, ISS expanded its business in the Australian market
through the acquisition of Topic Catering, a large catering
company established in 1988 and centred in Pilbara, a large
region dominated by the natural resources industry. Topic's
customers are predominantly large mining companies. Fur-
thermore, the acquisition through reference customers pro-
vides an opportunity to organically expand catering and
camp management services into remote areas of Australia.
The acquisition of Topic is a logical step towards ISS Australia
offering fully Integrated Facility Services to the remote na-
tural resources sector. The acquisition added approximately
DKK 184 million in annual revenue and approximately 200
employees.
Sardunya -— Turkey
In June, ISS acquired Sardunya, the third-largest provider
of catering in Turkey. The well respected catering company
provides catering services throughout Turkey and is head-
quartered in Istanbul where more than half of the revenue is
14: ANNUAL REPORT 2008 | COMPANY REPORT
generated. Sardunya was established in 1989 and has grown
organically to its size at time of acquisition with 94 kitchens
and approximately 1,500 employees. The customer portfolio
consists of primarily B2B customers, private hospitals and
private schools.
The acquisition of Sardunya added catering to ISS Turkey's
facility services platform and enables ISS to offer catering
in combination with other services in addition to pursuing
the potential within the catering market itself in Turkey. The
acquisition added approximately DKK 298 million in annual
revenue.
Golden Mind — Thailand
In September, ISS expanded its operations in Thailand into
-the growing. office. support.business segment.through the
acquisition of Golden Mind Services Ltd., the largest office
support and manpower provider in Thailand with about
9,000 employees.
The acquisition established the Office Support pillar within
ISS Thailand and added immediate critical mass. In addition,
ISS Thailand became a fully fledged provider of facility ser-
vices and significantly expanded its revenue, customer base
and workforce. The acquisition added approximately DKK
204 million in annual revenue.
Chubb — New Zealand
In December, iSS acquired the manned guarding and mobile
patrolling activities from the international security provider
Chubb in New Zealand. Together with the existing security
business, the acquired activities will provide ISS New Zealand
with nationwide coverage within the security segment.
Furthermore, the acquisition of Chubb has transformed ISS
New Zealand into a national multi-service provider and has
thereby significantly increased ISS's size and presence in New
Zealand. The acquisition added approximately DKK 132 mil-
lion in annual revenue and approximately 600 employees.
MANAGEMENT CHANGES
As announced in December 2007, Jeff Gravenhorst was ap-
pointed Group Chief Operating Officer (COO) with effect
from 1 April 2008. He continued to act as Group Chief Finan-
cial Officer (CFO) until his successor, Jakob Stausholm, was
appointed on 1 September 2008.
On 20 June 2008 John Murray Allan joined as new member
of the Board of Directors of ISS.
On 15 December Ole Andersen was appointed Chairman of
the Board of Directors of ISS, replacing Sir Francis Mackay
who stepped down from the Board.
SUBSEQUENT EVENTS
ISS has made a number of acquisitions subsequent to 31 De-
cember 2008. All acquisitions concluded between 1 January
2009 and 28 February 2009 are listed in note 11, Acquisition
and divestment of businesses, to the consolidated financial
statements.
With the exception of the above and the events described
in this Annual Report, ISS is not aware of events subsequent
to 31 December 2008 that are expected to have a material
impact on ISS's financial position.
OUTLOOK
The outlook set out below should be read in conjunction
with ”Forward-looking statements” (see below) and the
description of Risk management on pages 38-40 of this re-
port.
In 2009, ISS will continue its strategic course towards offer-
ing Integrated Facility Services, strengthening single-service
excellence and maintaining its focus on key operational ob-
jectives (i) cash flow; (ii) operating margin; and (iii) profit-
able organic growth. In 2009, ISS will continue rolling out
the initiatives included in its strategy plan - The ISS Way,
which focuses on further aligning the business model and
strengthening knowledge-sharing abilities. The initiatives
FORWARD-LOOKING STATEMENTS
indude the continued development of single-service excel-
lence concepts and Integrated Facility Services capabilities,
regional and global knowledge and best-practice sharing, as
well as increased focus on cross-border sales by strengthen-
ing the global Corporate Client organisation.
During the second half of 2008 the financiaj markets deterio-
rated but ISS has committed long-term financing in place with
only a part to be refinanced in the second half of 2010. ISS
is exploring a range of different refinancing options in order
to be well prepared for the upcoming refinancing of the EUR
850 million Medium Term Notes (EMTNs) due to mature in
September 2010. ISS also has acquisition facilities available to
continue to acquire companies in line with ISS's strategy until
May 2009.
ISS's business should be fairly resilient to the current slow
down in the global economies and ISS's business model is
well positioned to benefit from attractive sales opportu-
nities, as ISS's value proposition can help clients become
more efficient through outsourcing. Consequently, at the
prevailing currency rates and including acquisitions and di-
vestments completed up to 28 February 2009, ISS expects
revenue to continue to grow organically, although at lower
levels than in 2008, supplemented by selective acquisitions
within more tight constraints both in terms of strategic and
financial criteria. The operating margin is expected to be
around the current level in 2009.
ISS is determined to continue reducing the Group's financial
leverage on a multiple basis.
This report may contain forward-looking statements. Statements herein, other than statements of historical fact, regarding future events
or prospects, are forward-looking statements. The words may”, ”will”, ”should”, ”expect”, ”anticipate”, "believe", ”estimate"”, ”plan”,
”predict”, ”intend” or variations of these words, as well as other statements regarding matters that are not historical fact or regarding
future events or prospects, constitute forward-looking statements. ISS has based these forward-looking statements on its current views
with respect to future events and financial performance. These views involve a number of risks and uncertainties, that could cause actual
results to differ materially from those predicted in the forward-iooking statements and from the past performance of SS. Although ISS
believes that the estimates and projections reflected in the forward-iooking statements are reasonable, they may prove materially incor-
rect, and actual results may materially differ, e.g. as the result of risks related to the facility service industry in general or ISS in particular
including those described in this report and other information made available by ISS.
As a result, you should not rely on these forward-looking statements. ISS undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except to the extent required by law.
COMPANY REPORT | ANNUAL REPORT 2008 + 15
(JELTSIN ONES
Areva is one of three global players in the transmission and distribution
of energy. Areva has an Integrated Facilit: with ISS,
and 1721SS employees work at Arev i
day. Areva has 1,600 employees atth: here 155 provides: Cleaning,
Catering, Security, Office Support and Property Services 24 hours a day,
7 days a week. Puncer Tanriover is the ISS Facility Manager at Areva.
i
;
i
COUNTRY OVERVIEW
2008 2007
DKK million DKK million
Operating Operating
profit Number of profit Number of
Total before Operating Organic employees Total bef; Op g Organi ploy
Country revenue other items margin % growth % at year-end revenue other items margin % growth % at year-end
France 9,336 569 6.1 (0) 41,284 10,144 632 6.2 3 42,388
United Kingdom 7,565 511 6.8 9 42,848 7,814 526 6.7 9 42,227
Norway 5,683 394 6.9 7 13,114 5,324 381 7.2 6 13,755
Spain 4,603 287 6.2 6 28,855 3,775 242 6.4 8 27,371
Sweden 3,920 257 6.6 6 10,276 3,861 266 6.9 5 10,417
Denmark 3,702 232 6.3 0 11,073 3,713 205 5,5 0 10,994
Netherlands 3,540 103 2.9 (3) 20,175 3,654 220 6.0 2 20,941
Finland 3,517 285 8.1 4 11,842 3,317 292 8.8 5 12,243
Australia 3,381 220 6.5 4 13,763 3,307 212 6.4 6 13,194
Belgium and Luxembourg 3,094 220 71 3 11,192 2,888 204 7.1 7 10,661
Switzerland 2,463 192 7.8 8 10,639 2,228 186 8.4 6 9,415
Germany 2,406 84 3.5 8 11,968 2,235 91 4.1 4 12,534
USA Nee 2,131 128 6.0 6 14,696 1,100 00. 62 5.6 - 10,524.
Austria 1,662 94 5.7 0 7,254 1,737 100 5.8 3 8,313
Israel 1,454 73 5.0 11 11,723 900 58 6.5 8 8,133
Turkey 1,221 94 7.7 20 17,799 816 55 6.8 26 14,027
Hong Kong 968 73 7.5 15 12,897 761 58 7.17 11 9,451
Brazil 967 52 54 12 16,235 808 50 6.2 10 14,788
Greece 712 50 7.0 22 4,942 329 23 7.1 14 3,124
Singapore 702 47 6.7 19 6,503 515 31 6.1 11 5,688
Portugal 549 40 73 5 8,425 499 37 7.3 11 7,216
Czech Republic 484 40 8.3 3 6,211 380 31 8.3 2 6,835
Ireland 471 25 5.2 4 2,649 486 (31) (6.5) (5) 2,650
Mexico 393 23 5.9 12 12,552 292 13 4.4 10 11,455
Thailand 363 25 7.0 11 23,431 279 21 7.4 20 13,148
Indonesia 336 33 9.8 38 35,293 268 27 10.0 43 32,609
Slovakia 320 23 7.2 (0) 5,082 271 23 8.5 28 5,425
Chile 267 19 7.4 29 8,403 191 13 6.6 16 6,394
Italy 262 17 6.4 6 1,046 206 20 9.9 (1) 930
New Zealand 234 10 43 10 3,063 213 14 6.4 9 1,946
Argentina 217 12 54 32 3,549 171 9 5.0 49 3,913
China 211 12 5.6 24 10,526 159 10 6.4 58 12,092
India 194 10 5.2 74 12,634 98 3 2.6 94 10,730
Poland 186 9 4.9 17 2,529 85 3 33 (3) 1,784
Taiwan 181 16 9.0 5 2,041 180 12 6.5 - 1,845
Slovenia 164 9 5.5 13 1,269 136 8 6.2 24 1,302
Hungary 141 8 5.4 24 1,882 51 2 43 28 548
Estonia 137 8 6.1 9 1,793 123 6 4.6 10 1,800
Romania 137 24 17.4 23 2,734 107 18 17.2 48 2,307
Iceland 134 10 7.6 14 739 173 13 7.7 15 835
Greenland 106 8 7.1 16 306 91 6 7.0 9 267
Philippines 9% 3 3.5 15 2,564 40 3 8.4 43 2,286
Malaysia 73 5 7.4 9 2,246 71 3 3.7 3 2,374
Russia 64 3 4.0 36 663 49 (2) (3.1) 58 676
Uruguay 46 3 7.4 61 1,277 22 2 7.3 109 878
Croatia 30 (0) (0.7) 21 419 24 0 0.1 14 361
Brunei 17 3 15.3 7 293 17 2 11.9 2 254
Faroe islands 9 0 1.0 15 0 9 (0) (2.1) (3) 34
Japan 6 (0) (1.4) - 2 - - - -
Sri Lanka - - - - - 20 1 2.9 9 4,898
Regional cost, not allocated
to countries / eliminations (2) (17) 0.0 (2) (21) 0.0
Total regions 68,853 4,346 63 5. 472,699 63,935 4,140 65 6 437,980
Corporate functions / eliminations (24) (285) (0.4) - 102 (13) (305) (0.5) - 102
Total 68,829 4,061 5.9 5 472,801 63,922 3,835 6.0 6 438,082
ANNUAL REPORT 2008 + 17
FINANCIAL REVIEW
INCOME STATEMENT
Revenue
Revenue amounted to DKK 68,829 million representing reve-
nue growth of 11%, excluding foreign exchange adjust-
ments, compared with 2007. Revenue growth was driven
by 5% organic growth and 8% growth from acquisitions.
This was partly offset by divestments of 2% and adverse cur-
rency exchange-rate movements of 3%. The organic growth
was, as expected, driven by double-digit growth rates in the
growth-economies of-Asia and Latin America. Stable organic
growth was experienced in all other regions.
Staff costs
Staff costs increased by DKK 3,158 million, or 8%, from DKK
40,998 million in 2007 to DKK 44,156 million in 2008. This in-
crease was due primarily to an increase in the overall number
of employees as a result of acquisitions and organic growth.
Staff costs as a percentage of revenue increased from 64.1%
in 2007 to 64.2% in 2008.
Cost of sales
Cost of sales increased by DKK 520 million, or 9%, from DKK
5,614 million in 2007 to DKK 6,134 million in 2008. This in-
crease was due primarily to acquisitions and organic growth.
Cost of sales as a percentage of revenue amounted to 8.9%
in 2008, a slight increase compared with 8.8% in 2007.
Other operating expenses
Other operating expenses increased by DKK 979 million, or
8%, from DKK 12,630 million in 2007 to DKK 13,609 million
in 2008. This increase was due primarily to acquisitions and
organic growth. Other operating expenses as a percentage of
revenue totalled 19.8% which was level with 2007.
Depreciation and amortisation
Depreciation and amortisation excluding amortisation of
brands and customer contract portfolios and related cus-
tomer relationships (customer contracts) increased by DKK
24 million, or 3%, from DKK 845 million in 2007 to DKK 869
million in 2008, which as a percentage of revenue was un-
changed at 1.3% compared with 2007.
Operating profit before other items
Operating profit before other items increased by DKK 226
million, or 6%, from DKK 3,835 million in 2007 to DKK 4,061
million in 2008. Operating profit before other items as a per-
18 - ANNUAL REPORT 2008 | FINANCIAL REVIEW
centage of revenue, i.e. the operating margin before other
items, was 5.9% in 2008 compared with 6.0% in 2007, due
to lower earnings in the Netherlands. In line with previous
years, a number of non-recurring items affected the Group in
2008, including curtailment gains related to defined benefit
plans, income related mainly to settlement of a dispute on
social charge contributions for prior years and workers" com-
pensation incentives received. Corporate overhead costs de-
creased from 0.5% ofrevenue in 2007 to around 0.4% in 2008.
Other income and expenses,.net
Other income and expenses, net, represented a net expense
of DKK 242 million in 2008 compared with a net expense of
DKK 129 million in 2007. This related partly to losses on di-
vestments of non-core activities, including the energy activi-
ties in France as well as the non-strategic temporary staffing
and landscaping businesses in Austria and subsequent re-
structuring of the organisational setups in both France and
Austria. Furthermore, other income and expenses included
costs related to a restructuring project in the Netherlands
comprising changes in management teams, organisational
setups and business units, a relocation project in Norway as
well as redundancy and severance payment relating to or-
ganisational changes.
Other income and expenses, net, in 2007 represented a net
expense of DKK 129 million and included a gain on the sale
of a call option relating to a property in Norway and a gain
related to the sale of a PFI stake in the United Kingdom.
These gains were more than offset by losses on divestments
related mainly to landscaping activities in Ireland and part
of the energy activities in France, restructuring costs related
to office relocation and reorganisational projects in Norway
and the Netherlands, costs for consolidating properties in
central London and Scotland as well as costs related to the
IPO feasibility review.
Integration costs
Integration costs amounted to DKK 66 million in 2008,
which was level with 2007. Integration costs in 2008 related
primarily to redundancy payments and termination of rental
obligations with respect to acquired companies in Germany,
Spain, the USA, France and Israel.
Operating profit
Operating profit increased by DKK 114 million, or 3%, from
DKK 3,639 million in 2007 to DKK 3,753 million in 2008.
OPERATING RESULTS
Operating profit Operating margin before
Revenue before other items other items
DKK million DKK million
2007 2008 2007 Change
Nordic ” 17,071 16,488 4% 1,189 1,162 2% 7.0 % 7.0 %
Western Europe ? 39,337 37,709 4% 2,356 2,356 - 6.0 % 6.2 %
Eastern Europe 1,663 1,226 36% …— 124 9 0. 35% 74% 7.4%f
Asia» — ' 3,147 2,409 31% 210 158 33 % 6.7 % 66%
Latin America ? 1,890 1,484 27 % 109 86 27 % 5.8 % 5.8 %
USA 9 2,131 1,100 94 % 128 62 106 % 6.0 % 5.6 %
Pacific 7 3,614 3,519 3% 230 225 2% 6.4 % 6.4 %
Corporate / eliminations (24) (305) (7)% (0.4)% (0.5)%
” Nordic comprises Denmark, the Faroe Islands, Finland, Greenland, iceland, Norway and Sweden.
? Western Europe comprises Austria, Belgium & Luxembourg, France, Germany, Greece, Ireland, Israel, Italy, the Netherlands, Portugal, Spain, Switzerland, Turkey and the United Kingdom.
3 Eastern Europe comprises Bosnia and Herzegovina, Croatia, the Czech Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia and Slovenia.
1 Asia comprises Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, Sri Lanka, Taiwan and Thailand.
3 Latin America comprises Argentina, Brazil, Chile, Mexico and Uruguay.
9 USA was blished as a region through the acquisition of Sani Inc. in June 2007.
1 Pacific comprises Australia and New Zealand.
REVENUE GROWTH
Revenue growth, %
Total growth
exd. currency
Total growth
Acq./Div., net Currency
Nordic 5 1 6 (2) 4Kk
Western Europe 4 3 7 (3) 4E
Eastern Europe 9 19 28 8 36
Asia 20 18 38 (7) 31 få
Latin America 17 14 31 (4) 27
USA 2 6 22 28 (4) 24 f
Pacific
(6)
1 See page 131 for a definition of organic growth.
2 USA was established as a region through the acquisition of Sanitors inc. in June 2007. The growth rates above are presented on a like-for-like basis and represent the development in the seven months
ended December 2008 compared with the same period in 2007. The revenue in 2008 increased by 94% compared with 2007.
FINANCIAL REVIEW I ANNUAL REPORT 2008 - 19
Share of result from associates
The share of result from associates decreased by DKK 5 mil-
lion from a profit of DKK 8 million in 2007 to DKK 3 million
in 2008.
Net finance costs
Net finance costs decreased by DKK 286 million, or 9%, to
DKK 2,731 million in 2008 from DKK 3,017 million in 2007.
In 2007, net finance costs included DKK 222 million of non-
recurring costs relating to the redemption of Subordinated
Floating Rate Notes and a net accounting loss of DKK 338
million as a consequence of ISS Global's refinancing of ap-
proximately EUR 390 miliion of Medium Term Notes (EMTNs)
due in 2014. Excluding the impact of the redemption costs
and accounting loss, net finance costs increased by 11%. The
main reasons for the increase were additional drawings to
fund acquisitions in line with expectations and a negative
impact from loss on foreign exchange, which were partly off-
set by the savings impact from the July 2007 refinancing.
In 2008, net finance costs included DKK 2,315 million of net
interest expenses, DKK 255 million of net loss on foreign ex-
change and DKK 63 million of amortisation of financing fees.
In line with the company objectives, the Group's financial
leverage, on a multiple basis, was further reduced from
6.16x pro forma EBITDA in 2007 to 5.92x pro forma EBITDA
in 2008.
Profit before tax and goodwill impairment/amortisa-
tion of brands and customer contracts
Profit before tax and goodwill impairment/amortisation of
brands and customer contracts increased by DKK 395 million
from DKK 630 million in 2007 to DKK 1,025 million in 2008.
Income taxes
Income taxes increased from DKK 254 million in 2007 to DKK
531 million in 2008. The effective tax rate was 51.8% in 2008
compared with 40.3% in 2007, calculated as the consolidated
tax provision of DKK 531 million divided by the profit before
tax and goodwill impairment/amortisation of brands and
customer contracts of DKK 1,025 million. The tax expense in
2007 was positively impacted by recognition of previously
unrecognised tax losses, giving rise to capitalisation of a de-
ferred tax asset of approximately DKK 300 million related to
the jointly taxed Danish subsidiaries. These tax losses were
capitalised as they are expected to be utilised as a direct
consequence of an amendment to the Danish Corporation
Tax Act in 2007.
The bill to amend the Corporation Tax Act contained, among
others, provisions that limit the right to deduct financial ex-
20 - ANNUAL REPORT 2003 | FINANCIAL REVIEW
penses. Due to these provisions, the Group is subject to limi-
tations in deduction of financial expenses of approximately
DKK 826 million in 2008. The net effect in the tax expense in
2008 is estimated to be DKK 104 million.
Finally, the tax expense in 2008 was adversely impacted by
withholding taxes that are non-proportional to the profit
before tax.
Profit before goodwill impairment/amortisation of
brands and customer contracts
Profit before goodwill impairment/amortisation of brands
and customer contracts increased by DKK 118 million or
31%, from DKK 376 million in 2007 to 494 million in 2008.
Goodwill impairment and write-down
Goodwill impairment and write-down amounted to DKK
399 million, of which DKK 250 million related to ISS's busi-
ness in Germany and DKK 20 million related to ISS's business
in Italy, and was recognised following impairment tests.
The impairment losses resulted from an increase in the dis-
count rate applied combined with declining market condi-
tions within certain business activities in which ISS operates.
The remaining DKK 129 million related to the divestment of
ISS's non-strategic temporary staffing and landscaping busi-
nesses in Austria as well as minor divestments in Norway.
In 2007, goodwill impairment and write-down amounted to
DKK 128 million, and related primarily to the divestments of
ISS's landscaping business in Ireland and the first part of the
non-core energy activities in France.
Amortisation of brands and customer contracts
Amortisation of brands and customer contracts amounted
to. DKK 1,008 million in 2008, a decrease from DKK 1,101 mil-
lion in 2007. The amortisation related primarily to customer
contracts, whereas only a minor part of the amortisation
related to local brands. As the useful life of the ISS brand is
deemed indefinite, 18$ does not amortise the value of the
ISS brand.
Tax effect
The tax effect of goodwill impairment and write-down and
amortisation of brands and customer contracts, which is
presented separately in the income statement to show the
effective tax percentage before impairment/amortisation
of intangibles, was DKK 282 million in 2008 and DKK 411 mil-
lion in 2007. In 2007, the tax effect related to amortisation
of brands and customer contracts was positively impacted
by the reduction in corporate income tax rates in several
countries in which ISS operates, as the deferred tax liabilities
were reduced accordingly.
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Net loss
Net loss increased from a loss of DKK 442 million in 2007
to a loss of DKK 631 million in 2008, negatively impacted
by higher income tax expense, as well as higher non-cash
charges related to goodwill impairment and write-down.
This was partly offset by the improved operational perform-
ance and lower net finance costs. In 2008, a loss of DKK 641
million was åttributable to the equity holders of ISS, where-
as a profit of DKK 10 million was attributable to minority
interests.
CASH FLOW STATEMENT
Cash flow from operating activities
Cash flow from operating. activities was a net inflow of DKK
4,334 million in 2008, up DKK 621 million from DKK 3,713
million in 2007. The improvement was due primarily to the
increase in operating profit before other items of DKK 226
million as well as a positive development in cash flow from
working capital of DKK 153 million. Cash inflow related
to working capital was DKK 109 million, compared with a
cash outflow of DKK 44 million in 2007. The positive change
stemmed mainly from trade receivables that were main-
tained at the same level, as the organic growth realised in
2008 was in all material respect offset by lower debtor days.
Cash outflow from changes in provisions decreased from DKK
203 million in 2007 to DKK 96 million in 2008. The amount
comprised the effect of net changes in provisions charged
to the income statement during 2008 and payments made
in relation to such provisions, related predominantly to pen-
sion plans in Norway and Switzerland.
Income taxes paid, net, amounted to DKK 363 million in
2008 compared with DKK 434 million in 2007. The decrease
related primarily to refunds of tax payments in foreign ope-
rations.
Payments related to Other income and expenses, net,
amounted to DKK 181 million in 2008, down DKK 27 million
compared with 2007. Payments of DKK 54 million related to
the re-scoping of the IT outsourcing agreement in 2007 with
CSC and, DKK 49 million related to restructuring projects in
Norway and the Netherlands.
Cash fiow from investing activities
Cash flow from investing activities in 2008 was a net cash
outflow of DKK 2,543 million, of which DKK 2,095 million re-
lated to acquisitions, most significantly in the USA, Greece,
Israel, Turkey and the United Kingdom. This was partly off-
set by proceeds from divestments of DKK 272 million, related
primarily to the divestment of the remaining energy activi-
ties in France. Investments in intangible assets and property,
plant and equipment, net, were DKK 718 million in 2008, re-
presenting 1.0% of revenue. Investments in financial assets,
net, totalled an outflow of DKK 2 million in 2008.
In 2007, the net cash flow from investing activities represent-
ed an outflow of DKK 3,672 million, due mainly to payments
of DKK 2,957 million related to acquisitions and investments
in intangible assets and property, plant and equipment,
net, (excluding acquisition related intangibles) of DKK 715
million.
Net cash flow from financing activities
Cash flow from financing activities in 2008 was a net cash
outflow of DKK 1,348 million, This resulted. primarily. from
interest payments of DKK 2,267 million, partly offset by net
drawings on credit facilities primarily to fund acquisitions of
DKK 941 million.
In 2007, the net Cash flow from financing activities amount-
ed to a cash inflow of DKK 329 million. This was primarily the
result of increased indebtedness to fund acquisitions, partly
offset by interest payments of DKK 2,373 million. Further-
more, proceeds from issuance of share capital amounted
to DKK 178 million as proceeds from shares and warrants
issued by ISS's ultimate parent, FS Invest Sarl, in 2006 under
its Management Participation Programme, were made avail-
able to ISS.
Cash conversion
In spite of an organic growth rate of 5% in 2008, changes in
working capital represented a cash inflow of DKK 109 mil-
lion. As a result, cash conversion was 103% in 2008 compared
with 99% in 2007. The positive change stemmed mainly from
trade receivables that were maintained at the same level.
Cash conversion ratios for individual years may vary. The cash
flows from operations for the individual periods depend on
the timing of a number of payments towards the end of the
individual months and years. For a definition of cash conver-
sion, see page 131.
BALANCE SHEET
Total assets
Total assets amounted to DKK 53,605 million at 31 December
2008, of which DKK 39,011 million represented non-current
assets, primarily intangible assets, and DKK 14,594 million
represented current assets, primarily trade receivables of
DKK 10,097 million.
FINANCIAL REVIEW I ANNUAL REPORT 2008 - 21
Intangible assets
Intangible assets decreased by DKK 1,149 million from DKK
37,150 million at 31 December 2007 to DKK 36,001 million
at 31 December 2008. Intangible assets relate primarily to
goodwill, customer contracts and brands. Intangible assets
relate primarily to the acquisition of ISS A/S on 9 May 2005,
when a carrying amount of intangible assets of DKK 31,844
million, of which DKK 22,035 million related to goodwill,
was recognised in ISS's balance sheet.
The negative development in the world economy and finan-
cial markets during the second half of 2008 and beginning
of 2009, including increased market fluctuations and volatil-
ity, has made the valuation of intangible assets subject to
larger uncertainties than in recent years.
At 31 December 2008, goodwill amounted to DKK 27,259 mil-
lion, a decrease of DKK 334 million, or 1%, from DKK 27,593
million in 2007. Additions related to acquisitions in 2008
amounted to DKK 1,515 million while currency adjustments
reduced goodwill! by DKK 1,432 million. Goodwill was reduced
by impairment and write-down of DKK 399 million that relat-
ed primarily to ISS's impairment in Germany and the divest-
ment of Office support and Landscaping activities in Austria.
Goodwill relates to acquisitions, including the acquisition
of ISS A/S, carried out under varying circumstances and at
different stages of macroeconomic cycles. The goodwill is
distributed on most of the countries in which the Group op-
erates. The acquired companies to which the goodwill re-
lates, comprise a diverse portfolio of service types, customer
segments, geographical regions, contract sizes and manage-
ment skills. The largest amount of goodwill relates to the
Group's operations in France, representing approximately
18% of the total carrying amount of goodwill.
Customer contracts decreased by DKK 775 million to DKK
6,918 million at 31 December 2008, from DKK 7,693 million
at 31 December 2007. Amortisation of DKK 997 million and
negative foreign exchange adjustments of DKK 415 million
were partly offset by additions from acquisitions of DKK 634
million.
Other non-current assets
Non-current assets other than intangible assets amounted
to DKK 3,010 million at 31 December 2008, a slight decrease
from DKK 3,078 million at 31 December 2007. The decrease
related mainly to deferred tax assets that were partly offset
by an increase in property, plant and equipment.
Trade receivables
Trade receivables decreased slightly from DKK 10,114 million
22 - ANNUAL REPORT 2008 ! FINANCIAL REVIEW
at 31 December 2007 to DKK 10,097 million at 31 December
2008. This was achieved in spite of the 8% growth in rev-
enue and resulted in a decrease in debtor days from 48.6 in
2007 to 46.7 in 2008.
