Assets

Type	Time	Amount	Unit

Revenue

Type	Start date	End date	Amount	Unit

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KEY FIGURES

 

 

 

 

 

 

 

 

| Amount:s in DKK million (unless otherwise stated) 2009 2008 2007 2006 2005 =| :
Revenue - ' 69,004 68,829 63,922 55,772 31,741
Operating profit before other items 3,874 4,061 3,835 3,234 1,932
Operating margin before other items, % 5.6 5.9 6.0 5.8 6.1
EBITDA » 4,145 4,622 4,484 3,764 1,979
Adjusted EBITDA ”: 2 4,742 4,930 4,680 3,979 2,383
Operating profit ” . 3,277 3,753 3,639 3,019 1,528
Net finance costs . (2,308) (2,731) (3,017) (2,351) (1,721)
Profit before goodwill impairment/amortisation
of brands and customer contracts 385 494 376 226 (410)

Net profit/(loss) for the year ” (1,629) (631) (442) (809) (945)
Additions to property, plant and equipment, gross 954 964 938 907 576
Cash flow from operating activities 3,732 4,334 3,713 3,195 2,109
Investments in intangible assets, property, plant and equipment, net (897) (718) (715) (843) (372)
Total assets 54,354 53,605 55,348 52,253 46,456
Goodwill 27,434 27,259 27,593 26,178 22,995
Carrying amount of net debt ” 30,630 29,385 29,245 26,271 22,741
Total equity ? 2,213 3,533 5,518 5,980 6,774 .
Financial ratios ”

Interest coverage 2.1 1.8 1.6 1.7 1.4
Cash conversion, % 96 103 99 102 145
Employees on fuli-time, % 71 69 68 66 61
Number of employees at 31 December 485,800  472,800  438,100  391,400 310,800 ;
Growth

Organic growth, % 0.6 5.3 6.0 5.5 -
Acquisitions, net, % 2 6 9 15 -
Total revenue, % 3 8 15 20 -
Currency adjustments, % (3) (3) (0) 0 -
Other Financial Measures 9

Pro Forma Adjusted EBITDA 4,773 5,064 4,866 4,203

Pro Forma Net Debt … 31,261 29,978 29,981 27,714

Pro Forma Net Debt / Pro Forma EBITDA 6.55x 5.92x 6.16x 6.59x

Note: Except for the key figures that can be directly derived from the consolidated financial statements on pages 49-118 of this report, the key figures and ratios above are not measures
of financial performance under Danish GAAP or IFRS. The Group includes these financia) measures because it believes that they are appropriate measures of the Group's financial perform-
ance. Other companies, including those in 155's industry, may calculate similarly titled financial measures differently.

» ISS Holding A/S was founded on 11 March 2005, while the activities of 1$$ 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.

” See page 135 for definitions.

»” 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 EBITDOA 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.

B Excluding Goodwill impairment and write-down and Amortisation of brands and customer contratcs.

1 Including Minority interests.

% The Pro Forma adjusted financial information is for informational purposes only. See page 137, Capital Structure, for further information on Other Financial Measures.

 

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ISS AT A GLANCE

ISS IS ONE OF THE WORLD'S LARGEST COMMERCIAL PROVIDERS OF FACILITY SERVICES, OPERATING
IN OVER 50 COUNTRIES IN EUROPE, ASIA, PACIFIC, NORTH AMERICA AND LATIN AMERICA. ISS HAS A
DIVERSE CUSTOMER BASE THAT IS ESTIMATED TO INCLUDE MORE THAN 200,000 PUBLIC AND PRIVATE

SECTOR CUSTOMERS.

ISS is among the world's largest private employers,
the vast majority of its more than 485,000 employ-
ees are in the front-line delivery of services.

Through a network of local operations, ISS offers
Facility Services on an international scale, leverag-
ing knowledge and experience between countries
for the benefit of its customers. It is ISS's ambi-
tion 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 services within Clean-
ing, Support Services, Property Services, Catering,
Security and Facility Management.

The services are delivered as Single Services, Multi
Services or as an Integrated Facility Services (IFS) so-
lution with on-site management through a single
point of contact with the customer.

Organisation

ISS's head office is located in Copenhagen, Den-
mark. ISS maintains a decentralised organisational
structure under which its country operations are
separately organised and act with a significant
amount of autonomy, assisted by a strong regional
management structure providing strategic direc-
tion, managerial support and financial control. This
structure makes the organisation more responsive
to market conditions while at the same time foster-
ing an entrepreneurial culture within ISS.

 

Qwnership

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. Ole Andersen is
Chairman of the Board and Jørgen Lindegaard is
Group Chief Executive Officer.

History

ISS has operated in the service industry for more
than a hundred years. The ISS Group was founded
as a small Danish security company in 1901 and be-
gan offering cleaning services in 1934. Selected key
milestones of the Group's history are listed oppo-
site.

Vision
ISS has a strong position in the global Facility Ser-

vices market. To maintain this position, ISS contin-
ues 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-Fred-
eriksberg 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 SS name

Overseas expansion started

Group revenue reached DKK 1 billion

[SS shares listed on the Copenhagen Støck Exchange

The total number of employees in the Group reached
100,000

Strategy ”aim2002” was 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 2009

 

CLEANING 52%
CATERING 9%
PROPERTY SERVICES 21%

Q OQ Om

SUPPORT SERVICES 7%
SECURITY 7%

El FACILITY MANAGEMENT 4%

2000

2003

2005

2006

2007

2008

A new five-year strategy ”creat22005" was launched,
introducing 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. ISS's largest
ever international Integrated Facility Services contract
was signed

ANNUAL REPORT 2009
ISS HOLDING A/S

age:
men ED 2,700 customers in Indonesia.
Miley ye Hul torsrr ndonesia is now the largest ISS organisa-

tion. it is also one of them isations with a compound-
(TORE: rganic growth mrs is why Indonesia

ME — RRRERRE in ISS and we expect continued growth
and success from our colleagues in Asia.

 

ESTEFANIA ALVAREZ

FLS NEINEN

sg — —- ——— -Our-history-with-IBM.in- Argentina.d j
was a service agreement for two BEER mm SEEST mu
e ars, and today we provide a fu contract to IBM in
Argentina. After 24 years of an RS UYTaalet: VT TOR TES
time, on-site ISS employees on nine dittféren Kida Sel ladt FRE NOTE ES

RR meters and attending to the requirements of
UFL employees.

 

CONTENTS

KEY FIGURES
ISS AT A GLANCE
LETTER TO OUR STAKEHOLDERS
MANAGEMENT'S REVIEW

COUNTRY OVERVIEW

FINANCIAL REVIEW

STRATEGY - THE ISS WAY

CORPORATE GOVERNANCE

BOARD OF DIRECTORS

EXECUTIVE MANAGEMENT

GROUP MANAGEMENT
MANAGEMENT STATEMENT
INDEPENDENT AUDITOR'S REPORT
CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
DEFINITIONS
CAPITAL STRUCTURE
COUNTRY ADDRESSES

ISS GROUP & SERVICES

AMNUAL RE

COVER

COVER

17

20

27

36

42

43

44

46

47

49

135

137

142

144

ORT 2099 -3

   
   
  
   

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is a Dutch insurance company and fin

ntract ISS won in the Netherlands was FLE g LE = oyd
(Jug JN i i

: Jar- TØS VÆPÆTEER
emplovees delive ran

LETTER TO OUR STAKEHOLDERS

The financial instability and global recession in 2009 affec-
ted our customers and consequently ISS. However, operating
in such conditions has confirmed the robustness of our stra-
tegy and business model. ISS demonstrated its resilience and
ended 2009 with a solid financial performance, successful
refinancing and a stronger business that is ready for new
growth. Our strategy The ISS Way has outlined a sustainable
path for the future in which ISS is the leading global Facility
Services provider.

The ISS business model, based on our clear customer focus
and local management, generated solid performances in
most of the more than 50 ISS countries around the globe
and is being further strengthened through implementation
of The ISS Way strategy.

After years of building our business platform through acqui-
sitions, The (SS Way focuses on extracting the full value from
our existing platform. Key words in our strategy are there-
fore: focus, alignment, excellence centres, best practices and
knowledge sharing.