Cash and cash equivalents
Cash and cash equivalents increased from DKK 2,581 million
at 31 December 2007 to DKK 2,961 million at 31 December
2008, of which DKK 1,507 million resided at Group level
and the remainder resided at country level. The cash posi-
tion was positively impacted by working capital inflow in Q4
2008. The cash position during the months may fluctuate
significantly as a result of the frequency and timing of cash
collection and outgoing payments, e.g. salary payments.
Other-current assets- - un un nen meen m nnnenmen snnnn mee
Other current assets comprises inventories, contract work in
progress, tax receivables, other receivables, and securities
and amounted to DKK 1,536 million at 31 December 2008
(DKK 2,425 million at 31 December 2007). Other receivables
decreased from DKK 1,036 million at 31 December 2007 to
DKK 776 million at 31 December 2008. Other receivables
comprised mainly prepayments. Assets held for sale at 31
December 2007 amounting to DKK 619 million were dis-
posed of in 2008.
Total equity
Total equity decreased from DKK 5,518 million at 31 De-
cember 2007 to DKK 3,533 million at 31 December 2008,
of which DKK 3,498 million was equity attributable to the
equity holders of ISS Holding A/S. The total change in equity
for the year attributable to the equity holders of ISS was a
reduction of DKK 1,961 million.
Net income and expenses recognised in equity reduced eq-
uity by DKK 1,952 million. This incduded negative currency
adjustments of DKK 792 million relating to investments in
foreign subsidiaries, net loss for the year of DKK 631 million
and negative fair value adjustment of hedges, net, of DKK
310 million. Actuarial losses, net, including the effect of the
asset ceiling on defined benefit pension schemes amounted
to DKK 157 million. The tax effect of entries recognised di-
rectly in equity was an increase of DKK 36 million.
The equity ratio, defined as total equity relative to total as-
sets, decreased from 10.0% at 31 December 2007, to 6.6% at
31 December 2008.
Long-term debt
The increase in Long-term debt from DKK 30,882 million in
2007 to DKK 31,210 million in 2008 was due primarily to bor-
rowings in connection with funding acquisitions in 2008.
Other long-term liabilities
Other long-term liabilities comprises pensions and similar
obligations, deferred tax liabilities and other provisions and
amounted to DKK 3,729 million at 31 December 2008 (DKK
3,836 million at 31 December 2007).
Pensions and similar obligations amounted to DKK 834 million
at 31 December 2008, compared with DKK 724 million at 31
December 2007. The majority of the Group's pension plans
are defined contribution plans. The Group's contributions to
such plans are accrued and expensed on an ongoing basis. In
certain countries, mainly France, Germany, the Netherlands,
Sweden, Switzerland and the United Kingdom, ISS has defined
benefit plans. As mentioned above, actuarial losses of DKK
157 million, induding the net effect from the asset ceiling,
…— Were taken. directly to. equity. The. losses stemmed mainly
from the United Kingdom, Switzerland and the Netherlands.
Due to the current market conditions, the determination of
the discount rates in the individual countries is subject to un-
certainty.
Other provisions amounted to DKK 832 million at 31 De-
cember 2008, of which DKK 397 million had an estimated
maturity of more than one year. Comparative figures at 31
December 2007 were DKK 653 million and DKK 326 million,
respectively. The provisions comprise acquisition-related
provisions and various obligations incurred in the course of
business, e.g. self-insurance obligations, labour-related obli-
gations, legal obligations, restructurings, contract closures
etc.
Deferred tax liabilities decreased from DKK 2,786 million in
2007 to DKK 2,498 in 2008, attributable mainly to the tax
effect related to the amortisation of the brands and cus-
tomer contracts.
Other current liabilities
Other current liabilities comprises short-term debt, trade
payables, tax payables, other provisions and liabilities held
for sale and amounted to DKK 4,672 million at 31 December
2008 (DKK 4,618 million at 31 December 2007).
Other liabilities amounted to DKK 10,461 million at 31 Decem-
ber 2008 compared. with DKK 10,494 million.at 31 December
2007. Other liabilities consist mainly of accrued wages and
holiday allowances, tax withholdings, VAT and other pay-
ables and accrued expenses.
Carrying amount of net debt
Carrying amount of net debt amounted to DKK 29,385 million
at 31 December 2008, up DKK 140 million from DKK 29,245
million at 31 December 2007. The increase was due prima-
rily to acquisitions in 2008. At 31 December 2008, Long-term
debt was DKK 31,210 million, short-term debt amounted to
DKK 1,279 million while securities, cash and cash equivalents
and receivables from affiliates totalled DKK 3,104 million.
FINANCIAL REVIEW | ANNUAL REPORT 2008 - 23
STRATEGY — THE ISS WAY
THE ISS WAY IS THE STRATEGY PREPARED IN EARLY 2008 AND IMPLEMENTA-
TION BEGAN IN THE SECOND HALF OF 2008. THE ISS WAY REPRESENTS THE NEXT
PHASE IN ISS'S STRATEGY AND BUILDS ON THE PREVIOUS STRATEGY PLANS.
VISION AND VALUES
Everything we do at ISS must respect our corporate values
and be guided by our vision:
"LEAD FACILITY SERVICES GLOBALLY - BY LEADING FACILITY
SERVICES LOCALLY”
We aim to lead:
> globally with presence in all main regions and countries
> locally with leading positions in all established markets
based on our ambition to quickly achieve this position in
new markets
> the industry by offering best-in-class Single Services and
Integrated Facility Services (IFS) where appropriate
The road travelled to fulfil the vision must start with our
corporate values — honesty, entrepreneurship, responsibility
and quality.
HONESTY - WE RESPECT
Our honesty is not negotiable.
We respect our customers, our
colleagues and our company.
Honesty comes first.
> ENTREPRENEURSHIP - WE ACT
Action speaks louder than words.
All our employees have a "licence
to act” and are expected to do so.
RESPONSIBILITY - WE CARE
Indifference is immoral. We care
about what we do and for whom
we do it.
> QUALITY - WE DELIVER
We are professionals with a passion
for quality. We deliver on our promises.
ANNUAL REPORT 2008 - 25
A strategy designed around customer needs
The ISS Way has been developed with customer needs in
mind. In cooperation with our customers around the globe
we work to determine which of their businesses are non-core
and can benefit from being outsourced. ISS's business model
is based on creating value for these customers by taking
over these non-core activities, leveraging global scale, best
practice, integrating services and driving out synergies.
Our strategy and the IFS delivery model reflects customer
needs, aliowing them to outsource multiple services where
ISS takes on responsibility for both managing the ongoing
delivery of these services and actually delivers them through
our own organisation. Furthermore, we ensure that our offer-
ing evolves with our customers.
OUR CORNERSTONES
The ISS Way is built on four cornerstones: Service Excellen-
ce, the Integrated Facility Services strategy, a focus on Port-
folio-based business and a Multi-local approach.
Service Excellence
Service Excellence is the core of every ISS delivery. Ensuring a
consistent and high level of quality in the delivery of our ser-
vices to customers will continue to be central to our success.
The best way to promote and develop our Service Excellence
is to share knowledge, methodology and best practices
across the organisation.
IFS Strategy
We are continuing to pursue an Integrated Facility Services
strategy which enables us to manage and self-deliver a range
of services. ISS is the first broad-service provider to exploit
this market opportunity and for many years we have been
working with determination to roll out this service delivery
model all over the world. While serving customers through
our single-service and multi-service delivery models, we will
continue to focus on IFS as a vital means of differentiating
our value proposition from those of our competitors.
Portfolio-based business
The success of ISS has, in part, been founded on our ability
to generate and manage a large portfolio — as opposed to
"once only” business. This focus on portfolio-based business
yields many advantages, including recurring revenue and
operational and financial visibility.
Linked to the benefits of our portfolio-based business is
our ability to self-deliver and to provide excellence — either
26 - ANNUAL REPORT 2008 | STRATEGY — THE ISS VVAY
through our approach to Service Excellence or through our
ability to manage and integrate a suite of services for the
benefit of the customer through IFS.
Multi-local approach
At ISS, we build our business on strong, highly autonomous
local leadership. This ensures strong entrepreneurs who are
close to the customers and know their markets and can act
quickly in response to local market opportunities.
Going forward, ISS will combine these strong local capabili-
ties with a standardised delivery model and increased use of
best practices across the Group. We also intend to continue
growing and prospering by further emphasising knowledge
sharing and collaboration.
This is the essence of ”The ISS Way”.
THE BUSINESS MODEL
ISS distinguishes between services offered and the way in
which these services are delivered. The services offered in-
clude: Cleaning, Catering, Property Services, Office Support,
Security and Facility Management. The way the services are
delivered (delivery model) includes: Single Service, Multi
Services and Integrated Facility Services.
In 2008, ISS continued to develop and strengthen our Single
Service excellence concepts and Integrated Facility Services
capabilities. Similarly, ISS increased focus on cross-border sales
by strengthening our global Corporate Clients organisation.
THE SERVICE OFFERING
As a leading global Facility Services company, ISS' core busi-
ness is to deliver and manage facility services. These cover
a range of business support services within cleaning, office
support, property services, catering, security and facility
management.
The service offering is illustrated by the ”ISS House”, which
has five pillars: Cleaning, Office Support, Property Services,
Catering and Security. The ”roof”, Facility Management,
represents the sixth service and our capabilities within fa-
cilities service integration. The ISS House is built on a strong
foundation of Service Excellence.
ISS focuses primarily on delivering portfolio and site-based
services, where ISS employees become an integrated part of
the clients" daily operations. ISS also offers selected route-
THE ISS HOUSE
FACILITY MANAGEMENT
(SHFNINTE OS TNNÆS SIE S CATERING SSG
CLEANING | | RECEPTION i | BUILDING | ol CONTRACT | | ACCESSCONTROL |
WASHROOM | | SERVICES | | MAINTENANCE | | CATERING | GUARDING
SERVICES | OFFICE | TECHNICAL | : i] |
i | | LOGISTIC | SERVICES | | | | |
| | ; | LANDSCARING || | | i |
| | | | PEST CONTROL | | | | |
fl i
[| - | | | |
j i [| i jo i ] |
SERVICE EXCELLENCE
based services, such as pest control and wash room services.
Not ali country operations necessarily offer all services with-
in the six business areas. Local offerings depend on factors
such as customer demand, market conditions and access to
qualified staff.
if the country does not self-deliver all six business areas, the
use of subcontractors ensures a one-stop shop opportunity
for customers. Each country aims at building up services
according to market demand. In time, all ISS countries are
expected to be able to self-deliver the most significant com-
ponents of the full ISS House of services.
THE DELIVERY MODEL
ISS delivers services to customers in three different ways:
Single Services, Multi Services or Integrated Facility Services.
In most cases ISS delivers the services through its own per-
sonnel.
With Single-Service outsourcing, the customer buys one
service solution from ISS, for instance outsourcing of clean-
ing, so they can focus more on their core business activities.
With Multi-Service outsourcing, which consists of two or
more services but is not a fully integrated solution, the
customer achieves the same benefits as with single-service
outsourcing with the benefits of service integration where
possible.
In an Integrated Facility Services solution, ISS delivers two
ør more services under one contract with a single point of
contact on-site, and ISS takes over all or most of the facility
services functions at the customer's premises. The customer
receives both the full potential of Single-Service outsourcing
and the advantages of integrating services.
IFS contracts constituted around 16%, or DKK 11.2 billion, of
total annual revenue in 2008, up from 15% in 2007.
STRATEGY - THE ISS WAY | ANNUAL REPORT 2008 + 27
DEVELOPMENT AND METHODS
In line with The ISS Way, ISS will standardise and intensify
exchange of knowledge, methods and standards world-
wide. ISS must continuously work to improve the methods
and technologies for providing superior service within each
service area.
Excellence Centres and Knowledge Forums
Being a leading facility services company requires constant
attention to delivering service excellence in every service
area. ISS will continue its substantial focus on developing
and spreading Single-Service excellence throughout the or-
ganisation. In 2008, significant resources were added to the
Excellence Centres across services.
The Cleaning Excellence concept provides individual country
operations with knowledge and support to assist them in
delivering services optimally by using, for example, the most
efficient tools and methods, superior training, improved lo-
gistics and an efficient supply chain. The concept will also
contribute to improved ergonomics for the cleaning staff as
well as reduced environmental impacts.
To facilitate knowledge sharing and best practices between
countries and within the service lines ISS established a num-
REVENUE BY DELIVERY
ber of Knowledge Forums as a corporate initiative in 2007.
The Knowledge Forum activities were expanded in 2008,
where eight Knowledge Forums were established covering
a range of our services as well as an IFS Knowledge Forum.
With more than 300 participants at these Knowledge Fo-
rums, they constitute one of the important methods of shar-
ing best practices, enabling ISS to decide on levels of service
consistency and ensuring continuous development of our
services.
Global Corporate Client organisation
In November 2007, a global Corporate Client organisation
was established in order to further leverage and develop
the company's position as the leading global facility services
company. The Corporate Client organisation will:
> drive new business sales with selected multinational cus-
tomers
> serve multinational clients through a key account organi-
sation
> support 100% retention of existing multinational cus-
tomers
During 2008, the Corporate Client organisation was also sig-
nificantly expanded e.g. with regional experts and contract
2008
M SINGLE SERVICE 45%
mM MULTI SERVICES 16%
Em IFS 16%
å KEY ACCOUNTS 23%
28 - ANNUAL REPORT 2008 | STRATEGY — THE ISS WAY
2007
mM SINGLE SERVICE 47%
E MULTISERVICES 16%
EB IFS 15%
M KEY ACCOUNTS 22%
managers, and secured the largest international contract for
ISS ever to deliver facility services to all of HP's locations out-
side of the Americas.
THE ISS VALUE CHAIN
The ISS Value Chain is one of our most important manage-
ment tools for implementing The ISS Way. It illustrates the
interdependency between every action of every country or
business unit — and ensures that we deliver a complete and
coherent service solution that makes a valuable difference
to our customers.
The symbolism of the chain is that all links must work dosely
… together in the process of creating value (no chain. is strong-
er than its weakest link).
The model is developed by ISS and inspired by the Harvard
Business School Value Profit Chain.
The ISS Value Chain starts with the Business Platform that de-
termines which services we choose to deliver, which custom-
ers we choose to focus on and in which regions we choose
to deliver. It also defines how to structure the organisation
to support these decisions.
Once the Business Platform process sets the strategic pri-
orities, the Service Concept can take shape, converting the
identified priorities into concrete and operational service
offerings, for instance by defining how to price, position
and deliver a service in its given market and how it will be
delivered.
The value of any 1$S service depends on the person deliver-
ing the service. We therefore focus clearly on recruiting and
retaining capable and motivated staff to support low em-
ployee turnover, deliver quality service and ensure first-rate
customer interaction.
Satisfied and well managed employees directly influence
service value which again affects customer satisfaction. The
value experienced by. the customer must live up to both
objective and subjective quality criteria based on clear con-
cepts, work plans and innovative working methods.
Armed with compelling service concepts and supported by
intelligence from customer satisfaction surveys, business
growth ensures e.g. the generation of new sales and reten-
tion of existing customers.
Acquisitions are a useful tool in the continued development
of ISS, and will be used selectively to improve the company's
THE ISS VALUE CHAIN
STRATEGY — THE ISS WAY | ANNUAL REPORT 2008 - 29
competitiveness, build critical mass and increase service
capabilities and capacity where and when appropriate.
The ISS Value Chain is used actively on a strategic, tactical
and operational level and forms a central part of The ISS
Way of thinking and working.
OPERATIONAL OBJECTIVES
ISS seeks to maintain and enhance operational efficiency by
focusing on three well-established and prioritised operational
objectives for its local managers: (i) cash flow, (ii) operating
margin, and (iii) profitable organic growth. In addition, ISS
focuses on reducing financial leverage on a multiple basis.
CASH FLOW
ISS's first objective is to continue to maintain a relatively
high rate of cash conversion primarily by operating in a man-
ner that optimises working capital. Through this approach,
ISS expects to continue to generate a level of positive cash
flow from operations that exceeds its obligations to service
its credit facilities.
OPERATING MARGIN
ISS's second objective is to maintain or improve its opera-
ting margin. ISS seeks to improve operational efficiency by
increasing its local market positions and operational densi-
ties, and by implementing companywide best practices. in
2008, ISS further developed regional and global knowledge
and best-practice sharing including the establishment of
regional forums and competence centres.
PROFITABLE ORGANIC GROWTH
1SS's third objective is to continue to leverage its international
market position and service offering in order to increase its
local market positions and drive organic growth. ISS continues
to work with a wide range of initiatives to: (i) attract new
customers, (ii) increase customer retention rates, e.g. by estab-
lishing dedicated key account teams, and (iii) cross-selling re-
lated services to existing customers. ISS has also continuous-
ly increased its market presence and operating platform in
selected high-growth economies, particularly in Latin America
and Asia and continued to do so during 2008.
REDUCE FINANCIAL LEVERAGE
ISS intends to continue to reduce the financial leverage
of the Group on a multiple basis. This is expected to be
achieved primarily through a continued focus on cash flow
and growth in ISS's operating profit. The latter will be
achieved through a focus on operating margin and growth.
The extent and timing of iSS's deleveraging on a multiple
30 - ANNUAL REPORT 2003 | STRATEGY — THE ISS WAY
basis will, however, depend on factors such as ISS's cash flow
generation and the scale and timing of payments related to
its future acquisition activities, which may temporarily in-
crease its leverage on a multiple basis in terms of net debt
to pro forma adjusted EBITDA.
ACQUISITIONS
ISS acquires companies in order to further broaden its ser-
vice offering, to spread its geographical coverage and to
establish critical mass.
The acquisitions are based on careful screening and appro-
priate due diligence processes to ensure that the acquired
companies represent a strong strategic fit, match the cor-
porate values of ISS, add value and growth potential to the
Group, while also ensuring that the risks and integration
processes associated with acquisitions are manageable.
Since the turn of the millennium, ISS has acquired more than
640 companies around the world, adding close to DKK 40
billion in annual revenue. During 2008, ISS completed 66
acquisitions spread across 28 countries and all regions with
ISS operations. 35 of the acquisitions had estimated average
annual revenue of less than DKK 30 million, confirming the
strategy of limiting integration risks. With the acquisitions,
ISS gained annualised revenue of approximately DKK 3.9 bil-
lion and almost 40,000 employees.
Acquisitions in 2008 followed the strategy to firstly acquire
companies in high-growth regions and secondly to expand
ISS's service offerings primarily within Catering and Security
services. In ISS's high growth regions, which comprise Asia,
Eastern Europe and Latin America, the acquired annualised
revenue amounted to DKK 1.0 billion or 26% of the total
acquired revenue, while these regions accounted for only
10% of the total revenue in 2008. In 2008, the acquisitions
within Catering and Security services accounted for 25% and
22%, respectively, of total acquired annualised revenue. ISS
continued investing in Cleaning services through acquisi-
tions, which totalled 26% of the total acquired revenue.
Since 2004, ISS has established operations in 11 new geo-
graphies characterised by significant market potential for
facility services and a strong economic growth outlook.
These geographies include countries such as China, India,
Mexico and several countries in Eastern Europe. In emerging
markets such as Latin America and Asia, the general eco-
nomic development continues to generate high annual
growth rates. This is particularly interesting because global
buying power is gradually shifting towards these markets.
Today, ISS has national subsidiaries in over 50 countries. With
the expansion into the USA, in 2007, ISS established itself in
not only the world's largest economy but also the world's
largest market for outsourcing of facility services. In 2008,
ISS's US business was strengthened and significantly expand-
ed geographically when ISS acquired BGM Industries, add-
ing DKK 500 million in estimated annual revenue.
No new countries were added to the list of acquisitions in
2008. However, in existing ISS geographies, ISS broadened
its service offerings and geographical coverage and contin-
ued building up critical mass through acquisitions particu-
larly within Catering and Security services.
In 2009, ISS expects to continue to be a consolidator in the
. global facilities services industry, although.at aslower pace.
ISS expects to continue focusing primarily on smaller acqui-
sitions which enhance our business platform in individual
countries. ISS cannot provide any assurance, however, that it
will not pursue larger acquisitions in the future.
it should be emphasised that acquisition-driven revenue
growth will vary widely from year to year, depending on op-
portunities, organisational capability, financialresources, etc.
CORPORATE SOCIAL RESPONSIBILITY
ISS will continue to conduct its business around the world
in a sustainable manner. As a global company operating in
over 50 countries with more than 472,000 employees, ISS
influences the lives of many people and has a considerable
interface with societies around the world.
The following section describes ISS's relationships with a
group of stakeholders who influence ISS's way of conduct-
ing business and creating value.
Society
For ISS, sustainability is part of day-to-day operations and
daily interaction with society in general, locally and glo-
bally. Principles and policies form the framework of corpo-
rate sustainability. Conduct in day-to-day business is crucial
for putting the principles into practice, and ensuring a high
standard of sustainable behaviour.
This presents challenges to any company wanting to do busi-
ness in a sustainable way, because economic, social and envi-
ronmental issues are inevitably interconnected. ISS therefore
builds and maintains relationships based on commitment
and trust with key stakeholders in society. ISS believes that
this benefits society as well as the company.
ISS continuously works to ensure that employees and busi-
ness partners are treated fairly, that environmental impacts
of ISS's operations are reduced, and that ISS acts as a good
corporate citizen in the communities in which it operates.
United Nations Global Compact
ISS has been a signatory and supporter of the United Na-
tions Global Compact since its inception in 1999. In line with
membership regulations, ISS endeavours to comply with the
ten Global Compact principles, and participates in The Glo-
bal Compact Nordic Network.
The core of the UN Global Compact comprises principles
concerning human rights, labour rights, anti-corruption
and environmental protection. The Global Compact calls for
companies to: 2
> support and protect international human rights and to
ensure they are not complicit in abuse
> uphold the freedom of association, recognition of col-
lective bargaining, elimination of forced labour, child
labour and discrimination at work
> implement a precautionary approach to environmental
challenges, promote environmental responsibility and
environmentally friendly technologies
> work against all forms of corruption, including extortion
and bribery
ISS joined the Amnesty Business Forum in 2002 to discuss hu-
man rights protection with Amnesty International Denmark
and a group of companies headquartered in Denmark. ISS
maintains its dialogue with Amnesty International regard-
ing human rights issues.
The ISS Code of Conduct
In 2003, the Board of Directors adopted an ”ISS Code of
Conduct”.
The Code of Conduct constitutes the key operational frame-
work for ISS's proper conduct and corporate responsibility for
the protection of human rights, employee conduct, anti-cor-
ruption and bribery, compliance with competition rules, busi-
ness partner relations and workplace standards in accordance
with the UN Global Compact Principles.
Since the adoption of the ISS Code of Conduct, ISS has com-
municated and enforced its standards across the Group. Our
commitment to human rights protection has been communi-
cated to suppliers, major customers and employees by means
of leaflets, meetings, management training sessions, employ-
ee magazines etc. Local country managers are responsible for
compliance. When acquiring new companies and entering new
STRATEGY — THE ISS WAY | ANNUAL REPORT 2008 - 31
markets and joint venture opportunities, we promote busi-
ness conducted in compliance with the ISS Code of Conduct.
Human and Labour Rights
The UN Global Compact calls for companies to:
> support and protect international human rights and en-
sure they are not complicit in abuse
> uphold the freedom of association, recognition of collec-
tive bargaining, and elimination of forced labour, child
labour and discrimination at work
ISS profoundly respects and aims to support and protect hu-
man rights. ISS recognises labour rights and maintains close
ties and an open dialogue with unions. In 2003, ISS signed a
-— letter with The Union Network International (UNI), a union
representing 20 million workers globally, committing itself
to 12 fundamental principles in the workplace. The principles
are based on ILO conventions and cover the following areas:
forced/bonded labour, discrimination, child labour, free-
dom of association, unions, legal minimum wages, working
hours, health and safety, harassment, training, employers'
obligations and environmental protection. UNI has in turn
pledged to address and disclose companies that undermine
fundamental standards in the service industry.
In 2008, the letter of agreement with UNI was renewed.
The new agreement is the most advanced to date between
a global company and UNI Global Union, and takes the
mutual commitment to a new and higher level. The agree-
ment aims at enabling all ISS employees worldwide to be
able to exercise rights to union membership and collective
bargaining. ISS will work with and support unions to ensure
that they have the best possible access to inform employees
about union membership and to recruit employees wishing
to join a union. As part of the agreement, ISS will donate
EUR 100,000 annually to a jointly managed fund aimed at
monitoring and raising standards in specific markets where
current conditions are inadequate.
Subsequently, UNI named ISS as an employer that treats its
workers well and is setting a good example for other global
employers.
ISS uses no forced, compulsory or child labour and tolerates
no form of discrimination.
ISS plays an active role in employing vulnerable groups. As
a large employer, ISS has both the capability and motiva-
tion to conduct training and reintegration programmes for
immigrants, long-term unemployed and other groups for
whom it is difficult to gain access to the labour market. ISS
32 - ANNUAL REPORT 2008 | STRATEGY — THE ISS WAY
often forms partnerships with local authorities in order to
establish and run employment programmes with this aim.
ISS has taken initiatives in this field in more than two-thirds
of the countries. Positions are found both in administrative
and service-operative functions.
Environmental protection
The UN Global Compact calls for companies to implement a
precautionary approach to environmental challenges, and
promote environmental responsibility and environmentally
friendly technologies.
Environmental protection is a key component of ISS's overall
approach to sustainable development. The corporate envi-
ronmental policy provides a Group-wide. framework for lo-
cal environmental policies and initiatives and spells out ISS's
key environmental objectives:
> to minimise emissions and effluents (primarily arising
from transport and use of chemicals in cleaning)
> to minimise the use of energy and water
> to reduce, manage and recycle waste
> to use safe products and materials
ISS's country organisations implement local environmental
policies and management systems based on corporate poli-
cies. In most countries, the environmental policies and sys-
tems are already in place and many of them are ISO 14001
certified. In addition, environmental responsibility is pro-
moted through staff training and awareness programmes.
ISS aims at increasing fuel efficiency by raising the share of
diesel-fuelled cars in its fleet management programme. Die-
sel-fuelled cars account for approximately 83% of the entire
ISS fleet and the aim is to gradually increase this percentage.
As ISS has around 18,000 vehicles on the road, the high pro-
portion that are fuelled by diesel has lowered fuel consump-
tion per kilometre, offering a potential for considerable en-
vironmental benefits.
ISS continuously works to reduce the environmental impact
from the use of cleaning products and has entered into a
new global agreement on delivery of environmentally
friendly cleaning products. The use of highly concentrated
products, which requires less use of raw materials and pack-
aging, as well as increased use of dosing systems is expected
to reduce the carbon dioxide emissions considerably in the
coming years.
Through Office Support services, ISS offers scanning of docu-
ments to electronic format and thereby reduces the amount
of paper copies. ISS also offers paper destruction i.e. paper
is first shredded and then sent for recycling.
Anti-corruption
The UN Global Compact calls for companies to work against
all forms of corruption, including extortion and bribery.
ISS welcomes the tenth Global Compact principle on anti-
corruption. The ISS Code of Conduct expresses a clear com-
mitment to combating all forms of corruptive practice.
Through the ISS Code of Conduct, the anti-corruption posi-
tion is communicated to the entire Group.
During 2008, the ISS University hosted a range of training
Sseminars covering sustainability and the Code of Conduct.
More than 200 ISS managers from around the world attend-
ed the seminars. At these sessions, ISS's approach to sustain-
ability, induding anti-corruption, was presented and the par-
ticipants were engaged in dilemma training on these issues.
The appointment of ombudsmen in the local organisations
over the last few years has improved the procedure for rai-
sing concerns, for example about all types of breaches of the
ISS Code of Conduct. Employees can confidentially report
what they see as breaches of the Code or other wrongful
behaviour to the local ISS ombudsman, if normal organisa-
tional reporting channels are unsuitable.
In 2009, ISS will revise and strengthen the corporate guide-
lines on anti-corruption.
EMPLOYEES
In 2008, the number of ISS employees rose by roughly 35,000,
an increase of 8% compared with 2007. A large number of
these additional employees joined as a result of ISS expand-
ing in the US market as well as through other acquisitions.
At the end of 2008, ISS had more than 472,000 employees in
Europe, Asia, Pacific, Latin America and the USA.
Human Capital
The ISS Human Capital Vision ”to be the preferred empioy-
er in our industry” was made explicit in 2007. Aligned with
the Group strategy, it focuses on: upgrading leadership and
management capabilities, enhancing customers' service ex-
perience, integrating acquired businesses, and ensuring com-
petitiveness through cost ef ficiency.
The Human Capital strategy is implemented through ”ISS
International HR Standards”, which will be the future frame-
work for local HR initiatives. To ensure relevance, human
resource executives from across the Group collaborated on
formulating these minimum standards during International
HR Community meetings in 2007. Other main topics were
employee appraisals and performance management, which
were discussed by all country management teams in 2008.
Training remains the cornerstone of the Human Capital
strategy. Resources are invested in staff and management
development — ranging from basic skills training through
middle management programmes to full corporate MBASs.
The philosophy is to offer tailored training at all functional
levels in order to enhance employee skills and upward staff
mobility. Much attention is devoted to developing the first
management layer e.g. team leaders, supervisors and con-
tract managers, who are responsible for the immediate staff
and customer interface. Most training is conducted at ISS
academies and training facilities in national and local opera-
tions.
The first participants from the second intake of the ISS MBA
programme graduated in 2008. In line with Group strategy,
the MBA programme will continue in local settings.
The IFS Academy conducted centralised training in Calcula-
tion for Planners and the iSS Facility Management System
introduction. As in previous years, the ISS University pro-
gramme portfolio consisted of internal and external semi-
nars designed in cooperation with suppliers such as IMD,
Henley Management College and INSEAD.
The management induction programme, ISS Advantage,
continues with executives from throughout the Group. Dur-
ing 2008, approximately 700 senior managers and specialists
from the entire Group attended a total of 38 workshops and
programmes at ISS University.
Health and Safety
We operate on client premises in a number of challenging
environments including in the transport sector, major hos-
pitals, workplace restaurants and public parks and gardens.
We promote the fact that all employees are responsible for
their own safety and the safety of others who may be af-
fected by their work activities. Our efforts are concentrated
on ensuring the right working environment and giving our
employees the training and equipment necessary to per-
form their work safely.
We aim for continuous improvement in our Health and
Safety performance and plan to embrace it as part of over-
all business operations. For example, we provide regular
Health and Safety training to our frontline managers in the
STRATEGY — THE ISS WAY | ANNUAL REPORT 2008 - 33
United Kingdom and support them with a dedicated team
of 51 Health and Safety professionals.
Employee loyalty
The service industry in general has high levels of employee
turnover, as part of the industry is often considered suit-
able for short-term or secondary employment. ISS pursues a
range of strategies to retain its employees by offering more
full-time and daytime work, multi-task jobs, teamwork, skills
development, career opportunities, leisure activities, etc. In
2008, the share of full-time employees (working 25 hours or
more a week) rose to 69%. This indicator is important, as,
on average, full-time employees develop stronger ties with
ISS. The distribution of employee seniority (in years) pro-
vides another perspective on employee loyalty within ISS.
In 2008, approximately-65% of-the Group's employees had
been with ISS for more than one year.
Equal opportunities
ISS rewards its people solely on the basis of merit. When
recruiting, developing and promoting, ISS focuses on the
individual capabilities and qualifications of a candidate and
not on the person's gender, age, ethnic origin, religion, po-
litical views, etc.
Thanks to the corporate culture, and aided by language
courses and adapted training materials, today ISS is an em-
34 - ANNUAL REPORT 2008 | STRATEGY — THE ISS WAY
ployer of choice for many immigrants and ethnic minorities.
In countries such as Belgium, Denmark, France, Norway,
Sweden and the United Kingdom, ISS is among the largest
employers of ethnic minorities. In ISS Denmark, an initiative
to develop management skills among employees with an im-
migrant background was established in 2007. The goal is to
train 300 employees over a four-year period to fill manage-
ment positions.
The Danish ”Charter for Women in Management” was
signed in 2008 by Group CEO Jørgen Lindegaard, on behalf
of the Group head office, to ensure commitment to includ-
ing women as candidates for executive positions.
European Works Council
Employee-and-trade-union-relations-are.a natural part of.a
people-centred business such as ISS. The corporate policy of
involvement and dialogue is applied locally in the country
operations. Established in 1995, the European Works Coun-
cil (EWC) is a forum for dialogue between ISS executives and
employee representatives from across Europe.
A total of 13 countries as well as representatives from the
Danish Union 3F and the Union Network international took
part in the 2008 annual meeting. The participants discussed
primarily a new agreement between ISS and EWC. Negotia-
tions are still ongoing.
5" ANTONIO (XaL 15 ele i i i KEVIN SUTER AND SYLVIE DURAND
ACACIO DA SILVA
CORPORATE GOVERNANCE
EQT 5475 FS INVEST S.ar 1 (LUXEMBOURG)
GOLDMAN SACHS CAPITAL PARTNERS 4472
(EEN RARENS P.E STONE ER:
ISS EQUITY A;5
1 As described in note 34 to the c lidated financial certain bers of the Board, the EGM members and a number of senior officers of the Group have invested, directly or indirectly,
in shares and warrants in FS Invest $.å r.l. The total number of shares held by these officers is below 2% of the total share capital.
Note: The ulti parent c for which c d financial are prepared is FS Invest S.å r.l. The c lidated financial can be obtained from FS Invest 5.å r.l, 9-11 Grand Rue,
L-1661 Luxembourg.
The Board of Directors regularly considers the Group's cor- Shareholders
porate governance in relation to the Group's activities, ex-
ternal environment and statutory requirements. Good cor-
porate governance in ISS is a dynamic process with the Board
of Directors and the Company continuously assessing the
need for adjustments for the benefit of ISS's stakeholders
and the business itself.
The ISS corporate governance policies and procedures take
into account the Danish Companies Act, the Danish Financial
Statements Act, IFRS, the Action Plan for Corporate Social
Responsibility (CSR), the Danish Venture Capital and Private
Equity Association's guidelines for responsible ownership
and good corporate governance as well as good corporate
governance practices for companies of ISS's size and global
reach.
Reporting on Corporate Social Responsibility (CSR) is includ-
ed in the ”Strategy” chapter.
36 - ANNUAL REPORT 2008 | CORPORATE GOVERNANCE
ISS is a limited liability company incorporated and operating
under Danish law. The company's share capital is indirectly
owned by funds advised by EQT Partners (EQT) and Gold-
man Sachs Capital Partners (GS Capital Partners) — EQT and
GS Capital Partners are together referred to as the Principal
Shareholders and hold 54% and 44% of the share capital
respectively. The remaining approximately 2% of the share
capital is held by certain members of the Board of Directors,
the Executive Group Management and a number of senior
officers of ISS through director and management invest-
ment programmes.
EQT is a leading private equity group with operations in
Northern Europe and Greater China. EQT has raised approxi-
mately EUR 12.5 billion in twelve funds. In total, EQT funds
have invested approximately EUR 7.3 billion in more than
70 companies. EQT Partners, acting as exclusive investment
advisor to EQT, is headquartered in Stockholm and main-
tains offices in Copenhagen, Frankfurt, Helsinki, Hong Kong,
Munich, New York, Oslo, Warsaw and Shanghai.
GS Capital Partners is the private equity vehicle through
which the Principal Investment Area (PIA) of Goldman Sachs
Group, Inc. conducts its privately negotiated corporate
equity investment activities. Since 1986, PIA has raised 15
investment funds (including mezzanine and senior secured
loan funds) through three corporate investment vehicles,
aggregating over USD 87 billion of capital (including actu-
al and estimated leverage). GS Capital Partners is a global
private equity group focused on large, sophisticated business
opportunities in which value can be created by leveraging
the resources of Goldman Sachs.
. «The Principal. Shareholders.have.entered. into.a.sharehold-
ers' agreement covering all entities through which EQT and
GS Capital Partners hold their interest in ISS.
The Board
ISS has a two-tier governance structure consisting of:
> the Board of Directors (the Board), and
> the Executive Group Management (the EGM).
The Board supervises the company's activities, its manage-
ment and organisation. The EGM is responsible for ISS's day-
to-day operations. The two bodies are separate and do not
have overlapping members.
The Board functions in accordance with the rules set out in
the Danish Companies Act, the shareholders' agreement,
the articles of association and its rules of procedure, which
provide guidelines for the Board's work in general. Board
resolutions are generally passed with a simple majority, and
in the event of a tie, the Chairman casts the deciding vote.
However, undertheshareholders' agreement, certain actions
require special approval by the Principal Shareholders.
The Board convenes at least six times a year. Extraordinary
meetings are convened whenever specific matters need
attention between scheduled meetings. The Board held
eight meetings in 2008. The Board receives a monthly finan-
cial and operational reporting package and is briefed about
important matters in the periods between Board meetings.
The Board approves the strategy plan, the annual budget
and large or strategic acquisitions based on recommenda-
tions from the Acquisition Committee (see ”Board Commit-
tees” below).
According to the shareholders' agreement, EQT and GS Capi-
tal Partners are entitled to nominate three Board members
and a deputy member each, and EQT has the right to nomi-
nate the Chairman of the Board after consultation with GS
Capital Partners.
A further description of the Board members is available on
page 43 of this report and in note 34 to the consolidated
financial statements. Remuneration to the Board of Direc-
tors of the Group is disclosed in note 3 to the consolidated
financial statements.
Board committees
The Board has established the following four committees
that all report to the Board.
The Remuneration Committee decides the remuneration
packages and-incentive-schemes-for-the-Group-CEO, and-pro-
vides input for other members of the Group Management
Board, as well as compensation levels and bonus systems in
general. The committee consists of at least three members
of the Board (currently Ole Andersen, Peter Korsholm and
Sanjay Patel), and the Group CEO participates in its meet-
ings. -The committee held two meetings in 2008.
The Audit Committee evaluates ISS's external financial re-
porting, main accounting principles and estimates, and
systems of internal controls and risk management. Further,
the committee considers the relationship with ISS's external
auditor and reviews the audit process. The committee con-
sists of at least three members of the Board (currently Leif
Ostling, John Murray Allan, Christoph Sander and Steven
Sher), and the Group CFO participates in its meetings. The
committee held three meetings in 2008.
The Acquisition Committee considers ISS's procedures for
acquisitions, reviews the acquisition pipeline, approves cer-
tain acquisitions in accordance with adopted procedures,
and evaluates selected effected acquisitions. The committee
consists of at least three members of the Board (currently
Christoph Sander, Peter Korsholm and Steven Sher), and the
Group COO, Group CFO, Head of Group Strategy and Busi-
ness Development and Head of Group M&A participate in its
meetings. The committee held eight meetings in 2008.
The Financing Committee considers ISS's capital structure,
financing of future investments and hedging policies. The
committee consists of at least two members of the Board
(currently Peter Korsholm and Steven Sher), and the Group
CFO and Head of Group Treasury participate in its meetings.
The committee held four meetings in 2008.
Group Management
The Executive Group Management of ISS consists of Group
CORPORATE GOVERNANCE | ANNUAL REPORT 2008 - 37
CEO Jørgen Lindegaard, Group COO Jeff Gravenhorst and
Group CFO Jakob Stausholm (the ”EGM”). On 1 September
2008 Jakob Stausholm joined ISS and took over responsi-
bility as Group CFO.
The Group Management Board (the "GMB") comprises the
EGM together with COOs Jacob Gåtzsche, Hans John Oiestad,
Stig Pastwa, and Martin Gaarn Thomsen, Head of Group
Strategy and Business Development Todd O'Neill, Head of
Group M&A Jens Ebbe Olesen, Head of Corporate Clients
Magnus Åkerberg, Group General Counsel Bjørn Raasteen,
Head of Group Human Capital Helle Havgaard and Group
Treasurer Christian Kofoed Jakobsen. The primary tasks of
the GMB are to implement Group policies, monitor Group
performance, review operational and financial matters, co-
-ordinate-and-evaluate-acquisitions,-diseuss-and-develop new-
strategic initiatives and carry out day-to-day management
in general.
The members of the GMB are remunerated with a combi-
nation of a fixed salary and, for most members, a bonus,
which is capped at 50% of their fixed salary. The employ-
ment contracts of the GMB members are subject to termina-
tion periods of between 12 and 18 months. Directorships in
companies in the ISS Group held by members of the GMB are
not remunerated separately.
No member of the GMB is permitted to hold directorships
in companies outside the ISS Group unless specific consent is
granted. Remuneration received in respect of such external
directorships is retained by the member, and ISS assumes no
liability for such directorships.
Country management
in each of the countries in which ISS operates, country man-
agement teams are appointed to manage the business in
accordance with ISS Group policies and procedures and local
legislation and practice. ISS delegates substantial autonomy
and considerable powers to the country management teams
including management of operations in their relevant mar-
kets, financial reporting, local tax and compliance with local
legislation and practices. The country management teams
for each relevant country are described on the ISS website.
Management Participation Programme
The Principal Shareholders have established a Manage-
ment Participation Programme, under which the GMB and
a number of senior officers of the Group can invest. The
programme is structured as a combination of direct and
indirect investments in a mix of shares and warrants in FS
Invest (ISS's ultimate parent company) based on market val-
ues until the Principal Investors exit. At the introduction of
38 - ANNUAL REPORT 2008 I CORPORATE GOVERNANCE
the programme in 2006, warrants in FS invest were granted
free of charge with a vesting schedule (based on value of
shares and time) of which 396,940 were outstanding as of 31
December 2008.
Further, non-executive members of the Board (except rep-
resentatives of the Principal Shareholders) can participate
in a Directors Participation Programme and a Co-investment
Scheme, under which they have invested in a mix of shares
and warrants in FS Invest based on market values until the
Principal Investors' exit.
As of 31 December 2008, the net investments were as follows:
Investment i
Persons (ORK million) E
Risk management
ISS continuously seeks to identify and evaluate risk factors
that may have an adverse effect on the ISS Group's activities,
financial position, results and future growth. For a detailed,
non-exhaustive list of the risk factors to which the Group is
subject, reference is made to the High Yield Offering Memo-
randum (pages 33-52) available from the Group's website
www.issworld.com.
Overall, operational and financial risks are managed in accor-
dance with policies adopted by the Board. In addition, de-
tailed plans and business procedures for a number of func-
tions are described in manuals and guidelines. The policies
for operational and financial risk management and the ISS
Group's standards are documented and distributed to the
operating companies. 1SS's Group Risk Management and
Group Treasury departments supervise compliance with
these standards. Monthly reporting to the Board contains
an overview of the status in these areas.
OPERATIONAL RISK MANAGEMENT
Operational risk management focuses principally on proce-
dures for claims management, entering into contracts, occu-
pational safety, environmental aspects and safeguarding
of physical assets. Operational risk is assessed based on the
activities of each operating company, historic and current
claims events, and the markets in which the companies ope-
rate. Operational risk is monitored and mitigated in accor-
dance with ISS Group standards for risk management, risk
financing and good operational practice. Operational risk
financing is based on insurance and own funding, primarily
through local and global insurance programmes including a
captive (Global Insurance A/S), all managed centrally in ISS.
ISS considers that the Group is not subject to material opera-
tional risks except for risks common in the ordinary course
of business in the service industry. ”
Operational responsibility is delegated to the operating
companies under the supervision of regional management.
FINANCIAL RISK MANAGEMENT
Financial risk management focuses primarily on interest rate
risk, currency risk and credit risk. The ISS Group's financial
risk management.is.described in note 32 to the consolidated
financial statements.
MAIN ELEMENTS OF THE GROUPS INTERNAL
CONTROL ENVIRONMENT
The Board and the EGM have overall responsibility for the
Groups internal control and risk management systems rela-
ted to preparation of the consolidated financial statements.
The Audit Committee reviews and monitors the EGM in the
assessment of material risks and the internal controls and
risk management systems that manage the identified risks.
A material risk is considered to be a risk that may cause a
material error in the consolidated financial statements of the
Group. Internal control procedures at group level have been
established to assess the Group's internal control! environ-
ment and to manage identified risks.
ISS considers strong controls to be an essential manage-
ment tool. Accordingly, care is taken to ensure that a sound
framework of controls is in place for safeguarding the busi-
ness, the company's assets and the shareholder investments.
However, such controls are designed to manage rather than
eliminate the risks and can provide only reasonable and not
absolute assurance against material misstatements or losses.
The policies and procedures set out below reflect the prin-
cipal features of the IS$ Group's internal control environ-
ment.
ISS aims at establishing a control environment that provides
the Board and the EGM with reasonable assurance that:
> management reporting is reliable and in compliance
with applicable laws, regulations, internal policies and
procedures and gives a true and fair view of the financial
results
> risks are identified and minimised
> internal controls are in place to support the quality and
efficiency of the business processes and to safeguard the
Group's assets
> ISS's business is conducted in compliance with legislation
and ISS policies
The country management teams are responsible for ensuring
that the control environment in each operating unit is suffi-
cient to meet the objectives above. The regional manage-
ment teams provide governance of the country operations.
In order to ensure that adequate internal control procedures
are maintained locally, the Group Business Controlling de-
partment visits the subsidiaries regularly. Controlier visits
take place according to a plan for the year approved by the
Audit Committee and in accordance with the control pro-
cedures and standards defined in ISS's control-manual.. The
findings and conclusions of the visits, which include recom-
mendations on how to improve the control environment,
are presented in reports addressed to country and regional
managements and the external auditor. The controllers per-
form follow-up reviews to ensure that the recommendations
are implemented. The results of the control visits are pre-
sented to the Audit Committee and the Audit Committee
assesses the results reported and uses this assessment to
review the Control Plan for the coming year.
Other key elements of ISS's control environment are:
> strategy reviews — annua! meetings with country mana-
gers at which the strategy is discussed, and priorities and
plans for the coming year are agreed
> business reviews — monthly meetings between regional
management and country management with a focus on
the current performance and state of the business
> budgets and financial plans — all countries must prepare
budgets and plans for the following financial year in a
pre-defined procedure and format. Regional manage-
ments review the proposed budgets and plans with the
countries
> IT solutions — all countries must use a standardised IT re-
porting tool and the number of different ERP platforms
within the Group is continuously being reduced
> acquisitions — all acquisition proposals must be presented
in a predefined acquisition report and valuation mod-
el for approval. Board approval is required for large or
strategic acquisitions
> reporting of cash flow forecasts - countries must report
the daily cash flow forecast for the coming month on the
third working day of each month. Subsequently, actual
figures are continuously monitored by ISS's Group
Treasury department for deviations from the forecasted
figures
CORPORATE GOVERNANCE |! ANNIJAL REPORT 2008 - 39
> reporting of financial results — all countries must report
a fuil income statement, balance sheet, cash flow state-
ment, portfolio analysis etc. on a monthly basis. Any sig-
nificant variance from budgets must be explained
> full-year forecasts — all countries must update and report
their year-end estimates twice a year
Auditor
The Board nominates the external auditor for election pur-
suant to the shareholder's agreement. The nomination fol-
lows an assessment of the competencies, objectivity and in-
dependence of the external auditor and the effectiveness of
the audit process.
An independent business relationship with the ISS Group's
-— externabauditor.is essential for-the controkenvironment. As.
part of the safeguards to ensure independence, the external
auditor may not be used for certain non-audit services for
ISS including, but not limited to, preparation of accounting
40 - ANNUAL REPORT 2008 | CORPORATE GOVERNANCE
records and financial statements and recruitment for senior
management positions.
The company collaborates with its external auditor in relation
to procedures and internal controls by exchanging controller
reports and audit reports and by generally sharing relevant
knowledge.
All Board members receive the external auditor's long-form
audit reports in connection with the audit of the annual
financial statements and any other long-form audit reports.
Auditor reports are discussed in detail in the Audit Commit-
tee.
The Board reviews the Annual Report at a Board meeting
attended. by.the.external.auditor. The. potential findings of.
the external auditor and any major issues arising during the
course of the audit are discussed and key accounting princi-
ples and audit judgements are reviewed.
ANTONIO MADRID
DALE MICETIC AND RICKY LOCKHART
LS
JOHN MURRAY ALLAN
|
|
i
CHRISTOPH SANDER;
PETER KORSHOL
SES Tai
SY BES ØL ESTET
;
i
|
:
|
i
:
:
;
BOARD OF DIRECTORS
BOARD OF DIRECTORS OF ISS HOLDING A/S
Ole Andersen Leif Ostling John Murray Allan Peter Korsholm
(1956) (1945) (1948) (1971)
Chairman Vice-Chairman Member of the Board Member of the Board
Member of the Board since Member of the Board since 20 June 2008. since 16 April 2008.
27 May 2005. since 26 October 2005. Jointly nominated by EQT Nominated by EQT.
ff Jointly.nominated by.EQT and Jointly nominated by-EQT. and GS Capital Partners. Partner and-Head of.the 6
GS Capital Partners. and GS Capital Partners. CFO of Deutsche Post World Net. Copenhagen office of
President and CEO of Scania. AB. EQT Partners.
Sanjay Patel Christoph Sander Steven Sher
(1961) (1962) (1970)
Member of the Board Member of the Board Member of the Board
since 27 May 2005. since 6 April 2006. since 12 December 2007.
Nominated by GS Capital Partners. Jointly nominated by EQT and Nominated by GS Capital Partners.
Co-head of Private Equity GS Capital Partners. Managing Director for the
in Europe for the Principal Co-founder and Director Principal Investment Area of
Investment Area of of Casper Limited. Goldman Sachs International.
Goldman Sachs International.
BOARD OF DIRECTORS OF ISS HOLDING A/S
The membership of ISS Holding's Board of Directors is identical to that of the Board of Directors of ISS Equity A/S and ISS A/S
(except for elected employee representatives of ISS A/S.)
ANNUAL REPORT 2008 - 43
FRELSER RANE i AARN THOMSEN Hkolbls ROR TEN
HIK IEION STS] CHRISTIAN K. JAKOBSEN MAGNUS AKERBERG É HELLE HAVGAARD É BJØRN RAASTEEN
MANAGEMENT
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EXECUTIVE GROUP MANAGEMENT
MANAGEMENT OF ISS HOLDING A/S
Jeff Gravenhorst
Jikob Stausholm
Jacob Gåtzsche
(1967)
Chief Operating Officer.
With ISS since 1999.
Todd O'Neill
(1966)
Head of Group Strategy and
Business Development.
With ISS since 2008.
Helle Havgaard
(1959)
Head of Group Human Capital.
With ISS since 2000.
Hans John Oiestad
(1955)
Chief Operating Officer.
With ISS since 1986.
Jens Ebbe Olesen
(1962)
Head of Group M&A.
With ISS since 1998.
Bjørn Raasteen
(1964)
Group General Counsel.
With ISS since 1999.
Stig Pastwa
(1967)
Chief Operating Officer.
With ISS since 1998.
Christian K. Jakobsen
(1970)
Group Treasurer.
With ISS since 2004.
Martin Gaarn Thomsen
(1970)
Chief Operating Officer.
With ISS since 1999.
Magnus Åkerberg
1963)
Head of Corporate Clients.
With ISS since 2007.
MANAGEMENT OF ISS HOLDING A/S
The management team of ISS Holding A/S consists of the Executive Group Management. As ISS Holding A/S has no operating
activities of its own, it relies on the Group Management Board of ISS A/S, which other than the Executive Group Manage-
ment consists of certain senior officers responsible for the day-to-day operations of the ISS Group.
ANNUAL REPORT 2008 - 45
i
ESS
MASSERNE NREN EET]
MANAGEMENT STATEMENT
COPENHAGEN, 2 APRIL 2009
The Board of Directors and the Executive Group Manage-
ment have today discussed and approved the Annual Report
2008 of ISS Holding A/S. The Annual Report 2008 has been
prepared in accordance with International Financial Repart-
ing Standards (IFRS) as adopted by the EU and additional
Danish disdosure requirements for annual reports.
Group-Chiéf Executive Officer
Grbup Chief Operating Officer
In our opinion, the Annual Report gives a true and fair view
of the Group's and the Parent Company's assets, liabilities
and financial position at 31 December 2008 and af the
results of the Group's and the Parent Company's operations
and cash flows for the financial year 2008, Furthermore, the
section Capital Structure pages 133-135 gives 2 fair review of
the development of the Group's capital structure.
Group.Chief Financial-Officer
Christoph Sander Steven Sker
INDEPENDENT AUDITOR'S REPORT
To the shareholders of 155 Holding A/S
We have audited the Annual Report of ISS Holding A/S for the
financial year 1 January - 31 December 2008 pages 7-131,
which comprises the Company Report, Management State-
ment, Income Statement, Cash Flow Statement, Balance
Sheet, Statement of Total Recognised Income and Expense,
Statement of Changes in Equity and Notes to the Financial
Statements for the Group as well as for the parent company.
The Annual Report has been prepared in accordance with
the International Financial Reporting Standards (IFRS) as
adopted by.the EU and additional Danish disclosure require-
ments.
Management's responsibility for the Annual Report
Management is responsible for the preparation and fair
presentation of the Annual Report in accordance with the
International Financial Reporting Standards (IFRS) as adopt-
ed by the EU and additional Danish disclosure requirements
for annual reports. This responsibility includes: designing,
implementing and maintaining internal control relevant to
the preparation and fair presentation of an annual report
that is free from material misstatement, whether due to
fraud or error; selecting and applying appropriate account-
ing policies; and making accounting estimates that are rea-
sonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on the Annual
Report based on our audit. We conducted our audit in accor-
dance with Danish and International Standards on Auditing.
Those standards require that we comply with ethical require-
ments, and plan and perform the audit to obtain reasonable
assurance regarding whether the Annual Report is free from
material misstatement.
An audit involves performing procedures to obtain audit evi-
dence on the amounts and disclosures in the annual report.
The procedures selected depend on the auditor's judge-
ment, including the assessment of the risks of material mis-
statement of the Annual Report, whether due to fraud or
error. In making those risk assessments, the auditors consid-
er internal control relevant to the entity's preparation and
fair presentation of the Annual Report in order to design
audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the ef-
fectiveness of the entity's internal control. An audit also in-
cludes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presenta-
tion of the Annual Report.
We believe that the audit evidence we have obtained is suffi-
cient and appropriateto provide a basis for our audit opinion.
Our audit did not result in any qualification.
Opinion
In our opinion, the Annual Report gives a true and fair view
of the Group's andthe Company's assets, liabilitiesand finan-
cial position at 31 December 2008 and of the results of the
Group's and the Company's operations and cash flows for
the financial year then ended in accordance with the Inter-
national Finandal Reporting Standards (IFRS) as adopted by
the EU and additional Danish disclosure requirements.
KPMG
Statsautoriseret Revisionspartnerselskab
ILYAS KASIM,
DERE LEE SST:
HEL
HAS ULM:
GYL NSA LT Eco r
GERARD HUGHES, CHARLOTTE FURGE AND KWAME AMOATENG
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
1 January — 31 December. Amounts in DKK million
Note 2008 2007
2 Revenue 68,829 63,922
| 3,4 Staff costs (44,156) — (40,998)
| 19 Cost of sales (6,134) (5,614)
5 Other operating expenses . (13,609) (12,630)
13, 15 Depreciation and amortisation ” (869) (845)
Operating profit before other items 2 4,061 3,835
6 Other income and expenses, net (242) (129)
Integration costs (66) (67)
2 Operating profit ” 3,753 3,639
mr 16 Share of result from associates 3 8
7. Net finance costs (2,731) (3,017)
Profit before tax and goodwill impairment/amortisation of brands and customer contracts 1,025 630
8 Income taxes (531) (254)
Profit before goodwill impairment/amortisation of brands and customer contracts 494 376
9, 13, 14 Goodwill impairment and write-down (399) (128)
13 Amortisation of brands and customer contracts ? (1,008) (1,101)
8 Income tax effect ? 282 411
Net profit/(loss) for the year (631) (442)
Attributable to:
Equity holders of ISS Holding (641) (468)
Minority interests 10 26
Net profit/(loss) for the year (631) (442)
1 Exduding Goodwill impairment and write-down and Amortisation of brands and customer contracts.
3 Other items comprise Other income and expenses, net, Integration costs, Goodwill impairment and write-down and Amortisation of brands and customer contracts.
3 Excluding tax effect of Goodwilt impairment and write-down and Amortisation of brands and customer contracts.
2 Includes customer contract portfolios and related customer relationships.
I Income tax effect of Goodwill impairment and write-down and Amartisation of brands and customer contracts.