ISS's strategy strengthens sales by clearly defining custom-
er segments, services and geographies, and by specifying
how best to compete through concentrating resources and
consolidating market positions. For example, in 2009, ISS's
Corporate Client organisation signed two new international
IFS contracts with EDS and Shell. Winning these contracts
confirms the Group's successful pursuit of its vision to be the
leading global Facility Services provider.

Considering the economic turmoil, ISS performed well
against its key operational objectives. Total Group revenue
reached DKK 69 billion, up 3% excluding foreign exchange
adjustments. The operating margin before other items
amounted to 5.6% and in Q3 and Q4 was restored to the
levels realised in the same periods in 2008. Organic growth
was 0.6% with four of the seven regions recording posi-
tive organic growth in 2009. We have reduced the number
of debtor days by more than one day and achieved a solid
cash conversion rate of 96%, which underlines that ISS has a
strong and stable cash generation.

The decline in operating margin was recorded mainly in
countries most exposed to industrial segments (e.g. auto-
motive and manufacturing), particularly in France, Germany,
Belgium and Spain. Consequently, corrective actions to im-
prove our operating performance have been initiated, and
in 2009, ISS implemented a fixed cost reduction programme
across the entire Group.

We achieved an important milestone in July 2009 when we
refinanced EUR 500 million of the 2010 EMTNs by issuing
new Senior Notes due in 2014. A receivables backed securiti-
sation programme has also been launched to refinance the
remaining 2010 EMTNs.

Despite customers downsizing existing contracts, our port-
folio-based business continued its satisfactory organic
growth due to a satisfactory customer retention rate and
cross selling of services. This confirms the strategic direction
in The ISS Way strategy, which is focused mainly on delivery
of recurring services, i.e. portfolio-based services. Our non-
portfolio-based business was particularly hard hit, including
project work in the construction business, where economic
unrest caused customer demand to drop significantly.

ISS is one of the world's ten largest private employers, with in
excess of 485,000 employees in more than 50 countries, ser-
ving an estimated 200,000 public and private-sector custom-
ers. Implementing an ambitious strategy such as The ISS
Way and developing a people business of ISS's size requires
strong management. In 2009, we therefore developed new
leadership principles that put customers first and help us re-
alise our employees' full potential. We express our gratitude
to all our employees for their dedicated work, which is the
main reason for our successful performance.

The future composition of the Executive Group Manage-
ment will change as Jørgen Lindegaard, will step down as
Group CEO at the end of March 2010 and join the Board
of Directors. The Board wishes to thank Jørgen for his sig-
nificant and valuable contribution to ISS. Jørgen will be suc-
ceeded by the current Group COO, Jeff Gravenhorst.

Yours faithfully,

 

Ole Andersen
Chairman

Jørgen Lindegaard
Group Chief Executive Officer

ANNUAL REPORT 2009 -5

US3 (ls! oenix, År the bul

g
opening in 1992. With 0: min in attendance evcry year, the
20,000 seat arena is home to x Suns and a variety of sports,
oa ele are tal US: STER vent Services maintains the cleaning,

conversion (changeover from REN post-game clean-up as
well as the porter services for the entire Taaility including the luxury suite levels.

 

MANAGEMENT'S REVIEW

BUSINESS HIGHLIGHTS OF THE YEAR

2009 was a year marked by the challenges resulting from
the global recession, which proved the robustness of the ISS
business model and the strategic course as set out in "The
ISS Way” strategy introduced in 2008.

Considering the turbulence in the financial markets and
the severe economic challenges in the global economy ex-
perienced in 2009, ISS's performance remained sound. ISS
focuses on running the facility services for our chosen seg-
ments, thereby enabling our customers to focus on their
core business. This entails offering a range of business sup-
port services within Cleaning, Support Services, Property
Services, Catering, Security and Facility Management, which
can be delivered as a Single-Service, Multi-Service or an in-
tegrated service solution (Integrated Facility Services or IFS).
These recurring facility services where ISS employees form
an integrated part of our customers' daily operations are in
ISS classified as portfolio-based services. In addition, ISS also
provides project related and other once-only services, such
as event catering, construction-based landscaping and con-
sulting work in relation to construction of buildings. These
non-recurring services are in ISS classified as non-portfolio-
based services.