ANNUAL REPORT 2008 - 514
CONSOLIDATED CASH FLOW STATEMENT
1 January -
31 December. Amounts in DKK million
Note
13, 15
10
22
11
11
12
12
25
Operating profit before other items
Depreciation and amortisation
Changes in working capital
Changes in other provisions, pensions and similar obligations
Payments related to other income and expenses, net
Payments related to integration costs
Income taxes paid, net
Cash flow from operating activities
Acquisition of businesses
Divestment of businesses
Investments in intangible assets and property, plant and equipment, net
Investments in financial assets, net
Cash flow from investing activities
Proceeds from borrowings
Repayment of borrowings
Interest paid, net
Proceeds from issuance of share capital
Minority interests
Cash fiow from financing activities
Total cash flow
Cash and cash equivalents at 1 January
Total cash flow
Foreign exchange adjustments
Cash and cash equivalents at 31 December
2008
4,061
869
109
(96)
(181)
(65)
(363)
4,334
(2,095)
272
(718)
(2)
(2,543)
2,251
(1.310)
(2,267)
(22)
(1,348)
443
2,581
443
(63)
2,961
2007
3,835
845
(44)
(203)
(208)
(78)
(434)
3,713
(2,957)
(2)
(715)
2
(3,672)
15,581
(13,043)
(2,373)
178
(14)
329
370
2,216
370
(5)
2,581
52 - ANNUAL REPORT 20608 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
At 31 December. Amounts in DKK million
Note 2008 2007
Assets
13, 14 Intangible assets 36,001 37,150
15 Property, plant and equipment 2,276 2,223
16 Investments in associates 24 28
17 Deferred tax assets 472 598
18 Other financial assets 238 229
Total non-current assets 39,011 40,228
19 Inventories 264 249
20 Trade receivables 10,097 10,114
21 Contract work in progress 182 161
………….22 Tax receivables 228 277
23 Other receivables 776 1,036
24 Assets held for sale - 619
25 Securities 86 83
25 Cash and cash equivalents 2,961 2,581
Total current assets 14,594 15,120
Total assets 53,605 55,348
Equity and liabilities
Total equity attributable to equity holders of ISS Holding 3,498 5,459
Mincrity interests 35 59
26 Total equity 3,533 5,518
27 Long-term debt 31,210 30,882
28 Pensions and similar obligations 834 724
17 Deferred tax liabilities 2,498 2,786
29 Other provisions 397 326
Total long-term liabilities 34,939 34,718
27 Short-term debt 1,279 1,039
Trade payables 2,835 2,750
22 Tax payables 123 151
30 Other liabilities 10,461 10,494
29 Other provisions 435 327
24 Liabilities held for sale - 351
Total current liabilities 15,133 15,112
Total liabilities 50,072 49,830
Total equity and liabilities 53,605 55,348
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 53
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSE
At 31 December. Amounts in DKK million
2008
Foreign exchange adj. of subsidiaries and Minorities
Fair, value adjustment of hedges, net |
Fair value adjustment of hedges, net, transferred
to Net finance costs
Actuarial gains/(losses)
Impact from asset ceiling
Share-based payments
Tax of entries recognised directly in equity
Net income and expense recognised directly in equity
-Net profit/(loss) for the year
Total recognised income and expense for the year
2007
Foreign exchange adj. of subsidiaries and minorities
Fair value adjustment of hedges, net
Fair value adjustment of hedges, net, transferred
to Net finance costs
Actuarial gains/(losses)
Impact from asset ceiling
Share-based payments
Fair value adjustment of PFI investments transferred
to Other income and expenses, net
Tax of entries recognised directly in equity
Net income and expense recognised directly in equity
Net profit/(loss) for the year
Total recognised income and expense for the year
Attributable to equity holders of ISS Holding
Retained Translation Hedging Minority Total
earnings reserve reserve Total interests equity
- (791) - (791) (1) (792)
- - (266) (266) - (266)
- - (147) (147) - (147)
(182) - - (182) - (182)
25 - - 25 - 25
5 - - 5 ” 5
(67) - 103 36 - 36
(219) (791) (310) (1,320) (1) (1,321)
(641) - - (641) - -10-— (631)
(860) (791) (310) (1,961) 9 (1,952)
- (263) - (263) (1) (264)
- - 134 134 - 134
” - (87) (87) - (87)
152 - - 152 - 152
(41) - - - (41) - (41)
2 - - 2 - 2
(19) - - (19) - (19)
(34) - (12) (46) - (46)
60 (263) 35 (168) (1) (169)
(468) - - (468) 26 (442)
(408) (263) 35 (636) 25 (611)
54 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 31 December. Amounts in DKK million
2008
Equity at 1 January 2008
Total recognised income and expense for the year
Impact from acquired and divested companies, net
Dividends paid
Total changes in equity
Equity at 31 December 2008
2007
Equity at 1 January 2007
Total recognised income and expense for the year
Share issue
Impact from acquired and divested companies, net
Dividends paid
Total changes in equity
Equity at 31 December 2007
Translation reserve
Attributable to equity holders of ISS Holdi
Share Retained Translation Hedging Minority Total
capital earnings reserve reserve Total interests equity
100 5,486 (256) 129 5,459 59 5,518
- (860) (791) (310) (1,961) 9 (1,952)
- - - - - (11) (11)
- - - - - (22) (22)
- (860) (791) (310) (1,961) (24) (1,985)
100 4,626 (1,047) (181) 3,498 35 3,533
100 5,716 7 94 5,917 63 5,980
- (408) (263) 35 (636) 25 (611)
0 178 - - 178 - 178
- - - - - (15) (15)
- - - - (14) (14)
0 (230) (263) 35 (458) (4) (462)
100 5,486 (256) 129 5,459 59 5,518
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign subsidiaries/
joint ventures and investments in associates as well as from the translation of long-term intra-group balances which are considered an
addition to the net assets of subsidiaries/joint ventures, loans in foreign currency and derivatives hedging net investments in foreign subsidi-
aries/joint ventures.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments related to
hedged transactions that have not yet occurred. The reserve is presented net of the estimated tax effect.
Dividends
No dividends have been proposed or declared before the Annual Report was issued.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
DæØONOSMWMDWN
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Accounting policies
Significant accounting policies
Income statement
Segment reporting
Staff costs
Share-based payments
Fees to auditors
Other income and expenses, net
Net finance costs
Income taxes
Goodwill impairment and write-down
Cash flow statement
Changes in working capital
Acquisition and divestment of businesses
Investments in non-current assets
Balance sheet
iIntangible assets
Impairment tests
Property, plant and equipment
Investments in associates
Deferred tax
Other financial assets
Inventories
Trade receivables
Contract work in progress
Tax receivables and tax payables
Other receivables
Assets and Liabilities held for sale
Securities, cash and cash equivalents
Share capital
Borrowings
Pensions and similar obligations
Other provisions
Other liabilities
Other
Contingent liabilities
Financial risk management
Derivatives
Related parties
Interests in joint ventures
Subsequent events
Subsidiaries, joint ventures and associates
Page
57
68
69
70
71
71
72
72
73
80
81
82
85
85
8838888
91
92
94
97
98
98
100
102
104
105
106
106
56 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of ISS Holding A/S as of and
for the year ended 31 December 2008, comprise ISS Holding A/S and
its subsidiaries (together referred to as ”the Group”) and the Group's
interests in associates and jointly controlled entities.
STATEMENT OF COMPLIANCE .
The consolidated financial statements have been prepared in accor-
dance with International Financial Reporting Standards (IFRS) as
adopted by the EU and the statutory order on the adoption of IFRS
issued pursuant to the Danish Financial Statements Act.
In addition, the consolidated financial statements have been pre-
pared in compliance with the IFRSs issued by the IASB.
BASIS OF PREPARATION
The financial statements have been prepared on the historical cost ba-
sis except for the following assets and liabilities, which are measured
at fair value: derivatives, financial instruments designated as fair
value through the income statement and financial assets classified
as available-for-sale.
Non-current assets and disposal groups classified as held for sale are
measured at the lower of the carrying amount before the changed
classification and fair value less costs to sell.
CHANGES IN ACCOUNTING POLICIES
The Group has with effect from 1 January 2008 implemented IFRS 8,
"Operating Segments" and IFRIC 14 "IAS 19 — The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their Interaction".
IFRS 8 "Operating Segments" introduces a "management approach"
whereby the segment reporting is based on operating segments as
expressed in the Group's internal management reporting. Conse-
quently, the segments reported under IFRS 8 are changed compared
to the previous segment reporting under IAS 14, which required seg-
ment reporting to be based on both business segments and geo-
graphical segments. IFRS 8 has been adopted before the effective
date in accordance with the transitional provisions of the standard.
IFRIC 14 "IAS 19 — The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction” provides guidance on
assessing the limit on the amount of surplus to be recognised as a
defined benefit asset as well as the treatment of minimum funding
requirements. IFRIC 14 has been adopted before the effective date in
accordance with the transitional provisions of the interpretation.
The adoption of these Standards and Interpretations did not affect
the recognition and measurement, and consequently the accounting
policies set out below have been applied consistently by all entities
of the Group to all periods presented in these consolidated financial
statements. The new standards and interpretations only resulted in
changes to the presentation and disclosures in the notes. Compara-
tive figures have been adjusted accordingly.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assump-
tions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associ-
ated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis for the judgements on carry-
ing amounts of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The Group believes the following are the areas involving critical
accounting estimates and judgements used in the preparation of the
consolidated financial statements:
> revenue recognition and determination of deferred income
> the valuation of identifiable assets, liabilities and contingent liabili-
ties in connection with the acquisition of businesses
> the impairment testing of goodwill, brands, customer contract
portfolios and related customer relationships, and any other acqui-
sition-related intangible assets
> the actuarial calculations regarding pension benefits
> the valuation of provisions other than pension benefits
> the assessment of ongoing litigations and the valuation of contin-
gent liabilities
> the valuation of tax assets and
> bad debt provisions.
The estimates and underlying assumptions are reviewed on an on-
going basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revisions affect only
that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
BASIS OF CONSOLIDATION
Subsidiaries The consolidated financial statements include ISS
Holding A/S and all subsidiaries in which ISS Holding A/S, directly or
indirectly, holds more than 50% of the voting rights or otherwise has
a controlling interest.
The consolidated financialstatements are based on the financial state-
ments of ISS Holding A/S and the individual subsidiaries by adding
items of a similar nature.
Associates Entities, that are not regarded as subsidiaries, but in
which the Group holds investments and exercises a significant, but
not a controlling influence are regarded as associates. The propor-
tionate share of the associate's profit or loss after tax is recognised
in the income statement in the consolidated financial statements in
accordance with the equity method.
Joint ventures The Group's interests in jointly controlled entities are
regarded as joint ventures and recognised in the consolidated finan-
cial statements by including the Group's proportionate share of the
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 > 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
entities' assets, liabilities, income and expenses on a line-by-line basis
with items of a similar nature.
Transactions eliminated on consolidation Intra-group balances and
any unrealised gains and losses on income and expenses arising from
intra-group transactions are eliminated when preparing the con-
solidated financial statements. Unrealised gains arising from trans-
actions with associates and jointly controlled entities are eliminated
to the extent of the Group's interest in the entity. Unrealised losses
are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
Business combinations Acquired businesses are included in the consol-
idated financial statements as from the date when control commences.
where control ceases or the entity is wound-up. Comparative figures
are not restated for businesses acquired, divested or wound-up.
Acquisitions are treated in accordance with the purchase method,
under which identifiable assets, liabilities and contingent liabilities
of acquired businesses are recognised in the balance sheet at fair
value at the date of acquisition. Identifiable intangible assets are
recognised if separable or if they arise from contractual or other legal
rights, provided that the fair value can be measured reliably. Tax
impact related to fair value adjustments is taken into account.
Excess cost of acquisition over the fair value of acquired assets,
liabilities and contingent liabilities is capitalised as goodwill. Good-
will is allocated to cash-generating units and tested for impairment
annually. The first impairment test is prepared no later than at the
end of the year of acquisition.
If the initial accounting for a business combination can be deter-
mined only provisionally by the end of the period in which the com-
bination is effected, adjustments made within twelve months of
the acquisition date to the provisional fair value of acquired assets,
liabilities and contingent liabilities or cost of the acquisition, are ad-
justed to the initial goodwill. The adjustment is calculated as if it was
recognised at the acquisition date. Comparative figures are restated.
Subsequent to this period, goodwill is only adjusted for changes in
estimates of the cost of the acquisition being contingent on future
events. However, subsequent realisation of deferred tax assets not
recognised on acquisition will result in the recognition in the income
statement of the tax benefit concurrently with a write-down of the
carrying amount of goodwill to the amount that would have been
recognised if the deferred tax asset had been recognised at the time
of the acquisition.
Gains or losses on the divestment or winding-up of businesses or asso-
ciates are measured as the difference between the sales or winding-
up sum adjusted for directly related divestment or winding-up costs
and the carrying amount of the net assets at the time of disposal or
winding-up including any carrying amount of goodwill. Accumulated
58 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
exchange rate adjustments on divested or wound-up subsidiaries or
associates recognised in equity are included in the income statement
under Net finance costs at the time of divestment or wind-up.
Foreign currency Items included in the financial statements of each of
the Group's entities are measured using the currency of the primary
economic environment in which the entity operates (functional
currency). The consolidated financial statements are presented in
Danish kroner, which is the functional and presentation currency of
ISS Holding A/S.
Transactions in foreign currency are translated into the functional
currency at the exchange rate ruling at the date of transaction. Mone-
tary assets and liabilities in foreign currency are translated at the ex-
changerate ruling atthe balance sheet date. Non-monetary assetsand
liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of trans-
action.
The income statements of foreign subsidiaries are translated into
Danish kroner using the average exchange rates prevailing during
the year, whereas balance sheet items are translated by applying the
exchange rates ruling at the balance sheet date.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity having a functional currency different from Danish
kroner are treated as assets and liabilities belonging to the foreign
entity and translated into Danish kroner at the exchange rates ruling
at the balance sheet date.
Realised and unrealised exchange gains and losses are included in
the income statement under Net finance costs, except gains/losses
arising from the translation of:
> the opening balances of net assets of foreign subsidiaries/joint
ventures and investments in associates to exchange rates ruling at
the balance sheet date
> the income statements of foreign subsidiaries/joint ventures and
the share of result from associates from average exchange rates to
exchange rates ruling at the balance sheet date
> long-term intra-group balances which are considered an addition
to the net assets of subsidiaries/joint ventures
> loans in foreign currency and derivatives hedging net investments
in foreign subsidiaries/joint ventures.
Realised and unrealised exchange gains and losses related to the
translation of the above four groups of transactions are taken directly
to equity. The related tax impact is taken into account.
INCOME STATEMENT
Presentation The income statement is presented in accordance with
the "nature of expense" method. Goodwill impairment and write-
down and Amortisation of brands and customer contracts as well
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
as the Income tax effect hereof are presented in separate line items
after Operating profit. This income statement presentation is con-
sidered to more appropriately reflect the Group's profitability.
Revenue comprises the value of services provided during the year
less VAT and duties as well as price and quantity discounts. Revenue
is recognised when the significant risks and rewards of ownership
have been transferred to the buyer, recovery of the consideration
is probable, the associated costs can be estimated reliably and the
amount of revenue can be measured reliably. Contract work in
progress is recognised using the percentage-of-completion method
based on the value of work completed at the balance sheet date.
In assessing whether revenue should be reported on a gross or a net
"basis (i.e. net of related costs), the Group considers whether it: (i) is
the primary obligor in the arrangement; (ii) has the general inventory
risk; (iii) has latitude in establishing price; (iv) changes the product or
performs part of the service; (v) has discretion in supplier selection; (vi)
is involved in the determination of product or service specifications;
(vii) has physical loss inventory risk; or (viii) carries the credit risk. If
these assumptions are fulfilled revenue is reported on a gross basis.
Government grants Grants that compensate the Group for expenses
incurred are recognised in the income statement on a systematic basis in
the same periods in which the expenses are incurred. Grants that com-
pensate the Group for the cost of an asset are recognised in the income
statement on a systematic basis over the useful lifetime of the asset.
Staff costs comprises salaries and wages, pensions, social security
expenses and other employee related expenses.
Cost of sales comprises material consumption related to the recog-
nised revenue.
Other operating expenses includes expenses related to the opera-
tion of service equipment and other non-current assets, external
assistance as well as other selling, distribution and administrative
expenses, including expenses related to marketing, transportation,
operating leases, subcontractors, audit, legal assistance, realised
losses and loss provisions on receivables etc.
Depreciation and amortisation includes depreciation and amortisa-
tion of intangible and tangible assets excluding Goodwill impairment
and write-down and Amortisation of brands and customer contracts,
which are presented in separate line items after Profit before good-
will impairment/amortisation of brands and customer contracts.
Share-based compensation The value of services received in exchange
for granted warrants is measured at the fair value of the warrants
granted. The fair value of equity-settled programmes is measured
at grant date and recognised in the income statement under Other
income and expenses, net over the vesting period with a correspond-
ing increase in equity.
The fair value of the warrants granted is measured using the Black-
Scholes option pricing model based on the terms and conditions upon
which they were granted. Service and non-market vesting conditions
are not taken into account when estimating the fair value, but are
considered when estimating the number of warrants expected to
vest. At each balance sheet date, the Group revises the estimate of
number of warrants expected to vest. The impact of this revision,
if any, is recognised in the income statement, and a corresponding
adjustment to equity over the remaining vesting period. Adjust-
ments relating to prior years are included in the income statement
in the year of adjustment.
Operating leases Operating lease costs are recognised in the income
statement on a straight-line basis over the term of the lease. The
obligation for the remaining lease period is disclosed in the notes
under Contingent liabilities.
Other income and expenses, net consists of income and expenses,
both recurring and non-recurring, that the Group does not consider
to be part of normal ordinary operations, such as gains and losses
arising from divestments, the winding-up of operations, disposals of
property, restructurings and certain acquisition related costs, etc.
Integration costs includes costs regarding the acquiring Group com-
pany and the acquired business that are a consequence of the inte-
gration. Integration costs include costs of compensating employees
for termination of their employment, closing facilities, and termina-
tion of subscriptions and agreements.
Share of result from associates comprises the share of result after
tax in associates.
Net finance costs comprises interest payable on borrowings calcu-
lated using the effective interest rate method, interest receivable
on funds invested, foreign exchange gains and losses, and gains and
losses on derivatives that do not qualify for hedge accounting.
Income taxes consists of income tax and changes in deferred tax. De-
ferred tax is recognised based on the balance sheet method and com-
prises all temporary differences between accounting and tax values
of assets and liabilities. Furthermore, a deferred tax liability is recog-
nised for expected re-taxation of tax-deductible losses realised in
foreign subsidiaries previously included under Danish joint taxation.
Where the tax base can be calculated using different tax regulations,
deferred tax is measured based on the planned use of the asset or
the unwinding of the liability, as applicable. Deferred tax is computed
based on the tax rate expected to apply when the temporary differences
are reversed. No deferred tax provisions are made for undistributed
profits of subsidiaries and goodwill not deductible for tax purposes.
Deferred tax assets, including the tax value of losses carried forward,
are recognised at the value at which they are expected to be applied
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
either by eliminating tax on future earnings or by setting off de-
ferred tax liabilities within the same legal tax unit and jurisdiction.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
The recognised income tax is allocated to Income taxes, Tax effect
of goodwill impairment and write-down and amortisation of brands
and customer contracts and Equity, as applicable.
ISS Holding A/S is jointly taxed with all Danish resident affiliates. The
Danish income tax payable is allocated between the jointly taxed
Danish companies based on their proportion of taxable income (full.
absorption including reimbursement of tax deficits). The jointly taxed
. Companies are indluded in the Danish tax on account scheme. Additions,
deductions and allowances are recognised under Net finance costs.
Goodwill impairment and write-down includes impairment losses
arising from impairment tests as well as write-down of goodwill in
connection with divestments.
Amortisation of brands and customer contracts includes amortisa-
tion of acquired brands and acquired customer contract portfolios
and related customer relationships, impairment losses arising from
impairment tests and write-down in connection with divestments.
Income tax effect of Goodwill impairment and write-down and amor-
tisation of brands and customer contracts is presented in a separate
line item in connection with these two line items.
CASH FLOW STATEMENT
The cash flow statement shows the Group's cash fiows for the period
stemming from operating, investing and financing activities, the
change in its cash position during the year as well as the Group's
cash position at the beginning and the end of the year.
The cash flow statement is prepared using the indirect method based
on Operating profit before other items.
The liquidity effect of acquisitions and divestments of businesses is
shown separately under Cash flow from investing activities. The cash
flow statement includes cash flows from acquired businesses from
the date of acquisition and cash flows from divested businesses until
the date of divestment.
Cash flow from operating activities comprises Operating profit be-
fore other items adjusted for non-cash items, changes in working
capital and provisions and payments regarding income taxes, other
income and expenses and integration costs.
Cash flow from investing activities comprises cash flow from acquisi-
tion and divestment of businesses as well as the purchase and sale of
non-current assets.
60 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
Cash flow from financing activities comprises proceeds from and re-
payment of loans, dividends, proceeds from share issues, purchase and
sale of treasury shares, cash flow related to derivatives hedging net
investments and dividends to Minority interests. Furthermore, interest
paid and received is included in cash flow from financing activities as
this better reflects the distinction between operating and financing
activities following the acquisition of ISS A/S by ISS Holding A/S.
Cash and cash equivalents comprises cash and marketable securities,
with maturity of less than three months that are readily convertible
to known amounts of cash and which are subject to an insignificant
risk of changes in value.
BALANCE SHEET
Business combinations are accounted for using the purchase method
as described under ”Basis of consolidation”.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units, which is generally
equal to country level. Goodwill is tested for impairment annually
and whenever there is an indication that goodwill may be impaired.
An impairment loss is recognised whenever the carrying amount of
a cash-generating unit exceeds its recoverable amount. The recover-
able amount is calculated as the higher of net selling price and value
in use. In assessing value in use the estimated future cash flows are
discounted to their present value.
Brands Acquisition related brands are recognised at fair value at
the date of acquisition. Subsequently, acquired brands with indefi-
nite useful lives are measured at historical cost less any accumulated
impairment losses while acquired brands with finite useful lives
are measured at historical cost less accumulated amortisation and
any accumulated impairment losses. Amortisation is provided on a
straight-line basis over the expected useful life of the brand, which
is usually in the range 2-5 years.
The valuation of acquired brands is based on a discounted cash flow
model using the after-tax royalty Payments (the royalty relief method).
Cash flows are discounted on an after tax basis using the local
Weighted Average Cost of Capital (WACC) plus a risk premium for
the assumed risk inherent in the brand.
The net present value of the cash fiow is increased with an estima-
ted portion of the discounted tax amortisation benefit applicable
for a potential buyer based on the local tax amortisation opportu-
nity available for brand names when bought as a trade and asset
purchase. The tax amortisation benefit is discounted. This increased
value of the brand equals the fair value at the date of acquisition.
A deferred tax liability is calculated at the local tax rate on the dif-
ference between the book value and the tax value. The initial recog-
nition of this deferred tax liability increases the amount of goodwill.
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The value of brands is allocated to cash generating units and tested
for impairment as part of the annual impairment test of goodwill.
Customer contract portfolios and related customer relationships
(”Customer contracts") Acquisition related customer contracts are
recognised at fair value at the date of acquisition and subsequently
carried at cost less accumulated amortisation and any accumulated
impairment losses. The value is amortised based on the churn rate
of the acquired portfolio using the declining balance method. This
churn rate is calculated on a contract by contract basis and has histori-
cally averaged approximately 12% to 13% annually. In certain cases
the value of customer contracts is amortised on a straight line basis
based on the legal duration of the acquired contract.
The valuation of customer contracts is based on a discounted cash
flow model using an estimated split of the acquired revenue in busi-
ness segments and the related churn rates and profitability of the
revenue at the time of the acquisition. A contributory asset charge
as a cost or return requirement for assets supporting the intangible
asset has been included in the model. Cash flows are discounted on
an after tax basis using the local Weighted Average Cost of Capital
(WACC) plus a risk premium for the assumed risk inherent in cus-
tomer contracts.
The net present value of the cash flow is increased with an estimat-
ed portion of the discounted tax amortisation benefit applicable for
a potential buyer based on the local tax amortisation opportunity
available for customer contracts when bought as a trade and asset
purchase. The tax amortisation benefit is discounted. This increased
value of customer contracts equals the fair value at the date of acqui-
sition.
A deferred tax liability is calculated at the local tax rate on the dif-
ference between the book value and the tax value. The initial recog-
nition of this deferred tax liability increases the amount of goodwill.
The value of customer contracts is allocated to cash generating units
and tested for impairment as part of the annual impairment test of
goodwill.
Software and other intangible assets and Property, plant and equip-
ment are measured at cost less accumulated amortisation, deprecia-
tion, impairment loss and write-down.
Cost of assets includes cost price as well as costs directly attributable
to bringing the asset to the location and condition necessary for it to
be capable of operating in the manner intended. To the cost price is
added the estimated cost of dismantling and removing the item and
restoring the site on which it is located to the extent that this cost is
recognised as a provision.
Subsequent costs of replacing part of an item are recognised as an
asset if it is probable that the future economic benefits embodied
with the item will flow to the Group. The remaining carrying amount
of the replaced item is de-recognised in the balance sheet and trans-
ferred to the income statement. All other costs for common repairs
and maintenance are recognised in the income statement as and
when incurred.
When measuring the value of software developed for internal use,
external costs to consultants and software as well as internal direct
and indirect costs related to the development are capitalised. Other
development costs for which it cannot be rendered probable that
future economic benefit will flow to the Group are recognised in the
income statement as and when incurred.
Amortisation and depreciation is provided on a straight-line basis
over the expected useful lives of the assets taking into account the
estimated residual value. The amortisation and depreciation methods,
useful lives and residual values are reassessed annually.
Non-current assets Expected useful life
Software and other intangible assets 5-10 years
Buildings 20-40 years
Leasehold improvements (the lease term) 8-12 years
Plant and equipment 3-10 years
If the estimated useful lives of the assets or the estimated residual
value is changed the impact on the amortisation and depreciation is
recognised prospectively.
Gains and losses arising on the disposal or retirement of non-current
assets are measured as the difference between the selling price less
direct sales costs and the net carrying amount, and are recognised in
the income statement under Other operating expenses in the year of
sale, except gains and losses arising on disposals of property, which
are recognised under Other income and expenses, net.
Leased assets Assets held under finance leases are at inception of
the agreement measured in the balance sheet at the lower of the
fair value and the present value of future lease payments. When
calculating the present value, the interest rate implicit in the lease
or an approximated rate is applied as the discount rate. Assets held
under finance leases are depreciated in accordance with the policy
for non-current assets acquired by the Group.
Financial assets Investments in associates are measured in accor-
dance with the equity method. Associates with a negative net asset
value are stated at zero, and amounts owed to the Group by such
associates are written down by the Group's share of the negative net
asset value to the extent it is considered uncollectible. Should the
negative net asset value exceed the receivable, the residual amount
is recognised under provisions to the extent the Group has a legal or
constructive obligation to cover the negative balance.
Costs related to tenders for public offers for PPP (Public Private Part-
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 » 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
nership)/PFI (Private Finance Initiative) contracts are recognised in
the income statement as incurred. If the Group is awarded status
as preferred bidder, directly attributable costs and investments from
that date, if any, are recognised under Financial assets. For PPP/PFI
contracts awarded, the costs are amortised over the term of the
contract. If the Group is not awarded the contract, all costs åre
recognised in the income statement.
Investments in PFi contracts are classified as available-for-sale and
are measured at fair value at the balance sheet date, with any re-
sulting gains or losses being recognised directly in equity, except for
any impairment losses, which are recognised directly in the income
statement. When these investments are de-recognised, the cumula-
tive gain or loss previously recognised directly in equity is recognised
in the income statement. The fair value is the quoted bid price at the
balance sheet date.
Inventories Raw materials and supplies are measured at the lower
of cost under the FIFO principle and net realisable value. Finished
goods and Work in progress are measured at the lower of cost plus
attributable overheads and net realisable value. The cost price of
raw materials and supplies includes the purchase price plus costs
directly related to the purchase. Net realisable value is the estimated
selling price less costs of completion and selling costs.
Receivables are measured at amortised cost less a provision for doubt-
ful debts based on an individual assessment. Provisions and realised
losses during the year are recognised under Other operating expenses.
Contract work in progress is measured at the sales value of the pro-
portion of work completed at the balance sheet date. The sales value
is calculated based on the stage of completion and the total amount
expected to be received for each individual contract. Progress bill-
ings related to the completed proportion of work to be performed
are deducted from the recognised value, while progress billings
exceeding the completed proportion of work to be performed are
recognised as Prepayments from customers under Current liabilities.
Securities which are designated as fair value through the income state-
ment are measured at fair value at the balance sheet date, with any
resulting gains or losses recognised directly in the income statement.
Treasury shares Proceeds related to the acquisition or disposal of
treasury shares are taken directly to equity.
Dividends are recognised in the period in which they are deciared.
Financial liabilities are initially measured at the value of the pro-
ceeds received less related transaction costs. Subsequently, financial
liabilities are measured at amortised cost, equal to the capitalised
value when applying a constant effective rate of interest, and the
difference between the proceeds initially received and the nominal
value is recognised in the income statement over the loan period.
62 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
Defined benefit plans Net obligations in respect of defined benefit
pension plans are calculated separately for each plan by estimating
the amount of future benefits that employees have earned in re-
turn for their service in the current and prior periods; that benefit
is discounted to determine its present value, and the fair value of
any plan assets is deducted. Discount rates are based on the market
yield of high quality corporate bonds or government bonds in the
country concerned with a maturity approximating to the terms of
the Group's pension obligations. The calculations are performed by a
qualified actuary using the Projected Unit Credit Method. When the
benefits of a plan are improved, the portion of the increased benefit
relating to past service by employees is recognised as an expense
in the income statement on a straight-line basis over the average
period until the benefits vest. To the extent that the benefits vest
immediately, the expense is recognised immediately in the income
statement. Net pension assets are only recognised to the extent that
the Group is able to derive future economic benefits in the way of
refunds from the plan or reductions of future contributions. Any
actuarial gains and losses are recognised directly in equity.
Other long-term employee benefits The Group's net obligation in
respect of long-term empioyee benefits other than pension plans
is the amount of future benefit that employees have earned in re-
turn for their service in the current and prior periods. The benefit is
discounted to determine its present value and the fair value of any
related assets is deducted. Discount rates are based on the market
yield of high quality corporate bonds or government bonds in the
country concerned with a maturity approximating to the terms of the
Group's obligations. The calculations are performed by a qualified
actuary using the Projected Unit Credit Method. Any actuarial gains
and losses are recognised under Staff costs in the income statement.
Other provisions comprise obligations concerning labour related
matters, self-insurance, integration costs related to acquisitions, dis-
mantling costs, and various other operational issues. The provisions
are recognised when the Group has a legal or constructive obliga-
tion as a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Derivatives are measured at fair value calculated according to gene-
rally accepted valuation methods and are recognised in Other
receivables or Other liabilities.
For derivatives hedging the fair value of recognised assets and liabili-
ties the value of the hedged asset or hedged liability is also stated
at fair value in respect of the risk being hedged. When a hedging
instrument expires or is sold, terminated or exercised but the hedged
asset or hedged liability with a determinable maturity still exist, the
adjustment recorded as part of the carrying amount of the hedged
item is amortised to the income statement from that date onwards
using the effective interest method.
The effective part of the changes in the fair value of derivatives hedging
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
future transactions is recognised directly in equity, net of tax. On
realisation of the hedged item, value changes recognised under equi-
ty are reversed and recognised together with the hedged item. When
a hedging instrument expires or is sold, terminated or exercised but
the hedged future transactions are still expected to occur, the cumu-
lative gain or loss at that point remains in equity and is recognised in
accordance with the above policy when the transaction occurs.
Derivatives that qualify as net investment hedges of subsidiaries, joint
ventures and associates are recognised directly in equity, net of tax.
For derivatives, which do not comply with the hedge accounting
conditions, changes in fair value are recognised as Net finance costs
in the income statement as they occur.
Non-current assets held for sale Assets are classified as held for sale
when the carrying amount of the assets are expected to primarily
be recovered through a sale within 12 months rather than through
continuing use. Immediately before classification as held for sale, the
assets are remeasured in accordance with the Group's accounting poli-
cies. Thereafter, assets held for sale are recognised at the lower of the
carrying amount and fair value less costs to sell. Assets held for sale are
not amortised or depreciated. Impairment losses on initial classifica-
tion as held for sale are included in the income statement. The same
applies to gains and losses on subsequent remeasurement. Assets
and related liabilities are separated in the balance sheet and the main
elements are specified in the notes to the financial statements.
Discontinued operations comprises a component of the Group's busi-
ness that represent a separate major line of business or geographical
area of which the operations and cash flows can be clearly disting-
uished, i.e. as a minimum a cash-generating unit. Classification as
discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale. The profit or loss is
separated in the income statement, assets and related liabilities are
separated in the balance sheet, and the cash flows from operating,
investing and financing activities are disclosed in the notes to the
financial statements. When an operation is classified as discontin-
ued operation, the comparative income statement is re-presented as
if the operation had been discontinued from the beginning of the
comparative period.
Segment reporting The Group's reportable segments have been
identified based on the Group's internal management reporting.
Operations are managed based on a geographical structure in which
countries are grouped into 7 regions representing the Group's re-
portable segments. The regions have been identified based on a key
principle of grouping countries that share market conditions and
culture.
The accounting policies of the reportable segmenits are the same as
the Group's accounting policies described above. Segment revenue,
costs, assets and liabilities comprise items that can be directly re-
ferred to the individual segments. Unallocated items mainly consist
of revenue, costs, assets and liabilities relating to the Group's Corpo-
rate functions as weli as Net finance costs and Income taxes.
For the purpose of IFRS 8, segment profit has been identified as
Operating profit (before Goodwill impairment and write-down and
Amortisation åf brands and customer contracts). Segment assets
and segment liabilities have been identified as Total assets and Total
liabilities, respectively.
In presenting geographical information segment revenue and non-
current assets are based on the geographical location of the indi-
vidual subsidiary from which the sales transaction originates.
NEW STANDARDS AND INTERPRETATIONS
IASB has published the following new standards, amendments to
existing standards and interpretations that are not mandatory for
the preparation of the consolidated financial statements of the
Group for the year ended 31 December 2008: IAS 1, 23 and 27, IFRS 2
and 3, IFRIC 13 and 15-18, "amendments to IA$32 and IAS 1", "amend-
ments to IAS 39” and "amendments to IFRS 1 and IAS 27" and
"improvements to IFRSs May 2008”. IFRS 3, IAS 27, the mentioned
amendments and IFRIC 15-18 have not yet been approved by the EU.
The Group expects to implement the new standards and interpreta-
tions when they become mandatory in 2009 and 2010, respectively.
The standards and interpretations that are approved with different
effective dates in the EU than the corresponding effective dates un-
der IASB will be early adopted so that the implementation follows
the effective dates under IASB.
IFRS 3 (Revised) "Business Combinations" (and the simultaneous
amendment of IAS 27) is effective for annual periods beginning on
or after 1 July 2009. The standard incorporates a number of changes
of which the full impact is not yet known. However, it is expected
that primarily the following changes are likely to be relevant to the
Group's operations:
> Contingent consideration will be measured at fair value, with sub-
sequent changes therein recognised in the income statement.
> Transaction costs, other than share and debt issue costs, will be
expensed as incurred.
The Group does not expect to apply the possibility of recognising
goodwill related to any minorityshare of acquired businesses. Further-
more, it is expected that the impact of a number of the more tech-
nical adjustments to the purchase method will not be significant.
IFRS 3 (Revised) becomes mandatory for the Group's 2010 consoli-
dated financial statements and will be applied prospectively, and
therefore there will be no impact on prior periods in the Group's
2010 consolidated financial statements.
Apart from IFRS 3 (Revised) "Business Combinations" (and the simul-
taneous amendment of IAS 27), none of the standards and interpre-
tations are expected to have a material impact on the consolidated
financial statements of the Group.
SONSOUDATED FINANCIAL STAT
3-63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SEGMENT REPORTING
Reportable segments
ISS is a global Facility Services company, that operates in more than 50 countries and delivers a wide range of services within the areas clean-
ing, office support, property services, catering, security and facility management.
Operations are managed based on a geographical structure in which countries are grouped into 7 regions. The regions have been identified
based on a key principle of grouping countries that share market conditions and culture.
The segment reporting is prepared in a manner consistent with the Group's internal management and reporting structure. Segment revenue,
costs, assets and liabilities comprise items that can be directly referred to the individual segments.
Total
Western Eastern Latin reportable
DKK million Nordic Europe Europe Asia America USA Pacific segments
2008
Income statement
Revenue ”) 17,071 39,337 1,663 3,147 1,890 2,131 3,614 68,853
Depreciation and amortisation 2 (229) (462) (26) (41) (19) (13) (33) (823)
Operating profit before other items 1,189 2,356 124 210 109 128 230 4,346
Other income and expenses, net (20) (199) a (0) - - - (219)
Integration costs (6) (37) (2) (6) (6) (4) (5) (66)
Operating profit ? 1,163 2,120 122 204 103 124 225 4,061
Goodwill impairment and write-down (25) (374) - - - - - (399)
Amortisation of brands and customer contracts (244) (580) (32) (45) (17) (43) (47) (1,008)
Balance sheet
Total assets 12,971 31,660 1,352 2,564 1,014 1,612 2,404 53,577
Additions excluding acquisitions/divestments 318 565 18 70 26 18 35 1,050
Additions from acquisitions/divestments 104 1,195 120 334 121 282 176 2,332
Additions to non-current assets ?” 422 1,760 138 404 147 300 211 3,382
Total liabilities 8,570 20,324 896 1,261 799 1,165 1,945 34,960
" Segment revenue comprises total revenue of each segment. Due to the nature of the business internal revenue is insignificant and is therefore not disclosed.
3 Exduding Goodwill impairment and write-down and Amortisation of brands and customer contracts.
1 Other items comprise Other income and expenses, net, Integration costs, Goodwill impairment and write-down and Amortisation of brands and customer contracts.
+ Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment.
continues
B)BT 2008 | CONSGUDATED FINANCIAL STATSNAENTS
i
|
;
i
:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SEGMENT REPORTING (CONTINUED)
DKK million
2007
Income statement
Revenue ”)
Depreciation and amortisation
Operating profit before other items 3
Other income and expenses, net
Integration costs
Operating profit
Goodwill impairment and write-down
Amortisation of brands and customer contracts
Balance sheet
Total assets
Additions excluding acquisitions/divestments
Additions from acquisitions/divestments
Additions to non-current assets >?
Total liabilities
Vi total
of each
Total
Western Eastern Latin reportable
Nordic Europe Europe Asia America USA Pacific segments
16,488 37,709 1,226 2,409 1,484 1,100 3,519 63,935
' (217) (452) (21) (37) (14) (7) (34) (782)
1,162 2,356 91 158 86 62 225 4,140
(12) (65) - 3 3 - - (71)
(7) (44) (1) (5) (2) (3) (5) (67)
1,143 2,247 90 156 87 59 220 4,002
(16) (112) - - - - - (128)
(303) (641) (26) (40) (17) (24) (50) (1,101)
14,034 32,705 1,177 2,070 900 1,195 2,548 54,629
284 566 19 54 20 7 41 991
204 1,554 179 306 70 1,049 45 3,407
488 2,120 198 360 90 1,056 86 4,398
8,446 20,530 745 897 780 907 2,032 34,337
2 Exduding Goodwill impairment and write-down and Amortisation of brands and customer contracts.
» Other items comprise Other income and expenses, net, Integration costs, Goodwill impairment and write-down and Amortisation of brands and customer contracts.
3 Additions to non-current assets comprise additions to Intangibie assets and Property, plant and equipment.
Grouping of countries into regions
Nordic:
Western Europe:
land, Turkey and the United Kingdom
Eastern Europe:
Asia:
Pacific: Australia and New Zealand
USA: USA
Latin America:
Argentina, Brazil, Chile, Mexico and Uruguay
Denmark, Faroe islands, Finland, Greenland, Iceland, Norway and Sweden
Austria, Belgium & Luxembourg, France, Germany, Greece, Ireland, Israel, italy, the Netherlands, Portugal, Spain, Switzer-
TED FINANCIAL
Due to the nature of the business internal revenue is insignificant and is therefore not disclosed.
i
Croatia, the Czech Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia and Slovenia
Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, Sri Lanka, Taiwan and Thailand
STATEHATNTS I ANNU
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SEGMENT REPORTING (CONTINUED)
Products and services
The Group's revenue relates to the foliowing service types:
DKK million 2008 2007
Cleaning 36,528 34,773
Office Support 4,146 3,881
Property Services 15,410 15,186
Catering 5,727 4,198
Security 4,344 3,406
Facility Management 2,674 2,478
Total revenue 68,829 63,922
Geogråphical information
Revenue and non-current assets (excluding deferred tax assets) is specified below for each of the Group's significant countries?:
2008 2007
Non- Non-
current current
DKK million Revenue assets Revenue assets
France 9,336 6,904 10,144 7,104
United Kingdom 7,565 2,972 7,814 3,883
Norway 5,683 2,686 5,324 3,282
Spain 4,603 2,198 3,775 1,902
Sweden 3,920 1,907 3,861 2,167
Denmark (country of domicile) 3,702 2,491 3,713 2,474
Netherlands 3,540 2,431 3,654 2,486
Finland 3,517 3,373 3,317 3,437
Other countries ” 26,963 13,577 22,320 12,895
Total 68,829 38,539 63,922 39,630
” In this context significant countries are defined as countries representing 5% or more of the Group's revenue.
3 including unallocated items and eliminations.
Major customers
No customer comprises more than 10% of the Group's external revenue.
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SEGMENT REPORTING (CONTINUED)
2 Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment.
Reconciliations
DKK million 2008
Revenue
Revenue for reportable segments 68,853
Elimination of internal revenue (24)
Revenue according to the Consolidated Income Statement 68,829
Operating profit
Operating profit for reportable segments 4,061
Elimination of internal profit 0
Unallocated corporate costs (285)
Unallocated other income and expenses, net (23)
Operating profit according to the Consolidated Income Statement 3,753
Unallocated:
Share of result from associates 3
Net finance costs (2,731)
Profit before tax and goodwill impairment/amortisation of brands and
customer contracts according to the Consolidated income Statement 1,025
Total assets
Total assets for reportable segments 53,577
Elimination of internal assets (19,846)
Unallocated assets 19,874
Total assets according to the Consolidated Balance Sheet 53,605
Additions to non-current assets ”
Additions to non-current assets for reportable segments 3,382
Unallocated additions to non-current assets 51
Total additions to non-current assets according to the Consolidated Balance Sheet 3,433
Total liabilities
Total liabilities for reportable segments 34,960
Elimination of internal liabilities (19,447)
Unallocated liabilities 34,559
Total liabilities according to the Consolidated Balance Sheet 50,072
2007
63,935
(13)
63,922
4,002
(305)
(58)
3,639
(3,017)
630
54,629
(19,139)
19,858
55,348
4,398
80
4,478
34,337
(18,743)
34,236
49,830
CONSOLIDATED FINANCIAL STATEMENTS |! ANNUAL REPORT 2008 - 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. STAFF COSTS
DKK million 2008 2007
Wages and salaries 34,188 31,613
Pension costs, defined benefit plans 126 118
Pension costs, defined contribution plans 1,492 1,477
Social charges and other costs 8,350 7,790
Staff costs 44,156 40,998
Average number of employees 455,947 416,961
Remuneration to the Board of Directors and Executive Management of the Group
2008 2007
… ene Board of Executive Board of Executive
DKK thousand Directors Management Directors Management
Salaries (including benefits) and fees 1,856 18,102 1,613 17,267
Bonus - 5,148 - 6,510
Severance payments ” - - - 12,833
1,856 23,250 1,613 36,610
Executive Management of the Group comprises the Executive Group Management of ISS Holding A/S.
The members of Executive Management are, in the event of termination, entitled to a severance payment of between 12 -18 months salary
plus benefits.
Included in Other income and expenses, net.
4. SHARE-BASED PAYMENTS
Management Participation Programme
Funds advised by EQT Partners and Goldman Sachs Capital Partners (the ”Principal Shareholders”) have established a Management Partici-
pation Programme, under which Executive Management” and,a number of senior officers of the Group have been offered to invest. The
programme is structured as a combination of direct and indirect investments in a mix of shares and warrants of FS Invest S.a r.l ("FS Invest”),
ISS Holding A/S's ultimate parent. As part of the initial programme — in addition to the investments — warrants in FS Invest were granted free
of charge to Executive Management and a number of senior officers of the Group.
The direct and indirect investments in FS Invest were made on market terms and hence are not share-based payments within the scope of IFRS
2 Share-based Payment. Further details of the programme and these investments are provided in note 34, Related parties and in Corporate
Governance on page 38. The warrants granted to Executive Management and a number of senior officers of the Group are within the scope
of IFRS 2.
Warrants granted as part of the Management Participation Programme
The warrants were granted in July 2006 as a one-time grant and were issued in two series, A and B, both expiring on 1 June 2014. The es-
timated FS Invest share price at the time of the grant was DKK 1,019 per share. The warrants entitle the holder to subscribe for FS Invest
shares at an exercise price of DKK 2,039 and DKK 2,549 per share for warrants in series A and series B, respectively, in a proportion which is
determined by the exercise restrictions mentioned below. The warrants are exercisable for a period of 30 business days prior to and ending
on 1 June 2014. The warrants are non-transferable.
"Executive Management comprises Executive Group Management of 155 Holding A/S.
continues
68 - ANNUAL REPORT 2603 | CONSGLIDATED FINANCIAL STATEMENTS
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. SHARE-BASED PAYMENTS (CONTINUED)
The fair value of the warrants was estimated to DKK 25 million at the time of grant measured using the Black-Scholes option pricing model
based on the assumptions at the time of grant and exercise restrictions.
The warrants are accounted for as equity-settled transactions. The fair value of these warrants will be expensed in the income statement over
the vesting period from July 2006 to June 2014. In 2008, DKK 5 million were recognised under Other income and expenses, net in respect of
warrants granted (2007: DKK 2 million).
The warrants are subject to exercise restrictions depending on the share price at the time of exercise. At a share price of 6,114 or more at the
time of exercise 100% of the warrants vested can be exercised. The proportion of exercisable warrants decreases in intervals down to 10% at
a share price of 2,038. At share prices below 2,038 no warrants are exercisable.
Warrants outstanding at 31 December 2008 and movements during 2007 and 2008 were:
Executive Management Senior officers Total
ne mene … Series A
|. Number of warrants Series A Series B Total Series A Series B Total Series A Series B and B
Outstanding at 1 January 2007 125,424 125,424 31,367 385,575 416,942 31,367 510,999 542,366
Warrants forfeited - - - (1,515) (8,839) (10,354) (1,515) (8,839) (10,354)
Outstanding at 31 December 2007 -… 125,424 125,424 29,852 376,736 406,588 29,852 502,160 532,012
Warrants settled -… (67,536) (67,536) -… (67,536) (67,536) - (135,072) (135,072)
Outstanding at 31 December 2008 -…… 57,888 57,888 29,852 309,200 339,052 29,852 367,088 396,940
Warrants settled during 2008 relates to cash settlement by FS Invest of warrants in connection with termination of employment.
5. FEES TO AUDITORS
DKK million 2008 2007
KPMG
Audit fees ' 42 40
Other audit related services 5 12
Tax and VAT advisory services 13 10
Other services 16 26
Total KPMG 76 88
Audit fees comprised audit of the consolidated and local Annual Reports. Other services mainly comprised work related to acquisitions such
as financial and tax due diligence etc.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. OTHER INCOME AND EXPENSES, NET
DKK million 2008 2007
Gain on divestments 6 7
Gain on sale of properties 0 23
Gain on sale of option - 61
Gain on sale of Private Finance Initiative (PFI) stake in the United Kingdom - 41
Other 19 14
Other income 25 146
Restructuring projects (131) (70)
Redundancy and severance payments relating to organisational changes (21) (13)
Loss on divestments (43) (115)
Closedown and subsequent surveillance of landfill site in France (28) -
… Adjustment to accounting estimate in Belgium (17) -
Consolidation projects in the United Kingdom (4) (28)
IPO feasibility review - (33)
Re-scoping of IT outsourcing agreement - (10)
Other (23) (6)
Other expenses (267) (275)
Other income and expenses, net (242) (129)
Other income
Gain on sale of properties in 2007 mainly related to sale of buildings within Landscaping activities in the Netherlands.
Gain on sale of option in 2007 related to the sale of a call option for property located in Norway.
Gain on sale of PFI stake in 2007 related to the sale of the Group's interest in Criterion Healthcare (Bishop Auckland) which operates certain
facilities at Bishop Auckland Hospital in the United Kingdom.
Other expenses
Restructuring projects in 2008 reiates to costs for projects in the Netherlands, Norway, France, Austria and various other countries. In the
Netherlands a re-organisation of the organisational setup covering four business units as well as head office was initiated amounting to DKK
70 million. in Norway the office relocation project initiated in 2007 to consolidate several office locations in Norway continued amounting to
DKK 16 million. in France, Austria and Norway re-organisations of the organisational setup following the divestments of various activities was
carried out amounting to DKK 31 million. Restructuring projects in 2007 related to costs for the office relocation project in Norway amount-
ing to DKK 55 million and re-organisation of the organisational setup within a major business unit in the Netherlands amounting to DKK 15
million. The projects included redundancy payments, termination of leaseholds and relocation costs.
Redundancy and severance payments relating to organisational changes relates to organisational changes carried out by the Group at both
corporate level and country management level.
Loss on divestments in 2008 mainly relates to the remaining part of the non-core energy activities in France and non-strategic landscaping
activities in Austria. in 2007, divestments mainly related to landscaping activities in Ireland and various other countries as well as the divest-
ment of the initial part of the energy activities in France.
Closedown and subsequent surveillance of landfill site in France relates to additional costs regarding closure and subsequent supervision for
30 years of a landfill site, which was managed by ISS France and closed in 2008. The additional costs were mainly a result of changed expecta-
tions and administrative requirements for handling of landfill sites as well as an unfavourable climatic and geological evolution.
Adjustment to accounting estimate in Belgium relates to adjustment of prior years estimate regarding work in progress.
Consolidation projects in the United Kingdom comprise costs related to consolidation of properties in central London and Scotland. The
projects include termination of leaseholds, write-off of fixed assets and relocation costs.
IPO feasibility review in 2007 contains incurred costs to external advisors in relation hereto.
Re-scoping of IT outsourcing agreement in 2007 related to incurred re-scoping costs regarding the outsourcing of the Group's operation and
maintenance of certain of its information technology systems, primarily as a result of changing the IT outsourcing agreement from a central-
ised solution to a decentralised solution.
70 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. NET FINANCE COSTS
DKK million 2008 2007
Interest income etc. 153 149
Interest income from affiliates 0 5
Amortised gain from settlement of interest rate swaps 27 23
Foreign exchange gain 62 22
Financial income 242 199
Interest expenses etc. (2,465) (2,383)
Interest expenses to affiliates (3) (5)
Market price adjustment of bond loans (125) (169)
Amortisation of financing fees (63) (50)
Foreign exchange loss (317) (49)
Loss related to redemption of floating notes - (222)
Loss related to partial redemption of EMTN's . - (338)
Financial expenses . (2,973) (3,216)
Net finance costs (2,731) (3,017)
Amortised gain from settlement of interest rate swaps
The interest rate swaps hedging ISS Global's Medium Term Notes (EMTNs) were partially settled in June 2005 and the remaining part was set-
tled in June 2006 resulting in a net gain to be recognised in the consolidated income statement over the remaining term of the EMTNs. A part
of the gain is referred to the partially redeemed EMTNs and was recognised in the income statement in connection with the redemption in July
2007. The remaining unrecognised net gain of DKK 28 million at 31 December 2008 (DKK 55 million at 31 December 2007) will be recognised
in the income statement in the financial years 2009 - 2014 corresponding to the remaining term of the EMTNs, see note 27, Borrowings.
Loss related to redemption of floating notes
In July 2007, ISS Holding A/S's subordinated floating rate notes were fully redeemed resulting in a loss of DKK 222 million relating to a call
premium of DKK 63 million and financing fees of DKK 159 million previously recognised in long-term debt.
Loss related to partial redemption of EMTN's
In July 2007, 77.9% of the EMTN's due in 2014 were redeemed. The notes were acquired at a discount to nominal value. However, due to the
market price adjustment of the EMTN's in connection with ISS Holding A/S's acquisition of ISS A/S in 2005 the net book value was lower than
the redemption value resulting in a loss of DKK 338 million.
8. INCOME TAXES
DKK million 2008 2007
Current tax regarding profit before impairment/amortisation of intangibles ” 361 363
Deferred tax regarding profit before impairment/amortisation of intangibles ” 203 (95)
Tax on profit before impairment/amortisation of intangibles ” 564 268
Adjustments relating to prior years, net (33) (14)
Income taxes 531 254
Tax effect of impairment/amortisation of intangibles ” (282) (411)
Total tax recognised in the income statement 249 (157)
1 Intangibles comprise the value of goodwill, brands and customer contracts.
continues
CONSOUDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
DKK million 2008 2007
Current tax regarding equity movements 1 12
Deferred tax regarding equity movements (37) 34
Total tax recognised directiy in equity . (36) 46
Computation of effective tax rate
Statutory income tax rate in Denmark 25.0 % 25.0 %
Foreign tax rate differential, net 1.9 % 7.0 %
26.9 % 32.0 %
Non-tax deductible expenses less non-taxable income 3.8 % 5.3 %
Adjustments relating to prior years, net (3.2) % (2.2)%
.. Change of valuation of net tax assets 9.7 % 2.5 %
Effect of changes in tax rates (0.8) % (7.8)%
Other taxes 2 5.3 % 10.5 %
Limitation to interest deduction in Denmark 10.1 % 0.0 %
Effective tax rate (excluding effect from impairment/amortisation of intangibles) ” 51.8 % 40.3 %
1 intangibles comprise the value of goodwill, brands and customer contracts.
3 Other taxes mainly comprise withholding taxes.
9. GOODWILL IMPAIRMENT AND WRITE-DOWN
DKK million 2008 2007
Impairment 270 -
Write-down 129 128
Goodwill impairment and write-down 399 128
Goodwill impairment of DKK 270 million in 2008 relates to ISS Germany of DKK 250 million and ISS Italy of DKK 20 million. For further
description see note 14, Impairment tests.
Write-down of DKK 129 million in 2008 mainty relates to divestment of the landscaping and office support activities in Austria of DKK 104
million and the construction part of the landscaping activities in region Vestfold and Telemark in Norway of DKK 25 million. The write-down
of DKK 128 million in 2007 mainly related to divestment of the landscaping activities in Ireland of DKK 70 million and the energy activities in
France of DKK 38 million as well as a number of minor divestments primarily in Denmark.
10. CHANGES IN WORKING CAPITAL
DKK million 2008 2007
Changes in inventories (28) 2
Changes in receivables (111) (520)
Changes in payables 248 474
Changes in working capital 109 (44)
72 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES
Acquisition of businesses
The Group made 66 acquisitions during 2008 (67 during 2007). The total purchase price amounted to DKK 2,139 million (DKK 2,896 million
in 2007). The total annual revenue of the acquired businesses (unaudited approximate figure) is estimated at DKK 3,887 million (DKK 4,540
million in 2007) based on expectations at the time of acquisition.
The acquisitions (including adjustments to acquisitions in prior years) had the following effect on the Group's assets and liabilities on the
acquisition date:
Total acquisitions
Fair value adj.
Pre-
ge acquisition Current Prior Recognised
DKK million carrying year year values on
2008 amounts acquisitions acquisitions acquisition
-—--—Goodwill men benene 7 (7) - oe
Customer contracts - 677 1 678
Other non-current assets 158 21 (1) 178
Trade receivables ' 626 (20) 4 610
Other current assets 248 (27) (0) 221
Other provisions (15) (108) (9) (132)
Pensions, deferred tax liabilities and minorities (3) (163) 4 (162)
Long-term debt (23) (1) 1 (23)
Short-term debt (193) (4) (3) (200)
Other current liabilities (498) (52) (1) (551)
Net identifiable assets and liabilities 307 316 (4) 619
Goodwill 134 1,588
Acquisition costs, net of tax (1) (68)
Purchase price 129 2,139
Cash and cash equivalents in acquired businesses (118)
Cash purchase price 2,021
Changes in deferred payments and earn-outs 24
Changes in prepaid purchase price (11)
Acquisition costs paid, net of tax 61
Total payments regarding acquisition of businesses 2,095
In 2008, no acquisitions accounted for more than 2% of the Group's revenue on an individual basis. Consequently, all acquisitions are deemed
individually immaterial and are therefore shown in aggregate.
Opening balances are recognised in accordance with IFRS 3. At 31 December 2008, certain opening balances have only been provisionally
determined. Consequently, fair value adjustments may be recognised against goodwill within 12 months from the acquisition date.
The purchase price of prior years' acquisitions increased by DKK 129 million, mainly due to revised estimates relating to earn-outs for the
acquisitions of Carlos Rocha in Spain of DKK 80 million, Ryvola in Czech Republic of DKK 12 million and CMC in Turkey of DKK 10 million.
The goodwill recognised on acquisition is attributable mainly to; i) assembled workforce, ii) technical expertise and technological know how,
iii) training expertise and training and recruitment programmes and iv) platform for growth. As the Group is a service company that acquires
businesses in order to apply the ISS model and generate value by restructuring and refining the acquired business, the main impact from
acquisitions derives from synergies, the value of human resources and the creation of platforms for growth. continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Acquisition of businesses (continued)
Acquisitions made in 2007 (including adjustments to acquisitions in prior years) had the following effect on the Group's assets and liabilities
on the acquisition date:
Sanitors Inc. Total acquisitions
Fair value adj.
Pre- Pre-
NEN acquisition Recognised — acquisition Current Prior Recognised
DKK million carrying Fairvalue values on carrying year year values on
2007 amounts adjustment acquisition amounts acquisitions acquisitions acquisition
Goodwill 497 (497) - 497 (497) - -
Brands - 2 2 - 2 - 2
Customer contracts - 309 309 - 947 1 948
Other non-current assets 34 (6) 28 216 14 4 234
"Trade receivables 223 (13) 210 793 (32) 3 764
Other current assets 27 (3) 24 275 5 (21) 259
Other provisions (18) (13) (31) (65) (12) (5) (82)
Pensions, deferred tax liabilities and minorities (17) (58) (75) (35) (235) 5 (265)
Long-term debt - - - (91) 4 (0) (87)
Short-term debt (1) (1) (2) (205) 11 (15) (209)
Other current liabilities (117) (96) (213) (633) (145) 31 (747)
Net identifiable assets and liabilities 628 (376) 252 752 62 3 817
Hereof previously recognised as associates - - (42)
Net identifiable assets and liabilities 252 3 775
Goodwill 706 18 2,201
Acquisition costs, net of tax (13) (0) (80)
Purchase price 945 21 2,896
Cash and cash equivalents in acquired businesses (13) (196)
Cash purchase price 932 2,700
Changes in deferred payments and earn-outs 5 172
Changes in prepaid purchase price - (1)
Acquisition costs paid, net of tax 12 86
Total payments regarding acquisition of businesses 949 2,957
In 2007, only the acquisition of Sanitors Inc. accounted for more than 2% of the Group's revenue on an individual basis. All other acquisitions
were deemed individually immaterial and are therefore shown in aggregate.
The purchase price of prior years' acquisitions increased by DKK 21 million in 2007, mainly due to revised estimate relating to an earn-out for
the acquisition of Tempo Services Ltd. in 2006.
The goodwill recognised on acquisition is attributable mainly to; i) assembled workforce, ii) technical expertise and technological know how,
iii) training expertise and training and recruitment programmes and iv) platform for growth. As the Group is a service company that acquires
businesses in order to apply the ISS model and generate value by restructuring and refining the acquired business, the main impact from
acquisitions derives from synergies, the value of human resources and the creation of platforms for growth. continues
74 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Acquisition of businesses (continued)
The 66 acquisitions? made by the Group during 2008 are listed below:
Consolidated
in the income Percentage Annual Number of
Company Country statement interest revenue ” employees ?
Hoguin Espace Verts SAS France January 100% 10 21
Kolberg Norway January Activities 17 12
Rengøringscentralen A/S Denmark January 100% 24 120
Catering Tefen Ltd. Israel January 50% 26 230
Adams Secuforce Int. Ltd Hong Kong January 100% 111 1,627
Triumph Network Services India February Activities 2 35
Profi-Komfort Kft. Hungary February 100% 68 1,361
Smartcare New Zealand February Activities 7 85
Kfir Group Israel March 100% 268 4,500
-…Arena21 ltd... ——— United.Kingdom March 100% 43 114
Pest Check Ireland March Activities 5 6
Slim $.A. Chile March 100% 22 667
TimSar & Hawes Pest Australia March Activities 1 9
Technisch Onderhoud & Services BVBA Belgium March 100% 33 35
Strata Security and Combined Services Ltd. United Kingdom March 100% 152 635
Schack Firmafrugt Denmark April Activities 34 25
Vigor Services Norway April Activities 7 30
Gastropol Group Spolka z.0.0. Poland April 100% 81 670
BGM Industries USA April Activities 510 3,800
Ekå Våxtservice AB Sweden April 100% 4 6
Complete Cleaning Services Ltd. Australia April 100% 30 183
Inbuilt Engineering Pte Ltd. Singapore April 100% 94 110
Aspis Security SA Greece April 100% 216 1,430
Saneerauspari Finiand May Activities 13 26
Paksil & CSS Turkey May 100% 88 1,500
Smartkost AS Norway May 100% 7 6
Servicoin S.A. de C.V. Mexico May 100% 94 987
Provence Faucardage SAS France June 100% 15 19
Siddhi Caterers and Allied Services Pvt. Ltd. India June 100% 20 500
Naturdes Ambiental S.L. Spain June 100% 1 15
ISH Weissenfels Germany June Activities 1 2
Sardunya Hazir Yemek Uretim Tesisleri A.S. Turkey June 100% 298 1,500
David Morrisson SARL Luxembourg June 100% 2 3
Contract Building Services USA June Activities 9 95
Boracure New Zealand June Activities 11 22
Topic Catering Australia June Activities 184 200
Promocentro Portugal June Activities 47 1,473
Notre Bel Co., Ltd. Thailand July 100% 31 1,900
Jardineria Pedro Moral S.L. Spain July 100% 5 12
Webdie NV Belgium July 100% 11 20
StopFlam SAS France July 100% 15 14
Ciape DD, S.L. Spain July 100% 9 24
Catering Habitue Uruguay July Activities 18 188
Equipo Blanco SRL Argentina July 100% 10 310
Subtotal 2,654 24,527
YiIndudes all acquisitions completed prior to 1 January 2009.
2 Unaudited approximate figures based on information available at the time of acquisition.
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Acquisition of businesses (continued)
1 Unaudited approximate figures based on information available at the time of acquisition.
76 - ANNUAL REPORT 2008 i CONSOLIDATED FINANCIAL STATEMENTS
Consolidated
in the income Percentage Annual Number of
Company Country statement interest revenue ” employees ”
Subtotal (from previous page) 2,654 24,527
Gros Environment SAS France August 100% 39 42
Hung Fat Cleaning Transportation Company Ltd. Hong Kong August 100% 27 183
HTTP Finland August Activities 6 10
Gianzend Ltda Chile August 100% 39 774
Personellsikring AS Norway August 100% 41 144
Loghis Logistica Integrada Ltda. Brazil August 100% 108 1,895
… Grupo RV Catering Services Spain September 100% 57 250
HRS Helmut Riedi GmbH Germany September 100% 2 BB
Golden Mind Services Co. Ltd. Thailand September 100% 204 9,066
ASL SA France October 100% 11 36
Control y Tratamientos Sanitarios, 5.L. Spain October 100% 6 11
Silvertech E&M Engineering Co. Ltd. Hong Kong October 100% 72 145
The Catering People Ltd. United Kingdom October 100% 83 275
Frugt Karl Engros Denmark October Activities 3 0
MDN SAS France November 100% 40 272
Eltel Security Finland November Activities 11 13
Reaktorskolen AS Norway November 100% 54 21
Chubb (guarding & patrol) (Security Salesco NZ Ltd.) New Zealand December 100% 132 600
Van Den Brande Technieken Belgium December Activities 38 37
Bartens Pest Guard Germany December Activities 1 3
Gastronomia Mediterranea, S.L. and
Limpiezas Masan, S.A. Spain December 100% 100 465
Grupo Limpul Spain December 100% 159 1,050
Total 3,887 39,822
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Divestment of businesses
The Group made 12 divestments during 2008 (14 during 2007). The total sales price amounted to DKK 316 million (DKK 32 million in 2007).
The total annual revenue of the divested businesses (unaudited approximate figure) is estimated at DKK 1,281 million (DKK 394 million in
2007) based on expectations at the time of divestment.
The divestments had the following effect on the Group's assets and liabilities (carrying amounts) on the divestment date:
DKK million 2008 2007
Goodwill (15) (2)
Customer contracts (6) (1)
Other non-current assets (10) (45)
Trade receivables (43) (47)
Other current assets (20) (38)
Assets held for sale (619) -
Other provisions 3 -
Pensions, deferred tax liabilities and minorities 12
Short-term debt 1 6
Other current liabilities 19 35
Liabilities held for sale 351 -
Net identifiable assets and liabilities (327) (92)
Loss/(gain) on divestment of businesses, net 37 108
Divestment costs, net of tax (26) (48)
Sales price (316) (32)
Cash and cash equivalents in divested businesses 12 -
Cash sales price (304) (32)
Changes in deferred payments and earn-outs 1 (6)
Divestment costs paid, net of tax 31 40
Net proceeds regarding divestment of businesses (272) 2
The 12 divestments ” made by the Group during 2008 are listed below:
Excluded from the Annual
Company/activity Country income statement revenue »
Wood Restoration Business Spain January 6
EU Business in L&P France January 25
Slotsholmen Denmark January 45
ISS Energie France January 854
H. Jakober Transport Switzerland January 16
Eiendomsinvestor Norway February -
Aquawall Denmark March 4
Security Phone Business Finland June 5
Austria Office Support Austria October 209
ISS Faroe Islands Faroe islands November 10
Austria Landscaping Austria November 76
Vestfald & Telemark Norway December 31
Total 1,281
” includes all divestments completed prior to 1 January 2009. continues
1 Unaudited approximate figures based on information available at the time of acquisition.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Pro forma revenue and operating profit
Assuming all acquisitions and divestments in the year were included as of 1 January the effect on revenue and operating profit before other
items is estimated as follows:
DKK million 2008 2007
Pro forma revenue
Revenue recognised in the income statement 68,829 63,922
Adjustment, assuming all acquisitions in the year were included as of 1 January 1,641 1,996
Revenue, assuming all acquisitions in the year were included as of 1 January 70,470 65,918
Adjustment, assuming all divestments in the year were carried out as of 1 January (230) (181)
Revenue, assuming all acquisitions and divestments in the year were carried out as of 1 January 70,240 65,737
Pro forma operating profit before other items
Operating profit before other items recognised in the income statement 4,061 3,835
Adjustment, assuming all acquisitions in the year were included as of 1 January 113 152
Operating profit before other items, assuming all acquisitions in the year were included as of 1 January 4,174 3,987
Adjustment, assuming all divestments in the year were carried out as of 1 January (0) 7
Operating profit before other items, assuming all acquisitions and divestments
in the year were carried out as of 1 January 4,174 3,994
Applied assumptions
The adjustment of revenue and operating profit before other items is based on estimates made by local ISS management in the respective
jurisdictions in which such acquisitions and divestments occurred at the time of such acquisition and divestment or actual results where avail-
able. Synergies from acquisitions are not included for periods in which such acquisitions were not controlled by the Group.
These adjustments and the computation of total revenue and operating profit before other items calculated on a pro forma basis based on
such adjustments are presented for informational purposes only and have not been audited. This information does not represent the results
the Group would have achieved had the divestments and acquisitions during the year occurred on 1 January. In addition, the information
should not be used as the basis for or prediction of any annualised calculation.
The acquiree's profit or loss since the acquisition date
The amount of the acquiree's profit or loss since the acquisition date included in the income statement for the year is not disclosed, since
such disclosure is impracticable, as acquired companies are typically merged with (or activities transferred to) existing companies shortly after
completion of the acquisition.
continues
78 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Acquisitions and divestments subsequent to 31 December 2008
From 1 January to 29 February the Group made 10 acquisitions and 1 divestment.
Group's assets and liabilities on the acquisition/divestment date ”:
DKK million
Customer contracts
Other non-current assets
Trade receivables
Other current assets
Other provisions
Pensions, deferred tax liabilities and minorities
…Short-term.debt —… …
Other current liabilities
Net identifiable assets and liabilities
Goodwill
Acquisitior/divestment costs, net of tax
Purchase/(sales) price
Cash and cash equivalents in acquired/divested businesses
Cash purchase/(sales) price
Changes in deferred payments and earn-outs
Changes in prepaid purchase price
Acquisition/divestment costs paid, net of tax
Total payments regarding acquisition/divestment of businesses
Acquisitions
Acquisitions/divestments had the following effect on the
Divestments
Pre-acquisition
carrying
amounts
Recognised
values on
acquisition
Carrying
amounts
11
10
(1)
(20)
16
6
7
10
(0)
(10)
(1)
(23)
33
(2)
36
(9)
27
32
82
141
(2)
(0)
(2)
(2)
(2)
In accordance with usual Group procedures, opening balances are prepared during the first months following the acquisition. Hence, opening
balances are not yet available for all acquisitions completed from 1 January to 28 February 2009. For acquisitions, where the opening balance
is not yet available, any purchase price paid is shown in the line Changes in prepaid purchase price above.
1 Unaudited figures up until 31 January 2009.
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)
Acquisitions and divestments subsequent to 31 December 2008 (continued)
The 10 acquisitions and 1 divestment made by the Group in the period 1 January to 28 February 2009 are listed below :
1 Excluding goodwill, brands and customer contracts as well as additions related to assets under finance leases.
2 In 2007, sale of financial assets included proceeds from sale of Private Finance Initiative stake in the United Kingdom.
Consolidated in/
excluded from
the income Percentage Annual Number of
Company/activity Country statement interest revenue ” employees ”
Mettek Hizmet Turkey January 100% 137 2,178
Central Property Service USA January Activities 182 917
Industriservice Danmark A/S Denmark January 100% 7 13
Vaasan LVI-Huolto Finland January 100% 14 13
Sunparking Indonesia February Activities 107 5,000
Aplytec Spain February 100% 13 24
… Agria-Ved Hungary February 100% 7 25
ECO Servis Bosnia February 100% 5 65
Karmak italy February 100% 100 412
Suomala Finland February 100% 19 105
Acquisitions 591 8,752
Asker Norway January Activities 31 40
Divestments 31 40
» Unaudited approximate figures based on information available at the time of acquisition/divestment.
12. INVESTMENTS IN NON-CURRENT ASSETS
DKK million 2008 2007
Purchase of intangible assets and property, plant and equipment (938) (965)
Sale of intangible assets and property, plant and equipment 220 250
Investments in intangible assets and property, plant and equipment, net” (718) (715) u
Purchase of financial assets (4) (25) '
Sale of financial assets ? 8 54
Changes in financial receivables (6) (27)
Investments in financial assets, net (2) 2
80 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. INTANGIBLE ASSETS
Software
and other
Customer intangible
DKK million Goodwill Brands contracts assets Total
2008
Cost at 1 January 27,847 1,637 10,608 341 40,433
Foreign exchange adjustments (1,435) (97) (624) (21) (2,177)
Additions 1,515 - - 137 1,652
Additions from acquired companies, net (15) - 634 27 646
Disposals (129) - (22) (52) (203)
Transfer from Property, plant and equipment - - - 15 15
Cost at 31 December 27,783 1,540 10,596 447 40,366
Impairment, write-down and amortisation at 1 January (254) (11) (2,915) (103) (3,283)
- -Foreign exchange-adjustments: - 1 210 4 215
Amortisation - (4) (998) (91) (1,093)
Amortisation from acquired companies, net - - 3 - 3
Impairment (270) - - - (270)
Write-down (129) - - - (129)
Disposals 129 - 22 43 194
Transfer from Property, plant and equipment - - - (2) (2)
Impairment, write-down and amortisation at 31 December (524) (14) (3,678) (149) (4,365)
Carrying amount at 31 December 27,259 1,526 6,918 298 36,001
2007
Cost at 1 January 26,428 1,671 9,864 240 38,203
Adjustment of business combinations (110) - - - (110)
Foreign exchange adjustments (299) (21) (129) (2) (451)
Additions 2,136 - - 133 2,269
Additions from acquired companies, net (2) 2 917 5 922
Disposals (99) - - (33) (132)
Transfer to Assets held for sale (207) (15) (44) (2) (268)
Cost at 31 December 27,847 1,637 10,608 341 40,433
Impairment, write-down and amortisation at 1 January (250) (7) (1,862) (52) (2,171)
Foreign exchange adjustments (4) 1 37 2 36
Amortisation - (5) (1,096) (80) (1,181)
Amortisation from acquired companies, net - - 4 (3) 1
Write-down (128) - - - (128)
Disposals 99 - 29 128
Transfer to Assets held for sale 29 - 2 1 32
Impairment, write-down and amortisation at 31 December (254) (11) (2,915) (103) (3,283)
Carrying amount at 31 December 27,593 1,626 7,693 238 37,150
The carrying amount of Brands is primarily related to the ISS brand, which is considered to have an indefinite useful life since there is no fore-
seeable limit to the period over which the brand is expected to generate net cash inflows. Factors that played a significant role in determining
that the ISS brand has an indefinite useful life are: i) the ISS brand has existed for decades, ii) the Group's strategy is based on the ISS brand,
iii) all acquired brands are converted to or co-branded with the ISS brand and iv) the ISS brand is used in the business to business and public
segments with low maintenance cost attached.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2908 + 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. IMPAIRMENT TESTS
The Group performs impairment tests on intangibles” annually and whenever there is an indication that intangibles may be impaired. As
described in note 9, Goodwill impairment and write-down, impairment losses of DKK 250 million related to the German business and DKK
20 million related to the Italian business have been recognised in 2008.
. The Group's intangibles primarily relate to the purchase price allocation following the take-over of ISS A/S as at 9 May 2005. A part of the
Group's intangibles relate to acquisitions carried out after the take-over of ISS A/S as at 9 May 2005. Companies acquired after the take-over
comprise a diverse portfolio of service types, customer segments, geographical regions, contract sizes and management skills.
Impairment tests are carried out per country as this represents the lowest level of cash-generating units (CGU) to which the carrying amount
of intangibles can be allocated and monitored with any reasonable certainty. This level of allocation and monitoring of intangibles should be
seen in the light of the Group's strategy to integrate acquired companies as quickly as possible in order to benefit from synergies.
Acquired companies are typically organisationally integrated and merged with (or activities transferred to) existing Group companies shortly
after the completion of the acquisition. Furthermore, synergies and other effects resulting from cooperation with existing Group companies
in-their geographical or business area normally influence the financial performance of an acquired company. Consequently, after a short
period of time, it is generally not possible to track and measure the value of intangibles of the individual acquired companies (or activities)
with any reasonable certainty.
As a company based in Europe, the Group assumes the long-term market equity risk premium to be 4.5%. When performing impairment tests
for individual CGU's, the risk premium applied may be higher than the Group's. When doing acquisitions the Group typically applies a hurdle
rate, which is significantly higher than the calculated cost of capital.
The carrying amount of intangibles and the key assumptions? used in the impairment testing for each CGU representing more than 3% of
the carrying amount of intangibles are presented below.
Applied expected Applied
Carrying amount (DKK million) long-term rate discount rate
Discount Discount
Customer Total rate, rate,
2008 Goodwill Brands cc cts intangibles Growth Margin net of tax pre tax
France 4,999 302 932 6,233 3.0% 6.7% 9.3% 12.9%
Finland 2,297 120 699 3,116 3.0% 8.0% 9.1% 11.5%
United Kingdom 2,042 148 634 2,824 3.0% 6.8% 8.8% 11.3%
Norway 1,767 110 564 2,441 3.0% 7.5% 10.1% 13.2%
Netherlands 1,943 121 258 2,322 3.0% 6.6% 9.7% 12.0%
Denmark 1,790 131 341 2,262 3.0% 6.7% 9.7% 12.2%
Spain 1,528 90 432 2,050 3.0% 6.1% 9.2% 12.2%
Belgium 1,573 86 348 2,007 3.0% 7.1% 8.9% 12.4%
Switzerland 1,090 51 318 1,459 3.0% 7.6% 8.3% 10.0%
Sweden 1,090 96 216 1,402 3.0% 6.8% 8.9% 11.3%
Australia 1,128 8 259 1,395 3.0% 6.6% 10.2% 13.7%
Austria 707 49 268 1,024 3.0% 6.4% 9.4% 11.8%
Germany Id 732 67 101 900 3.0% 4.6% 9.2% 12.2%
Other 4,573 147 1,548 6,268
Total carrying amount at 31 December 2008 27,259 1,526 6,918 35,703
1 In this context intangibles cover the value of goodwill, brands and customer contracts resulting from the acquisition of companies.
» The key assumptions applied in the impairment tests are used for accounting purposes and should not be considered a forward-looking statement within the meaning of the US Private Securities Litigation
Act of 1995 and similar laws in other countries regarding expectations to the future development.
1 After the recognition of the impairment loss of DKK 250 million, intangibles in Germany no longer represent more than 3% of the total carrying amount of the Group's intangibles.
continues
82 - ANNUAL REPORT 2003 | CONSOLIDATED FINANCIAL STATEMENTS
… each CGU.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. IMPAIRMENT TESTS (CONTINUED)
Estimates used to measure recoverable amount
The recoverable amount of each CGU is determined on the basis of its value-in-use. The value-in-use is established using certain key assump-
tions as described below. The key assumptions are revenue growth, operating margin (before other items) and discount rates.
Value-in-use cash flow projections are based on financial budgets approved by management covering the following financial year. The
operating margin is based on past performance and expectations for the future market development. The assumptions applied in the short
to medium term are based on management's expectations regarding the development in growth and operating margin. The terminal growth
rates do not exceed the expected long-term average growth rate including inflation for the business in which the CGU's operate.
Uncertainties reflecting historical performance and possible variations in the amount or timing of the future cash flow is reflected in the
discount rate.
In determining the country specific discount rates, which are calculated net of tax, a target ratio of 60/40 between the market value of debt
and enterprise value is used. A country specific risk premium has been added to the discount rates to reflect the specific risk associated with
impairment test results
The impairment test for ISS Germany has been based on a business plan prepared by management of ISS Germany applying the assumptions
set out below. The impairment test resulted in recognition of an impairment loss of DKK 250 million which was caused by declining market
conditions within certain business activities in which ISS Germany operates, and thus lower expectations for future earnings combined with
an increase in the discount rate applied,
The impairment test for ISS Italy resulted in recognition of an impairment loss of DKK 20 million. The impairment loss was primarily a conse-
quence of a significant increase in the applied discount rate. Furthermore, the Italian business is negatively impacted by a high effective tax
rate as a result of a special regional tax on productive activities (IRAP) as well as a decline in the margin. After recognition of the impairment
loss of DKK 20 million, the total intangibles in ISS Italy amounts to DKK 153 million.
Sensitivity analysis
A sensitivity analysis on the key assumptions in the impairment testing is presented below. The allowed change represents the percentage
points by which the value assigned to the key assumption as applied in the expected long-term rate can change, all other things being equal,
before the unit's recoverable amount equals its carrying amount.
Growth Margin Discount rate, net of tax
Applied Applied
expected expected
long-term Allowed long-term Allowed Allowed
2008 rate decrease rate decrease Applied rate increase
France 3.0% 0.8% 6.7% 0.8% 9.3% 0.6%
Finland 3.0% 1.3% 8.0% 1.5% 9.1% 1.4%
United Kingdom 3.0% >3.0% 6.8% >3.0% 8.8% >3.0%
Norway 3.0% >3.0% 7.5% 2.9% 10.1% >3.0%
Netherlands 3.0% 1.5% 6.6% 1.3% 9.7% 1.1%
Denmark 3.0% 1.0% 6.7% 0.9% 9.7% 1.0%
Spain 3.0% 1.4% 6.1% 1.1% 9.2% 1.4%
Belgium 3.0% 1.2% 7.1% 1.2% 8.9% 1.3%
Switzerland 3.0% >3.0% 7.6% >3.0% 8.3% >3.0%
Sweden 3.0% >3.0% 6.8% >3.0% 8.9% >3.0%
Australia 3.0% 2.0% 6.6% 1.5% 10.2% 2.1%
Austria 3.0% 0.4% 6.4% 0.4% 9.4% 0.5%
Germany 3.0% 0.0% 4.6% 0.0% 9.2% 0.0%
continues
CONSOLIDATED FINANCIAL STATEMENTS I ANNUAL REPORT 2008 + 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. IMPAIRMENT TESTS (CONTINUED)
2007
France
United Kingdom
Finland
Norway
Netherlands
Denmark
Belgium
Spain
Sweden
"Australia
Switzerland
Austria
Germany
Other
Total carrying amount at 31 December 2007
2007
France
United Kingdom
Finland
Norway
Netherlands
Denmark
Belgium
Spain
Sweden
Australia
Switzerland
Austria
Germany
Applied expected Applied
Carrying amount (DKK million) long-term rate discount rate
Discount Discount
Customer Total rate, rate,
Goodwill Brands contracts intangibles Growth Margin net of tax pre tax
4,949 303 1,013 6,265 3.0% 7.0% 8.2% 11.2%
2,603 198 885 3,686 3.0% 6.7% 8.1% 10.2%
2,283 120 779 3,182 3.0% 8.0% 8.6% 10.7%
2,162 136 754 3,052 3.0% 7.5% 9.1% 11.7%
1,945 122 307 2,374 3.0% 6.7% 8.7% 10.8%
1,777 131 380 2,288 3.0% 7.0% 9.3% 11.5%
1,546 86 380 2,012 3.0% 7.3% 7.5% 10.1%
1,239 90 442 1,771 3.0% 6.2% 8.2% 10.6%
1,261 111 282 1,654 3.0% 6.6% 9.1% 11.7%
1,308 10 314 1,632 3.0% 6.5% 10:5% 13.8%
983 46 336 1,365 3.0% 7.5% 7.71% 9.2%
817 49 316 1,182 3.0% 6.6% 8.7% 10.8%
980 68 114 1,162 3.0% 5.5% 8.4% 10.8%
3,740 156 1,391 5,287
27,593 1,626 7,693 36,912
Discount rate,
Growth Margin net of tax
Applied Applied
expected expected
long-term Allowed long-term Allowed Applied Ailowed
rate decrease rate decrease rate increase
3.0% 2.1% 7.0% 1.4% 8.2% 1.3%
3.0% >3.0% 6.7% 3.0% 8.1% 4.3%
3.0% 2.0% 8.0% 1.7% 8.6% 1.2%
3.0% >3.0% 7.5% 2.7% 9.1% 3.6%
3.0% >3.0% 6.7% 2.3% 8.7% 2.9%
3.0% 1.2% 7.0% 1.3% 9.3% 1.2%
3.0% 2.0% 7.3% 2.1% 7.5% 2.0%
3.0% 2.0% 6.2% 1.7% 8.2% 2.0%
3.0% >3.0% 6.6% 3.8% 9.1% 8.5%
3.0% >3.0% 6.5% 1.5% 10.5% 2.1%
3.0% >3.0% 7.5% 4.4% 7.71% 6.8%
3.0% 1.3% 6.6% 1.2% 8.7% 1.3%
3.0% 0.5% 5.5% 0.6% 8.4% 0.4%
84 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. PROPERTY, PLANT AND EQUIPMENT
2008 2007
Land and Plant and Land and Plant and
DKK million buildings — equipment Total buildings — equipment Total
Cost at 1 January 266 3,141 3,407 288 2,561 2,849
Foreign exchange adjustments . (8) (183) (191) 2 (55) (53)
Additions ” 65 899 964 10 928 938
Additions from acquired companies, net 8 163 171 40 309 349
Disposals (38) (674) (712) (69) (544) (613)
Transfers » (8) (7) (15) (5) (58) (63)
Cost at 31 December 285 3,339 3,624 266 3,141 3,407
Depreciation at 1 January (63) (1,121) (1,184) (26) (660) (686)
— foreign exchange adjustments 2 127 129 0 48 48
Depreciation (18) (766) (784) (15) (750) (765)
Depreciation from acquired companies, net |. (1) (99) (100) (23) (197) (220)
Disposals 31 558 589 1 398 399
Transfers 2 2 0 2 - 40 40
Depreciation at 31 December (47) (1,301) (1,348) (63) (1,121) (1,184)
Carrying amount at 31 December 238 2,038 2,276 203 2,020 2,223
Hereof assets heid under finance leases - 182 182 - 156 156
Land and buildings with a carrying amount of DKK 5 million (DKK 6 million in 2007) have been provided as collateral for mortgage debt of
DKK 0 million (DKK 0 million in 2007). Additionally, a minor part of Land and buildings and Plant and equipment in certain countries has been
provided as security for the borrowings under the senior facilities, see note 31, Contingent liabilities.
1 in 2008, additions includes assets held under finance leases of DKK 155 million (2007: DKK 111 million).
2 in 2008, DKK 13 million was transferred to Intangible assets. In 2007, DKK 23 million was transferred to Assets held for sale.
16. INVESTMENTS IN ASSOCIATES
DKK million 2008 2007
Cost at 1 January 24 60
Foreign exchange adjustments (3) 1
Disposals ” 0 (37)
Cost at 31 December 21 24
Revaluation at 1 January 4 6
Foreign exchange adjustments (0) 0
Net result for the year 3 8
Dividends received (4) (3)
Disposals ” 0 (7)
Revaluation at 31 December 3 4
Carrying amount at 31 December 24 28
1 in 2007, disposals included transfers related to associates now fully owned. continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. INVESTMENTS IN ASSOCIATES (CONTINUED)
The Group's share
DKK million Operating Net Owner- Net
2008 Country Revenue profit result Assets Liabilities ship % Equity result
NSB Trafikservice AB Norway 32 2 31 26 45 2 1
ISS Industriservice AB Sweden 280 11 6 119 88 48 15 3
Other associates 151 0 (2) 43 37 4 (1)
463 13 6 193 151 21 3
Goodwill at 31 December 2008 3 -
Carrying amount at 31 December 2008 24 3
The Group's share
DKK million Operating Net Owner- Net
2007 Country Revenue profit result Assets Liabilities ship % Equity result
NSB Trafikservice AS Norway 64 4 3 27 22 45 2 1
ISS Industriservice AB Sweden 245 24 16 127 91 49 18 8
Other associates 153 1 (3) 50 38 8 (1)
462 29 16 204 151 28 8
Goodwill at 31 December 2007 - -
Carrying amount at 31 December 2007 28 8
17. DEFERRED TAX
DKK million 2008 2007
Deferred tax liabilities/(assets), net at 1 January 2,188 2,648
Adjustment of business combinations ” - (110)
Foreign exchange adjustments (117) (21)
Additions from acquired companies, net 71 173
Tax regarding equity movements (37) 34
Transfer to assets held for sale - (30)
Tax on profit before impairment/amortisation of intangibles ? 203 (95)
Tax effect of impairment/amortisation of intangibles 2 (282) (411)
Deferred tax liabilities/(assets), net at 31 December 2,026 2,188
Recognised in the balance sheet as follows:
Deferred tax liabilities 2,498 2,786
Deferred tax assets (472) (598)
Deferred tax liabilities/(assets), net 2,026 2,188
” The adjustment related to prior year acquisitions.
» Intangibles comprise the value of goodwill, brands and customer contracts.
86 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. DEFERRED TAX (CONTINUED)
Deferred tax specification
2008 2007
Deferred tax Deferred tax Deferred tax Deferred tax
DKK million assets liabilities assets — liabilities
Tax losses carried forward ' 443 - 504 -
Goodwill 47 265 65 170
Brånds - 433 - 461
Customer contracts - 1,860 - 2,129
Property, plant and equipment 86 118 139 140
Provisions 153 - 161 -
Bond loans - 56 - 134
Losses in foreign subsidiaries under Danish joint taxation - 23 - 23
Set-off within legal tax units and jurisdictions (257) (257) (271) (271)
Deferred tax 472 2,498 598 2,786
The recognition of deferred tax assets regarding tax losses carried forward is supported by expected future profitability in the foreseeable
future.
A deferred tax liability associated with investments in subsidiaries, joint ventures and associates has not been recognised, because the Group
is able to control the timing of the reversal of the temporary differences and does not expect the temporary differences to reverse in the
foreseeable future.
Unrecognised tax assets
" The Group had unrecognised deferred tax assets regarding tax losses carried forward in the following countries:
2008 2007
Recog- Unrecog- Recog- Unrecog-
DKK million Total nised nised Total nised nised
Germany 254 58 196 239 47 192
Denmark 19% 195 1 304 303 1
Brazil 39 2 37 25 2 23
Belgium 22 17 5 12 8 4
USA 22 19 3 12 10 2
Israel 10 3 7 5 1 4
France 8 - 8 - - -
Argentina 3 - 3 4 - 4
New Zealand 3 - 3 2 - 2
Austria 2 - 2 - - -
Italy 2 - 2 - - -
Hong Kong 2 1 1 - - -
Greece 1 - 1 -
Australia - - - 3 1 2
Total 269 234
The unrecognised tax losses can be carried forward indefinitely in the individual countries. Deferred tax assets relating to tax losses carried
forward are only recognised to the extent that it is more likely than not that future taxable profit will be available against which the unused
tax losses can be utilised in the foreseeable future taking into account any restrictions in utilisation in the local tax legislation.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. OTHER FINANCIAL ASSETS
DKK million 2008 2007
Costs related to PPP (Public Private PartnershipsyPFI (Private Finance Initiative) contracts 34 61
Regulatory long-term loans 47 46
Other 157 122
Other financial assets 238 229
Regulatory long-term loans are measured at amortised cost with any resulting adjustment being recognised in the income statement.
19. INVENTORIES
DKK million 2008 2007
— Raw materials and supplies 102 95
Work in progress 15 14
Finished goods 147 140
Inventories 264 249
Inventories expensed 6,134 5,614
20. TRADE RECEIVABLES
DKK million 2008 2007
Trade receivables (gross) 10,325 10,341
Provision for doubtful debts (228) (227)
Trade receivables i 10,097 10,114
The ageing of trade receivables at 31 December was:
Not past due 7,793 7,586
Past due 1 to 60 days 1,814 2,041
Past due 61 to 180 days 407 417
Past due 181 to 360 days 66 57
More than 360 days 17 13
Trade receivables 10,097 10,114
88 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. TRADE RECEIVABLES (CONTINUED)
DKK million
Movements in the provision for doubtful debts during the year was:
Provision for doubtful debts at 1 January
Foreign exchange adjustments
Additions from acquired businesses, net
Provisions for the year
Provisions reversed
Amounts written off as uncollectible
Provision for doubtful debts at 31 December
2008 2007
(227) (225)
6 2
(22) (47)
(73) (53)
51 74
37 22
(228) (227)
Trade receivables are shown net of provision for doubtful debts. The carrying amount approximates the fair value.
In general, the Group does not receive collateral for sales on credit. However, if collateral is received this is taken into account when assessing
-the-necessary. provision-for-doubtful.debts.
21. CONTRACT WORK IN PROGRESS
DKK million 2008 2007
Contract expenses 410 372
Recognised profits 72 61
Contract work in progress (before advances and prepayments) 482 433
Advances and prepayments (300) (272)
Contract work in progress 182 161
22. TAX RECEIVABLES AND TAX PAYABLES
DKK million 2008 2007
Tax (receivablesYpayables, net at 1 January (126) (50)
Foreign exchange adjustments 32 (3)
Additions from acquired companies, net 5 4
Adjustments relating to prior years, net (33) (14)
Tax on profit before impairment/amortisation of intangibles ” 361 363
Tax regarding equity movements 1 12
Reclassification of joint taxation contribution 18 (4)
Tax paid, net (363) (434)
Tax (receivables)/payables, net at 31 December (105) (126)
Recognised in the balance sheet as follows:
Tax payables 123 151
Tax receivables (228) (277)
Tax (receivables)/payables, net (105) (126)
1 Intangibles comprise the value of goodwill, brands and customer contracts.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. OTHER RECEIVABLES
DKK million 2008 2007
Receivables from affiliates 57 16
Interest rate swaps - 159
Prepayments 470 404
Other 249 457
Other receivables 776 1,036
The carrying amount of other receivables approximates their fair values.
Receivables from affiliates are related to a joint taxation scheme with Danish resident affiliates. The effective interest rate regarding receivables
from affiliates was 6.3% (2007: 5.8%).
… Interest rate swaps are carried at marked-to-market value. Changes in the fair value are recognised in equity.
Prepayments comprise various prepaid expenses such as rent, leasing and insurance as well as accrued interest expenses.
24. ASSETS AND LIABILITIES HELD FOR SALE
In 2008, no assets or liabilities are classified as held for sale,
In 2007, assets and liabilities held for sale related to the energy activities in France. The first part of the activities was divested in September
2007, and the assets and liabilities attributable to the remaining activity were reclassified as held for sale. The remaining energy activity was
disposed 1 January 2008.
DKK million 2008 2007
SS RR |
Goodwill - 178 SEN
Other intangibies - 58
Property, plant and equipment - 23 |
Financial assets - 3
Inventories - 50 |
Trade and other receivables - 307 |
|
|
Assets held for sale - 619 |
|
Deferred tax liabilities - 30 |
Other provisions - 8 |
Bank loan - 8 |
Trade and other payables - 305
Liabilities held for sale - 351
90 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. SECURITIES, CASH AND CASH EQUIVALENTS
2008 2007
Carrying Average Average
amount effective Average Carrying effective Average
(DKK interest duration amount interest duration
million) rate (years) (DKK million) rate (years)
Bonds 86 4.0% 1.8 83 4.0% 2.7
Securities 86 83
Cash and cash equivalents 2,961 2.7% 2,581 4,1%
Bonds consist of listed Danish government bonds measured at fair value through the income statement.
amortisation of term facility A and acquisition facility in accordance with the terms of the Senior Facility Agreement.
” Of the total cash position, DKK 61 million (2007: DKK 50 million) was restricted and DKK 315 million (2007: DKK 198 million) was reserved for
26. SHARE CAPITAL
DKK million 2008
Share capital at 1 January 100
Capital increase -
Share capital at 31 December 100
Number of shares (in thousands of shares)
Number of shares at 1 January 100,000
issued during the year -
Number of shares at 31 December - fully paid 100,000
At 31 December 2008, a total of 100,000,001 shares with a nominal value of DKK 1 per share were issued and fully paid (2007
shares). No shares carry special rights. Shares are not freely transferable.
2007
100
100
100,000
0
100,000
: 100,000,001
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. BORROWINGS
DKK million
Issued bonds
Bank loans
Finance lease obligations
Long-term debt
Long-term debt due within one year
Bank loans and overdrafts ”
Finance lease obligations
Debt to affiliates 2
Short-term debt
Total long-term and short-term debt
Fair value
2008
10,174
20,914
122
31,210
315
782
69
113
1,279
32,489
29,981
2007
10,069
20,705
108
30,882
198
733
77
31
1,039
31,921
32,272
The fair value of the issued bonds (EMTNs and subordinated notes) is based on the quoted market price on the Luxembourg Stock Exchange.
For the remaining part of long-term and short-term debt fair value is equal to the nominal value.
During 2008, financing fees amounting to DKK 0 million (2007: DKK 198 million) have been recognised in long-term debt while accumulated
financing fees recognised in long-term debt on 31 December 2008 amounted to DKK 307 million (2007: DKK 370 million).
in 2008 and 2007, the Group had no debt convertible into equity.
1 The effective interest rate was 5.9% (2007: 6.9%).
2 Debt to affiliates includes 43 million (2007: DKK 20 million) related to a joint taxation scheme with Danish resident affiliates. The effective interest rate regarding debt to affiliates was 6.7% (2007: 7.0%).
Maturity profile of long-term debt
DKK million
2008
Issued bonds
Bank loans and finance lease obligations
Long-term debt
2007
Issued bonds
Bank loans and finance lease obligations
Long-term debt
92 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
6,182 - - - 3,992 10,174
822 890 597 14,318 4,409 21,036
7.004 890 597 14,318 8,401 31,210
1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
- 6,101 - - 3,968 10,069
484 717 925 625 18,062 20,813
484 6,818 925 625 22,030 30,882
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. BORROWINGS (CONTINUED)
Terms and maturity of long-term debt
DKK million
Issued bonds:
EMTNs due 2010
EMTNs due 2014
Subordinated notes
Interest rate swaps
Bank loans:
Senior facilities:
— Term facility Aa
Term facility B
Acquisition facility A
Acquisition facility B
Second lien facility
Other bank loans
Finance lease obligations
Long-term debt
2008 2007
Weighted average Interest Interest Year of Face Amount Carrying Carrying
interest rate rate raterisk maturity value hedged ? amount amount
4.75% Fixed Fair value 2010 6,332 - 6,149 6,046
4.50% Fixed Fair value 2014 823 - 706 686
8.875% Fixed Fair value 2016 3,383 - 3,291 3,282
- - - - - - 28 55
Libor + 2.00% Floating Cash flow 2012 952 1,069 884 1,207
Libor + 2.00% Floating Cash flow 2013 12,938 7,766 12,851 13,246
Libor + 2.25% Floating Cash flow 2012 1,280 600 1,280 1,384
Libor + 2.25% Floating Cash flow 2013 1,467 - 1,467 406
Euribor + 3.75% Floating Cash flow 2015 4,470 4,023 4,409 4,410
- - - - 23 - 23 52
- - - - 122 - 122 108
6.06%”
1 Weighted average interest rate taking the effect of interest rate hedges into account.
2 Interest rate swaps hedging the floating interest rates are adjusted to fair value and recognised directly in equity. The amount hedged for term facility A relates to the long-term as well as the short-term
part of the debt.
Currency profile of long-term debt
The Group's long-term debt is denominated in the following currencies:
DKK
EUR
GBP
NOK
SEK
USD-related
Others
Finance lease obligations
Finance lease obligations are payable as follows:
DKK million
Within 1 year
1-5 years
After 5 years
31,210 30,882
2008 2007
0.0% 0.1%
91.6% 89.7%
4.1% 5.5%
1.4% 1.9%
1.2% 1.7%
0.1% 0.1%
1.6% 1.0%
100.0% 100.0%
2008 2007
Minimum Minimum
lease lease
payments Interest Principal payments interest Principal
79 (10) 69 84 (7) 77
136 (15) 121 113 (6) 107
1 (0) 1 1 - 1
216 (25) 191 198 (13) 185
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. PENSIONS AND SIMILAR OBLIGATIONS
The Group contributes to defined contribution plans as well as defined benefit plans. The majority of the pension plans are funded through
payments of annual premiums to independent insurance companies responsible for the pension obligation towards the employees (defined
contribution plans). In these plans the Group has no legal or constructive obligation to pay further contributions irrespective of the funding
by these insurance companies. Pension costs related to such plans are recorded as expenses when incurred.
In some countries, most significantly, the Netherlands, Sweden, Switzerland, France, Germany and the United Kingdom, the Group has pen-
sion schemes where the actuarially determined pension obligations are recorded in the consolidated balance sheet (defined benefit plans).
The defined benefit plans are primarily based on years of service, and benefits are generally determined on the basis of salary and rank. The
majority of the obligations are funded, but in some countries, mainly Sweden and France, the obligation is unfunded.
The Group's liabilities under defined benefit plans may be significantly affected by changes in the discount rate, the expected return on plan
assets, the social security rate, the rate of increase in salaries and pension contributions, changes in demographic variables or other events
and circumstances.
There can be no. assurance that the Group will not incur additional liabilities relating to.its pension plans, and these additional fiabilities
could have a material adverse effect on the Group's business, results of operations and financial condition. Changes to local legislation and
regulations relating to defined benefit plan funding requirements may result in significant deviations in the timing and size of the expected
cash contributions under such plans.
In certain countries, the Group participates in multi-employer pension schemes. The funds are currently not able to provide the necessary
information in order for the Group to account for the schemes as defined benefit plans. There is a risk that the plans are not sufficiently
funded. Furthermore, there is a risk that changes to local legislation will entail that pension plans are reclassified from defined contribution
plans to defined benefit plans, requiring the Group to recognise a provision.
In Norway, curtailment gains totalling DKK 30 million have been recognised in the income statement under staff costs, as a consequence of
a reduction in the future benefits of the participants in the defined benefit plan.
Recognised in the balance sheet
DKK million 2008 2007
Present value of funded obligations 2,860 2,736
Fair value of plan assets (2,591) (2,617)
Funded obligations, net 269 119
Present value of unfunded obligations 478 508
Unrecognised past service costs 1 1
Accumulated effect of asset ceiling 14 44
Recognised in the balance sheet for defined benefit obligations 762 672
Other long-term employee benefits 72 52
Pensions and similar obligations at 31 December 834 724
Specification of defined benefit obligations:
Present value of funded obligations 2,860 2,736
Present value of unfunded obligations 478 508
Defined benefit obligations at 31 December 3,338 3,244
continues
94 - ANNUAL RE2ZORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. PENSIONS AND SIMILAR OBLIGATIONS (CONTINUED)
Recognised in the balance sheet (continued)
DKK million
Movement in defined benefit obligations (funded and unfunded):
Present value of obligations at 1 January
Foreign exchange adjustments
Reclassifications
Additions from acquired companies, net
Interest on obligation
Current service costs
Benefits paid
Employee contributions
Actuarial (gains)/losses
Recognised past service costs
Liabilities extinguished on settlements and curtailments
Present value of obligations at 31 December
Movement in fair value of plan assets:
Fair value of plan assets at 1 January
Foreign exchange adjustments
Reclassifications
Additions from acquired companies, net
Expected return on plan assets
Actuarial gains/(losses)
Assets distributed on settlements
Contributions
Benefits paid
Fair value of plan assets at 31 December
Realised return on plan assets:
Expected return on plan assets
Actuarial gains/(losses)
Realised return on plan assets at 31 December
Major categories of plan assets (% of total plan assets):
Bonds
Equities
Property
Cash
Other
Total
The Group expects to contribute DKK 178 million to its defined benefit plans in 2009.
2008
3,244
32
47
32
139
149
(96)
74
(244)
4)
3,338
2,617
43
53
14
134
(426)
(16)
213
(41)
2,591
134
(426)
(292)
60%
21%
10%
1%
8%
2007
3,446
(108)
(48)
37
123
156
(91)
65
(200)
(0)
(136)
3,244
2,606
(91)
(43)
116
(48)
(91)
221
(53)
2,617
116
(48)
68
54%
29%
1%
8%
8%
100%
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. PENSIONS AND SIMILAR OBLIGATIONS (CONTINUED)
Recognised in the income statement
DKK million 2008
Current service costs 149
Interest on obligation ' 139
Expected return on plan assets (134)
Recognised past service costs, net 2
Gains on curtailments and settiements, net (30)
Recognised in the income statement as staff costs 126
Recognised in equity
Cumulative (gains)/losses recognised in equity at 1 January (35)
Actuarial (gains)Y/losses during the year 182
Effect of asset ceiling HE (25)
Cumulative (gains)/losses recognised in equity at 31 December 122
Hereof accumulated actuarial (gains)/losses 103
Actuarial assumptions
2007
156
123
(116)
(0)
(45)
118
76
(152)
41
(35)
(79)
Actuarial calculations and valuations are performed annually for all major defined benefit plans. The actuarial assumptions vary from country
to country due to local conditions. The range of actuarial assumptions used is as follows:
2008
Discount rates at 31 December 1.8-13.0%
Expected return on plan assets at 31 December 1.8-8.0%
Future salary increases 2.0-10.0%
Future pension increases 1.3-5.1%
2007
3.4-11.0%
3.9-6.9%
2.0-5.0%
0.3-3.1%
Discount rates are based on the market yieid of high quality corporate bonds or government bonds with a maturity approximating to the
terms of the defined benefit obligations. In Switzerland, which represents 56% of the gross obligation (2007: 49%), the discount rate was
3.8% (2007: 3.4%) and in the euro countries representing 23% of the gross obligation (2007: 25%) the discount rate was between 5.6% and
6.0% (2007: 5.15%-5.25%).
Expected return on plan assets is based on the plan asset portfolio and general expectations to the economic development.
Historical information
DKK million 2008 2007 2006 2005
Present value of obligations 3,338 3,244 3,446 2,240
Fair value of plan assets (2,591) (2,617) (2,606) (1,441)
Unrecognised past service costs 1 1 1 2
Asset ceiling 14 44 3 -
Net obligations at 31 December 762 672 844 801
Actuarial (gains)/losses on obligations (244) (200) (59) 134
Actuarial gains/(losses) on plan assets (426) (48) (13) 15
Actuarial (gains)/losses during the year 182 (152) (46) 119
Cumulative actuarial (gains)/losses at 31 December 103 (79) 73 119
96 - ANNUAL REPORT 2098 i CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. OTHER PROVISIONS
Acquisition
Labour- and Contingent
related Self- integration liabilities in
DKK million items insurance costs acquisitions Other Total
2008
Other provisions at 1 January 86 167 41 14 345 653
Foreign exchange adjustments ' (3) (17) (3) - (13) (36)
Transfers, net ” 2 8 (1) - 8 17
Additions from acquired companies, net 23 - - 31 68 122
Provisions for the year (included in goodwill) - - 68 - - 68
Provisions for the year (included in the income statement) 37 103 66 - 199 405
Provisions for the year (dismantling costs) - - - - 30 30
Provisions reversed (against the income statement) (23) (18) (1) - (42) (84)
Provisions used during the year (30) (77) (125) - (112) (344)
Unwind of discount - - - - 1 1
Other provisions at 31 December 92 166 45 45 484 832
Current 68 70 43 13 241 435
Non-current 24 96 2 32 243 397
92 166 45 45 484 832
2007
Other provisions at 1 January 89 120 64 - 472 745
Foreign exchange adjustments 0 (5) 1 - (4) (8)
Transfers, net ” 4 2 0 - (19) (13)
Additions from acquired companies, net 4 26 0 14 38 82
Provisions for the year (included in goodwill) - - 80 - - 80
Provisions for the year (included in the income statement) 48 83 67 - 129 327
Provisions reversed (against the income statement) (21) (13) (5) - (135) (174)
Provisions used during the year (38) (46) (166) - (136) (386)
Other provisions at 31 December 86 167 41 14 345 653
Current 68 49 28 14 168 327
Non-current 18 118 13 0 177 326
86 167 41 14 345 653
Labour related items
The provision mainly related to labour related obligations in Belgium, Brazil, France, Israel, the Netherlands, Spain and Turkey.
Self-insurance
In Australia, Ireland, the USA and the United Kingdom, the Group carries an insurance provision on employers' liability. Ireland and the
United Kingdom are self-insured up to a yearly limit of DKK 18 million (DKK 35 million in 2007) for employers' liability. The USA is self-insured
up to a limit of DKK 1.3 million per claim. Australia is self-insured up to a limit of DKK 1.8 million per claim. ISS Corporate has taken out a
group third party liability insurance programme. The ISS captive insurance company Global Insurance A/S carries part of the risk on the third
party liability programme with a maximum annual limit of DKK 42 million (DKK 42 million in 2007).
Acquisition and integration costs
The provision includes obligations incurred in the normal course of acquisitions mainly related to transaction costs, redundancy payments and
termination of rental of properties. Transaction costs are included in goodwill. Other costs are included in the income statement.
" in 2008, transfers, net consisted of net provisions transferred from Other liabilities and Pensions and similar obligations. In 2007, transfers, net consisted of net provisions transferred to Other liabilities
and Pensions and similar obligations and Trade receivables. continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. OTHER PROVISIONS (CONTINUED)
Contingent liabilities in acquisitions
The provision relates to contingent liabilities assumed in connection with acquisitions.
Other
The provision comprises various obligations incurred in the course of business, e.g. provision for restructuring, dismantling costs, operational
issues, closure of contracts and legal cases.
30. OTHER LIABILITIES
DKK million 2008 2007
Accrued wages and holiday allowances 4,358 4,267
Tax withholdings, VAT etc. 2,841 2,934
— Prepayments from customers 420 446
Interest rate swaps 254 -
Other payables and accrued expenses 2,588 2,847
Other liabilities 10,461 10,494
The carrying amount of other liabilities approximates their fair value.
Interest rate swaps are carried at marked-to-market value. Changes in the fair value are recognised in equity.
31. CONTINGENT LIABILITIES
Senior Facility Agreement
ISS Holding A/S has executed a share pledge over its shares in ISS A/S as security for the Group's senior facilities and a secondary share pledge
over such shares as security for the subordinated notes issued by ISS Holding A/S.
ISS A/S, ISS Global A/S and certain material subsidiaries of ISS Global A/S in Australia, Belgium, Denmark, Finland, France, the Netherlands,
Norway, Spain, Sweden, the United Kingdom and the USA have provided guarantees for ISS Global A/S's borrowings under the senior fa-
cilities. The guarantees have been backed up by security over bank accounts, trade receivables, intra-group receivables, other receivables,
properties, production equipment and intellectual property rights of ISS A/S and these subsidiaries. At 31 December 2008, the aggregate
approximate values of assets provided as security for the borrowings under the senior facilities were:
DKK billion 2008 2007
Goodwill 2.7 3.9
Customer contracts 0.8 1.2
Intellectual property rights 1.5 1.5
Other intangible and tangible assets 0.3 0.3
Trade receivables 3.2 3.8
Other receivables 0.2 0.1
Bank accounts 1.8 1.8
Total 10.5 12.6
In addition, the shares in the material subsidiaries and shares in certain of their subsidiaries as well as shares in certain subsidiaries in Austria,
Germany, Hong Kong, Ireland, Portugal, Singapore, Switzerland and Turkey have been pledged.
continues
98 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. CONTINGENT LIABILITIES (CONTINUED)
Operating leases
Operating leases consist of leases and rentals of properties, vehicles (primarily cars) and other equipment. The total expense under operating
leases in the income statement amounted to DKK 1,876 million (DKK 1,834 million in 2007). Assuming the current car fleet etc. is maintained,
the future minimum lease payments under operating leases are:
After Total lease
DKK million Year 1 Year 2 Year 3 Year 4 Year 5 5 years payment
At 31 December 2008 1,299 920 649 401 286 395 3,950
At 31 December 2007 1,251 901 661 414 288 433 3,948
Additional future lease payments of DKK 7 million (DKK 5 million in 2007) existed regarding associates at 31 December.
Commitment vehicle leases
"On 1 January 2005 the Group entered into a global car fleet lease framework agreement for three years, including an option for extension.
The agreement was re-negotiated and extended for another three year term from 1 January 2008 to 31 December 2010. The framework
agreement contains an option for the Group to terminate the fleet of an entire country or the entire fleet under the framework agreement
with four weeks notice subject to payment of a termination amount. The majority of the underlying agreements have a duration of 3-5 years.
The disclosed contingent liability includes the Group's total leasing commitment assuming no early termination of any agreement.
Guarantee commitments
Indemnity and guarantee commitments at 31 December 2008 amounted to DKK 318 million (31 December 2007: DKK 405 million).
Performance guarantees
The Group has issued performance guarantee bonds for service contracts with an annual revenue of DKK 1,305 million (31 December 2007:
DKK 1,229 million) of which DKK 1,112 million (31 December 2007: DKK 979 million) were bank-guaranteed performance bonds. Such per-
formance bonds are issued in the ordinary course of business in the service industry.
Outsourcing of IT
The Group has an IT outsourcing agreement with Computer Sciences Corporation (CSC) running until 2015. The Group's contractual obliga-
tions related to the agreement at 31 December 2008 amounted to approximately DKK 60 million (31 December 2007: DKK 75 million).
Divestments
The Group makes provisions for claims from purchasers or other parties in connection with divestments and representations and warranties
given in relation to such divestments. Management believes that provisions made at 31 December 2008 are adequate. However, there can be
no assurance that one or more major claims arising out of the Group's divestment of companies will not adversely affect the Group's activities,
results of operations and financial position.
Legal proceedings
The Group is party to certain legal proceedings. Management believes that these proceedings (which are to a large extent labour cases inci-
dental to its business) will not have a material impact on the Group's financial position beyond the assets and liabilities already recognised in
the balance sheet at 31 December 2008.
CONSOLIDATED FINANCIAL STATEMENTS I ANNUAL REPORT 2008 - 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. FINANCIAL RISK MANAGEMENT
The Group is exposed to a number of financial risks as a result of its operating activities, investing activities and financing activities, mainly
related to fluctuations in exchange rates and interest rates as well as availability of funding. The Group has not identified any additional
financial risk exposures in 2008. However, the individual risks associated with the exposures identified have changed following the current
financial crisis.
The Group's financial risks are managed centrally in Group Treasury based on policies approved by the Board of Directors. The Group's finan-
cial risk management is focused on managing risks arising from the Group's operating and financing activities, mainly by use of interest rate
instruments and currency instruments. It is not the Group's policy to take positions in the financial markets.
Currency risk
The service industry is characterised by a relatively low level of transaction risk, since the services are produced and delivered in the same local
currency with minimal exposure from imported components.
However, as an international business with the majority of revenue and operating profit stemming from foreign entities, the Group is ex-
. posed to risk relating-to-translation-into Danish. kroner.of income statements and.net assets of foreign subsidiaries, including intercompany.
items such as loans, royalties, service fees and interest payments between entities with different functional currencies.
Additionally, the Group has a currency risk to the extent that its interest payments with respect to borrowings are not denominated in the
same currencies as the Group's revenue.
The Group hedges the exposure on the intercompany loans to foreign subsidiaries by entering into currency swaps. Foreign exchange gains
and losses arising from both the intercompany loans and currency swaps are recognised in the income statement. it is not Group policy to
hedge the currency exposure on foreign investments. Consequently, no hedging transactions of net investments in foreign subsidiaries were
entered into in 2008 and 2007. However, the Group may choose to hedge the currency exposure on foreign investments by funding such
investments in local currencies.
In 2008, the currencies in which the Group's revenue was denominated decreased with an average of 2.6% (2007: decreased with 0.3%)
relative to Danish kroner, decreasing the Group's revenue by DKK 1,624 million (2007: a decrease of DKK 160 million). Currency movements
decreased the Group's operating profit before other items by DKK 107 million (2007: a decrease of DKK 10 million). The effect of the transia-
tion of net assets in foreign subsidiaries decreased equity by DKK 791 million (2007: a decrease of DKK 263 million).
A 5% change in foreign exchange rates of the Group's main currencies would have impacted revenue, operating profit before other items
and equity by the amounts shown below. The analysis is based on the assumption that all other variables remain constant.
2008 2007
Operating Net assets Operating Net assets
profit before in foreign profit before in foreign
Effect in DKK million Revenue otheritems subsidiaries Revenue otheritems subsidiaries
EUR 1,523 90 448 1,476 93 517
CHF 123 10 59 111 9 51
GBP 378 26 90 390 26 114
NOK 284 20 29 266 19 39
SEK 196 13 27 193 13 30
USD 211 13 65 138 8 47
Other 536 34 101 432 29 103
Total 3,251 206 819 3,006 197 901
continues
100 - ANNUAL REPORT 2008 i CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. FINANCIAL RISK MANAGEMENT (CONTINUED)
Interest rate risk
The Group's most significant interest rate risk relates to interest-bearing debt.
The Group's loan portfolio primarily consists of bank loans (senior facilities and second lien facility) and listed bonds (EMTN's and subordi-
nated notes). To manage the interest rate risk the Group uses fixed-rate bonds and derivatives, such as interest rate swaps. A part of the
Group's interest påyments on the bank loans and second lien facility have been swapped from floating into fixed rates, see note 27, Borrow-
ings, where a breakdown of the Group's long-term debt and applied interest rate swaps is provided.
The interest rate risk is measured by the duration of the net debt (fixed-rate period). As at 31 December 2008, the duration of net debt was
approximately 2.0 years (31 December 2007: 2.8 years). A decrease in interest rates will increase the fair value of the debt with a fixed interest
rate, but only part of this increase will be reflected in the income statement and equity as long-term borrowings are stated at amortised cost
and therefore not adjusted to fair value. It is estimated that a general increase in relevant interest rates of 1%-point would increase the an-
nual interest expenses, net by DKK 60 million (2007: DKK 54 million), all other things being egual. The estimate is based on net debt adjusted
for the effect of hedging instruments as at 31 December 2008.
Liquidity risk is the risk of the Group failing to honour its contractual obligations due to insufficient liquidity. The Group's liquid reserves
mainly consist of liquid funds and unused credit facilities. As at 31 December 2008, the Group's liquid reserves consisted of liquid funds of DKK
2,900 million (2007: DKK 2,531 million), unused revolving credit facilities of DKK 817 million (2007: DKK 738 million) available for drawing
until 30 June 2012 and unused acquisition facilities of DKK 2,033 million (2007: DKK 3,135 million) available for drawing until 11 May 2009.
It is the Group's policy to maintain an appropriate level of liquid reserve.
The bank loans and subordinated notes are subject to customary undertakings, covenants (including financial covenants) and other restric-
tions. Financial covenants comprise the following: i) Debt cover ii) Senior debt cover, iii) Cash flow cover, iv) Interest cover and v) Limitation on
Capex spending. The financial covenants are calculated on a last-twelve-months basis and reported quarterly, except for ii) and v), which are
only reported at year-end. In the event of a default under those agreements, the debt incurred including accrued interest could be declared
immediately due and payable. In 2008 and 2007, all covenants have been complied with.
For a breakdown of the maturity of the Group's long-term debt, see note 27, Borrowings. In 2010, EUR 850 million of the EMTN's will mature.
The Group intends to repay the principal amount of the notes at maturity using funds obtained from other financing sources, rather than
with cash from operations. In accordance with the provisions of the Group's Intercreditor Agreement, the Group is obliged to publicly an-
nounce that it is in negotiations to refinance these EMTN's at least 6 months prior to maturity date. .
Capital management
The Group monitors the capital structure and evaluates the need for adjustments on an ongoing basis. The dividend policy and payment
of dividends is made subject to the necessary consolidation of equity and the Group's continuing expansion. The Group seeks to reduce the
financial leverage on a multiple basis in terms of net debt to pro forma adjusted EBITDA”, At 31 December 2008, the Group's net debt to pro
forma adjusted EBITDA was 5.92x (2007: 6.16x).
ISS Holding A/S (the Group's parent) is a holding company, and its primary assets consist of shares in ISS A/S and cash in its bank accounts. ISS
Holding A/S has no revenue generating operations of its own, and therefore ISS Holding A/S's cash flow and ability to service its indebtedness,
will depend primarily on the operating performance and financial condition of ISS A/S and its operating subsidiaries, and the receipt by ISS
Holding A/S of funds from ISS A/S and its subsidiaries in the form of dividends or otherwise.
Credit risk
Credit risk is the risk of a counterparty failing to meet its contractual obligations and so inflicting a loss on the Group. The Group's credit
risk is mainly related to transactions with financial institutions (liquid funds and derivatives with positive fair value) and service deliveries to
customers (trade receivables). It is the Group's policy that financial transactions may be entered into only with financial institutions with a
high credit rating.
The Group is not exposed to significant risks relating to individual customers. The Group performs ongoing credit evaluations of the financial
condition of the Group's counterparties in order to reduce the credit risk exposure. Losses on bad debt relating to individual customers have
historically been relatively low. It is estimated that the provisions made are sufficient to cover expected losses (see note 20, Trade receivables).
.
% Pro forma i ion is dited and for inf: i purp: only. For further information, see Capital structure on page 134.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 + 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. DERIVATIVES
Contractual values and unrealised gains and losses are specified below for financial instruments used to hedge the foreign exchange risk and
the interest rate risk:
Unrealised
gain/(loss) on iIndluded in Taken directly
Contractual revaluation the income to equity on
DKK million value to fair value statement 31 December Maturity
2008
Forward foreign currency, purchases
CHF 263 5 5 - 2009
EUR 3,842 (2) (2) - 2009
GBP 435 (13) (13) - 2009
4,540 (10) (10) -
"Forward foreign currency, sales
AUD 977 (1) (1) - 2009
CZK 151 2 2 - 2009
ILS 205 (3) (3) - 2009
MXN 73 4 4 - 2009
NOK 1,098 2 2 - 2009
SEK 280 - - - 2009
USD 909 6 6 - 2009
Others 471 3 3 - 2009
4,164 13 13 -
Interest rate instruments ”
Interest rate swap - 2009 (CHF), payer 192 (1) - (1) 2009
Interest rate swap - 2010 (CHF), payer 169 (2) - (2) 2010
Interest rate swap - 2009 (GBP), payer 289 (3) - (3) 2009
Interest rate swap - 2010 (GBP), payer 289 (8) - (8) 2010
Interest rate swap - 2010 (GBP), payer 994 (38) - (38) 2010
Interest rate swap - 2009 (SEK), payer 415 (1) - (1) 2009
Interest rate swap - 2010 (SEK), payer 361 (5) - (5) 2010
Interest rate swap - 2009 (NOK), payer 462 (0) - (0) 2009
Interest rate swap - 2010 (NOK), payer 398 (5) - (5) 2010
Interest rate swap - 2009 (EUR), payer 600 (1) - (1) 2009
interest rate swap - 2010 (EUR), payer 600 (7) - (7) 2010
interest rate swap - 2010 (EUR), payer 3,129 (44) - (44) 2010
Interest rate swap - 2010 (EUR), payer 3,353 (69) - (69) 2010
Interest rate swap - 2010 (EUR), payer 4,023 (70) - (70) 2010
15,274 (254) - (254)
Total financial instruments (251) 3 (254)
” The swaps convert a major part of the floating rates within the bank ioans to fixed interest rate.
102 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. DERIVATIVES (CONTINUED)
Contractual values and unrealised gains and losses are specified below for financial instruments used to hedge the foreign exchange risk and
the interest rate risk:
Unrealised
gain/(loss) on included in Taken directly
Contractual revaluation the income to equity on
DKK million ' value to fair value statement 31 December Maturity
2007
Forward foreign currency, purchases
CHF 220 0 0 - 2008
EUR 5,421 (4) (4) - 2008
GBP 679 (10) (10) - 2008
HKD 46 (1) (1) - 2008
NOK 243 0 0 - 2008
Others 17 0 0 - 2008
6,626 (15) (15) -
Forward foreign currency, sales
AUD 1,098 9 9 - 2008
CZK 145 1 1 - 2008
ILS 154 1 1 - 2008
MXN 179 5 5 - 2008
SEK 208 0 0 - 2008
SGD 60 1 1 - 2008
USD 855 18 18 - 2008
Others 226 2 2 - 2008
2,925 37 37 -
interest rate instruments?
Interest rate swap - 2009 (CHF), payer 173 1 - 1 2009
Interest rate swap - 2009 (SEK), payer 481 8 - 8 2009
Interest rate swap - 2009 (NOK), payer 570 12 - 12 2009
Interest rate swap - 2010 (GBP), payer 384 0 - 0 2010
Interest rate swap - 2010 (EUR), payer 600 10 - 10 2010
Interest rate swap - 2010 (GBP), payer 1,319 3 - 3 2010
Interest rate swap - 2010 (EUR), payer 3,132 59 - 59 2010
Interest rate swap - 2010 (EUR), payer 3,355 11 - 11 2010
Interest rate swap - 2010 (EUR), payer 4,027 55 - 55 2010
14,041 159 - 159
Total financial instruments 181 22 159
3 The swaps convert a major part of the floating rates within the bank loans to fixed interest rate.
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34. RELATED PARTIES
Parent and ultimate controlling party
The sole shareholder of ISS Holding A/S, ISS Equity A/S, has controlling influence in the Group. The ultimate controlling company of the Group
is FS Invest S.å r.I ("FS Invest"), which is 54% owned by funds advised by EQT Partners and 44% owned by funds advised by Goldman Sachs
Capital Partners, together The Principal Shareholders.
Key management personnel
Members of the Board of Directors and Executive Group Management
Apart from remuneration and co-investment programmes described below there were no significant transactions with members of the Board
of Directors or the Executive Group Management during the year.
Co-investment programmes
The Principal Shareholders have established a Management Participation Programme, under which the Executive Group Management and a
number of senior officers of the Group were offered to invest. The programme is structured as a combination of direct and indirect invest-
ments in a mix of shares and warrants of FS Invest, ISS Holding A/S's ultimate parent. As of 31 December 2008, the investments amounted
—to DKK 185 million in total for 132 executives and officers. As part of the initial programme — in addition to the investments — certain senior
officers were granted warrants in FS Invest with a vesting schedule (based on value of shares and time). As of 31 December 2008, 396,940
were outstanding, see note 4, Share-based payments.
Non-executive members of the Board of Directors (except representatives of the Principal Shareholders) were offered to participate in a Direc-
tors Participation Programme, under which they have invested in a mix of shares and warrants of FS Invest amounting to approximately DKK
8.3 million in total. In addition, they have co-invested with the Principal Shareholders for approximately DKK 19.2 million in total.
External directorships and external executive positions of the Group's Board of Directors and Executive Group Management
Board of Directors
Board Member
Executive Position
Ole Andersen (Chairman)
Leif Ostling (Vice-Chairman)
John Murray Allan
Peter Korsholm
Sanjay Patel
Christoph Sander
Steven Sher
Executive Group Management
Dako A/S
Scania AB, AB SKF (Chairman of the Board),
Svenskt Nåringsliv (Confederation of Swedish
Enterprise) and Teknikfåretagen (The Association
of Swedish Engineering Industries)
National Grid plc, Deutche Lufthansa AG,
Deutsche Postbank AG
BTX Group A/S and CaridianBCT Holding Corp
Ahlsell Sverige AB and certain holding companies
of Ahiseli Sverige AB, Endemol N.V., (Companies
relating to Sigma Electric), Get A/S and Expro
Casper Limited and subsidiaries of Casper Limited
.… Ahlsell Sverige AB, Edam Acquisitions B.V. and
certain holding companies of Ahlsell Sverige AB
and Endemo! N.V.
Board Member
Senior advisor to EQT Partners
President and CEO of Scania AB
CFO of Deutsche Post World Net and other
positions in subsidiaries hereof
Partner and Head of the Copenhagen office of
EQT Partners
Co-head of Private Equity in Europe for the
Principal Investment Area of Goldman Sachs
Co-founder and Director of Casper Limited
Managing Director, Goldman Sachs International,
Principal Investment Area
Executive Position
Jørgen Lindegaard
Jeff Gravenhorst
Jakob Stausholm
Efsen Engineering A/S
None
None
104 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
None
None
None
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34. RELATED PARTIES (CONTINUED)
Affiliates
In 2008, the Group had the following transactions with affiliates:
> the Group received/paid interest from/to affiliates, see note 7, Net finance costs.
> the Group received/paid joint taxation contribution equal to 25% of taxable income from/to ISS Equity A/S (the ultimate parent company
in Denmark). . .
> the Group and Goldman Sachs have agreed general terms and conditions for the supply of Facility Services to be applied by local ISS opera-
tions and local Goldman Sachs affiliates when contracting with each other. ISS in Switzerland, Russia and the United Kingdom have entered
into Facility Services agreements with local Goldman Sachs affiliates. The annual revenue from these agreements is estimated at DKK 83
million. Furthermøore, the Group have local agreement terms with Goldman Sachs in France, Hong Kong, Ireland, Italy and Singapore. The
annual revenue from these agreements is estimated at DKK 8 million.
> the Group and Goldman Sachs have entered into various agreements on provision of financing and banking related services.
All transactions were made on market terms.
Joint ventures and associates
Transactions with joint ventures and associates are limited to transactions related to shared service agreements. There were no significant
transactions with joint ventures and associates during the year. All transactions were made on market terms.
Other
In addition to the above and except for intra-group transactions, which have been eliminated in the consolidated accounts, there were no
material transactions with related parties and shareholders during the year.
35. INTERESTS IN JOINT VENTURES
As of 31 December 2008, the Group had interests in 10 joint ventures (9 in 2007). The significant joint ventures are specified in note 37, Sub-
sidiaries, joint ventures and associates. The Group's interests in joint ventures are recognised using the proportionate consolidation method.
At the balance sheet date the joint ventures had the following effect on the Group's consolidated income statement and balance sheet:
DKK million 2008 2007
Revenue 202 116
Expenses (190) (112)
Operating profit before other items 12 4
Net profit for the year 7 3
Non-current assets ” 16 12
Current assets 76 51
Total assets 92 63
Equity . 22 28
Non-current liabilities 2 2
Current liabilities 68 33
Total equity and liabilities 92 63
The Group's part of contingent liabilities (operating leases) in joint ventures 6 6
The aggregate investment in joint ventures is as follows: Sri Lanka DKK 4 million (2007: .DKK 4 million), Norway DKK 12.6 million (2007: DKK
18 million), the Netherlands DKK 3.4 million (2007: DKK 6.2 million), Spain DKK 1.7 million (2007: DKK 0.3 million), Hong Kong. DKK 0.4 million
(2007: DKK (0.4) million) and Israel DKK (0.3) million) (2007: DKK (0.3) million).
1 Excluding goodwill arising from the acquisition of the joint ventures.
CONSØLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36. SUBSEQUENT EVENTS
Acquisitions and divestments completed subsequent to 31 December 2008 are listed in note 11, Acquisition and divestment of businesses.
Apart from these and the events described in this Annual Report, the Group is not aware of events subsequent to 31 December 2008, which
are expected to have a material impact on the Group's financial position.
37. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
ISS Global A/S
Argentina
- Facility Services $.R.L.
ISS Argentina $.A.
Top Service S.R.L.
Australia
ISS Catering Services Pty Ltd.
ISS Facility Services Australia Ltd.
ISS Facility Services Pty Ltd.
ISS Franchise Services Pty Ltd.
ISS Health Services Pty Ltd.
ISS Holdings Pty Ltd.
ISS Hygiene Services Pty Ltd.
ISS Integrated Services Pty Ltd.
ISS Property Services Pty Ltd.
ISS Security Pty Ltd.
Pacific invest December 2004 Pty Ltd.
Pacific Service Solutions Pty Ltd.
Prestige Protection Services Pty Ltd.
Austria
ISS Austria Holding GmbH
ISS Beta Beteiligungsverwaltung GmbH
ISS Facility Services GmbH
ISS Ground Services GmbH
Belgium
Abilis Cemstobel Wallonie N.V.
BD Food SA
ISS Building Services N.V.
ISS Catering N.V.
ISS Industrial Cleaning N.V.
ISS Industrial Services N.V.
ISS N.V.
ISS Office Support N.V.
Lease Plant International N.V.
National Pest Control Bvba
Party & Dinner N.V.
Pest Management Solutions N.V.
Synerg' ISS SA
Technisch Onederhoud & Services Bvba
Bosnia and Herzegovina
ISS Facility Services d.0.0. Banja Luka
ISS Facility Services d.0.0. Sarajevo
106 - ANNUAL REPORT 2008 | CONSOLIDATED FINANCIAL STATEMENTS
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Brazil
BJP Manutencåo e Operacåo de Utilidades Ltda.
ISS Biosystem Saneamento Ambiental Ltda.
ISS Catering Sistemas de Alimentacåo Ltda.
ISS Servisystem do Brasil Ltda.
ISS Sulamericana Brasil Ltda.
Loghis Logistica Integrada Ltda.
SMV Manutencåo Volante Ltda
Brunei
ISS Facility Services Sdn. Bhd.
Bulgaria
ISS Facility Services EOOD
Ryvola Bulgaria EOOD
Canada
ISS Facility Services Inc.
Chile
EFI Ltda.
Glanzend Ltda.
ISS Chile S.A.
ISS Facility Services $.A.
ISS Office Support Ltda.
ISS Servicios Generales Ltda.
Ledan Ltda.
Slim S.A.
China and Hong Kong
Beijing Hanyang Facility Management Co., Ltd.
Cornerstone Associates Ltd.
Hung Fat Cleaning Transportation Co., Ltd.
ISS Adams Secuforce Limited
ISS Building Consultancy Ltd.
ISS China Holdings I Ltd.
ISS China Holdings Ltd.
ISS EastPoint Properties Ltd.
ISS EastPoint Property Consultants Ltd.
ISS EastPoint Property Management Ltd.
ISS Environmental Services (HK) Ltd.
ISS Facility Services China Ltd.
ISS Facility Services Ltd.
ISS Greater China Ltd.
ISS Hangyang (Beijing) Cleaning Services Co., Ltd.
ISS Hong Kong Services Ltd.
ISS Hongrun Facility Services (Shanghai) Ltd.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
60%
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
China and Hong Kong (continued)
ISS Hygiene Services (HK) Ltd.
ISS Macau Services Ltd.
ISS Mediclean (HK) Ltd.
ISS Pan Asia Security Services Ltd.
ISS Robocliean (HK) Co., Ltd.
ISS Servisystem (China) Ltd.
ISS Shun Tak Company Ltd.
1SS Thomas Cowan Co., Ltd.
3SL Ltd.
LAWN Environmental Protection Ltd.
Shanghai ISS Houban Catering Management Co., Ltd.
Silvertech E&M Engineering Co., Ltd.
Croatia
ISS Kadrovske uslige d.0.0.
"155 Usluzne djetatnosti d:0.0.
Czech Republic
ISS Facility Services s.r.o
ISS Sprava Budov s.r.o.
Ryvola s.r.0.
Denmark
Global insurance A/S
House of Coffee A/S
Industriservice Danmark A/S
ISS Document A/S
ISS Facility Services A/S
ISS Finans A/S
ISS Funding A/S
ISS Holding France A/S
ISS Kloak- & Industriservice A/S
ISS Venture A/S
Estonia
Ha&Ho Kinnisvarateenused OG
ISS Eesti AS
ISS Haldus OU
ISS Holding OU
Minu Vara OU
Finland
ISS Palvelut Holding Oy
ISS Palvelut Oy
ISS Proko Oy
ISS Security Oy
ISS Teollisuuspalvelut Oy
Suomen Laatutakuu Palivelut Oy
France
BSE SAS
Channel SAS
CPMS SA
Europe Filtration SAS
Europrop SAS
Extincteurs HaaS SAS
100%
50%”
100%
100%
100%
100%
50%”
70%
100%
100%
100%
100%
100%
100%”
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
51%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Force Protection SAS
FSI SAS
GIE ISS Services
GROS Environnement SAS
Hoguin Espaces Verts SAS
Ifopro Sarl
ISS Abilis France SAS
ISS Accueil & Services SAS
ISS Environnement SAS
ISS Espaces Verts SAS
ISS Facility Service SAS
ISS Holding Paris SAS
ISS Hygiene & Prevention SAS
ISS Hygiéne SAS
ISS Logistique et Production SAS
ISS Sécurité SAS
” Liimpectctabte SAS
Qualitec SAS
STOP FLAM SAS
Verts Paysages & Aménagement SAS
Germany
AA Schådlingsbekåmpfung HRS Helmut Riedl GmbH
DEBEOS GmbH
ISS Damage Control Deutschland GmbH
ISS Facility Services GmbH
ISS HWS GmbH & Co. KG
ISS Personalservice GmbH
ISS Schådlingsbekåmpfung und Hygiene GmbH
ISS Security GmbH
Klaus Harren GmbH
Vatro GmbH & Co. KG
Vatro Verwaltungs GmbH
Greece
ISS ASPIS Security $.A.
ISS Facility Services S.A.
ISS Human Resources S.A.
Greenland
ISS Grønland A/S
Hungary
ISS Facility Services Kft.
Profi-Komfort Kft.
Iceland
ISS Island ehf.
India
Integrated Siddhi Hospitality Pvt. Ltd.
ISS Catering Services (South) Pvt. Ltd.
ISS Facility Services India Pvt. Ltd.
ISS Integrated Facility Services Pvt. Ltd.
ISS Management Services Pvt. Ltd.
ISS Pest Control Services Pvt. Ltd.
ISS Records Management Solutions Pvt. Ltd.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
86%
86%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
continues
CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2008 - 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
Indonesia
P.T. ISS Catering Services
P.T. ISS Facility Services
P.T. ISS Indonesia
Ireland
ISS Ireland Holding Ltd.
ISS Ireland Ltd.
U.S. Security Limited
Israel
A.B Ogen Management Project Ltd.
A.Kfir Holdings Ltd.
Catering Ltd.
Catering Tefen (1991) Ltd.
"Glat Chef Ltd.
ISS Ashmoret Ltd.
ISS Comprehensive Services for Business Ltd.
ISS Israel Manpower Services Ltd.
Jet Gourmet Ltd.
Kfir Electronic Security Systems and Surveillance Ltd.
Kfir Security Guarding and Services Ltd.
M.A.S.H. Mahatz Agencies Ltd.
Norcat Ltd.
Nortec Food Industries (1995) Ltd.
Italy
ISS Facility Services S.r.l.
G.S. Service S.p.A.
Japan
Nihon ISS KK
Latvia
ISS Namu Serviss SIA
Lithuania
ISS Pastatu Valda UAB
Luxembourg
ISS Facility Services S.A.
Lux Interim $S.A.
Malaysia
ISS Facility Services Sdn. Bhd.
ISS Hygiene Services S$dn. Bhd.
Kontrekleen Services Sdn. Bhd.
Reliance Suci Environmental Services Sdn. Bhd.
Mexico
Decoracidn y Mantenimiento San Rafael, SA de CV
ISS Centro America, S de RL de CV
ISS Servicios Gerenciales, S de RL de CV
ISS Servicios integrales, $ de RL de CV
Mantenimiento Ténico Tapnew, SA de CV
Martex, SA de CV
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50% %
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
100%
100%
30%
100%
30%
30%
100%
100%
100%
100%
100%
100%
108 - ANNUAL REPORT 20093 | CONSOLIDATED FINANCIAL STATEMENTS
Netherlands
Drielanden Bos & Landscapsbouw B.V.
Groene Team B.V.
ISS Arbo Plus B.V.
. ISS Building Maintenance Services B.V.
ISS Catering Services B.V.
ISS Contact Centers B.V.
ISS Food Hygiene B.V.
ISS Holding Nederland B.V.
ISS Hospital Services B.V.
ISS Hygiene Services B.V.
ISS Integrated Facility Services B.V.
ISS Landscaping Services B.V.
ISS Nederland B.V.
1S5 Reception Services B.V.
ISS Security & Services B.V.
Omring Thuisservice B.V.
SureeCalls B.V.
TalentGroep Montaigne Facility Management B.V.
New Zealand
Basecare Ltd.
First Security Guard Services 2008 Ltd.
ISS Facilities Services Ltd.
ISS Holdings NZ Ltd.
Norway
ForvaltningsCompagniet AS
Hero Holding AS
Human Ressource Center AS
IPEC Kristiansand AS
ISS Facility Services AS
ISS Holding AS
ISS Industri AS
ISS Personalhuset AS
ISS Serveringspartner AS
NSB Trafikkservice AS
Personellsikring AS
Raufoss Beredskap AS
Reaktorskolen AS
Smartkost AS
Varig Gruppen AS
Philippines
ISS Facility Services Phils., Inc.
Poland
ISS Facility Services Sp. Zz.0.0.
Gastropol Group $p. 2.0.0.
Portugal
ISS Facility Services, Lda
ISS FS Acores, Lda
ISS Human Resources, Lda.
ISS Pest Control, Lda.
ISS Plantiagro, Lda.
ISS Portugal il, Lda.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%”
100%
100%
100%
100%
100%
100%
100%
50%”
100%
100%
100%
100%
100%
100%
100%
45%=+
100%
51%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
continues
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
Romania
3D Romania S.A.
ISS Facility Services S.R.L.
ISS Romania Group S.R.L.
Russia |.
Facility Services RUS LLC
Singapore
Inbuilt Engineering Pte Ltd.
ISS Facility Services Pte Ltd.
ISS Hydroculture Pte Ltd.
ISS Landscaping Pte Ltd.
ISS Pest Management Pte. Ltd.
ISS Sanitation Services Pte Ltd.
ISS-CDCS Catering Pte Ltd.
””TSS-Woko Catering Pte Ltd.
Serve Ist Services Pte Ltd.
Slovakia
ISS Aviation Slovakia spol s.r.o.
ISS Facility Services spol s.r.o.
ISS Security spol s.r.o.
Ryvola Slovakia spol s.r.o.
Slovenia
ISS Facility Services d.0.0.
Magnetik d.0.0.
Spain
Activa Contrabalx, S.L.
Centro de Actividades Formativas y Educacionales S.L.
Extintores Balear, S.L.
Fabri Facility Management, S.L.
Gelim $.A.
Gelim Valencia S.A.
Gelim Asturias 5.A.
Gelim Madrid S.A.
Gelim Baleares S.A.
Integrated Service Solutions, S.L.
Inser Systems S.L.
ISS Facility Services S.A.
ISS Higiene Ambiental 3D S.A.
ISS Logistica Produccidn y Outsourcing, S.L.
ISS Salud y Servicios Sociosanitarios S.A.
ISS Serv. Auxiliares y Complem. de Oficinas $.A.
ISS Soluciones de Catering, 5.A.
ISS Soluciones de Jardineria S.A.
ISS Soluciones de Mantenimiento Gestidn Integral S.L.
ISS Soluciones de Seguridad, S.L.
Rocha Vending, S.L.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Sri Lanka
ISS Abans Environmental Services (PT) Ltd.
Sweden
GK Rengårarna AB
ISS Demogruppen AB
ISS Ekonomiføårvaltning AB
ISS Facility Services AB
ISS Facility Services Holding AB
ISS Industriservice AB
ISS Lemonia AB
ISS Mayday AB
ISS Palvelut Holding AB
ISS Teleoffice AB
ISS Terrakultur AB
ISS TraffiCare AB
Switzerland
Erwin Jakober AG
ISS Aviation AG
ISS Bernasconi SA
ISS Facility Services (Liechtenstein) AG
ISS Facility Services AG
ISS FM Services AG
ISS Holding AG
ISS Pest Control AG
ISS Schweiz AG
Jakober AG
Jakober Transporte und Kanalreinigungs AG
Notter Kanalser