ISS's focus on portfalio-based services ensured that revenue
remained at the level realised in 2008 offsetting the decline
in the non-portfolio-based services which were hit hard in
2009. The operating margin before other items (referred to
as the operating margin) decreased slightly compared with
2008. 2009 was characterised by a relentless focus on cross
selling of services, defending margins and implementing ex-
tensive turnaround plans and cost-saving initiatives. These

efforts ensured that four of the seven ISS regions delivered -

operating margins in 2009 that exceeded the level realised
in 2008.

Businesses within ISS which were most exposed to non-port-
folio-based services and/or to the industrial segments (e.g.
automotive and manufacturing) experienced slowdowns,
especially France, Germany, Belgium and Spain were among
the hardest impacted countries.

The ISS Way continues to focus on customer needs and to drive
the development and delivery of the needed services, includ-
ing Integrated Facility Services, This development is based on
knowledge and best practice sharing thereby ensuring ef-
ficiencies. The ISS Way encourages targeting customer seg-
ments, services and geographies that benefit from ISS's value
proposition. It also promotes loyalty to our core values and
extracts more value from the business platform by harvest-
ing the benefits of standardisation across the organisation.
As part of this process certain non-core activities were either
divested in 2009 or are planned for divestment in 2010.

In the countries most significantly impacted by the economic
slow down, corrective actions were taken to adapt to the
conditions and improve operating performance, including
implementing turnaround plans for affected service types
and adaptating the cost structure. in addition, ISS initiated
a Group-wide cost reduction initiative targeting fixed costs,
which complements the ongoing and country-specific turn-
around plans. The impact of the actions was evident in the
second half of 2009 and was an important reason for restor-
ing the operating margin in Q3 and Q4 to the levels realised
in the same periods in 2008.

In 2009, though ISS experienced a decline in its non-port-
folio-based business, its portfolio-based business continued to

PERFORMANCE HIGHLIGHTS

> Revenue growth in the continuing business was 4% at constant
exchange rates. Adverse foreign exchange adjustments and di-
vestments reduced the growth to 0%

> Operating margin before other items was 5.6% in 2009

Cash conversion was maintained at a high level of 96% in 2009

>. Number of employees surpassed 485,000, making ISS one of the
world's ten largest private employers

V

MAMAGENENT'S REVIEW | ANNUAL REPORT 2099 -7

grow organically, despite some customers downsizing exist-
ing contracts. The increase in the portfolio-based business
underlines the increasing demand for integrated facility ser-
vices on a local, regional and international basis and confirms
ISS's strategic choice to focus on portfolio-based services.

In 2009, total Group revenue amounted to DKK 69.0 billion,
up 3%, excluding foreign exchange adjustments, compared
with 2008. The organic growth for the year was 0.6%, down
from 5.3% in 2008. Four of the seven regions delivered posi-
tive organic growth rates in 2009, with Asia and Latin Ameri-
ca once again achieving double-digit organic growth rates.

ISS's continued focus on cash flow resulted in a reduction of
1.4 debtor days compared with 2008 and a strong cash con-
version of 96%, which underlines that ISS has a strong and
stable cash generation.

Operating profit before other items amounted to DKK 3,874
million in 2009, representing a decrease of 2%, excluding
foreign exchange adjustments, compared with 2008. The
operating margin for 2009 amounted to 5.6%, down by
0.3 percentage point compared with last year. While many
countries delivered operating margins in line with or above
the level realised in 2008, this could not off-set the perform-
ance in certain countries in Western Europe that were par-
ticularly impacted by the economic slowdown.

Net loss amounted to a loss of DKK 1,629 million and was
negatively impacted by certain non-cash expenses. When
adjusted for the effect of the following non-cash items, ISS's
adjusted net result amounted to approximately DKK 88 mil-
lion. Firstly, the net of tax effect of approximately DKK 1,216
million related to goodwill impairment and write-downs.

2009 REVENUE BY REGIONS

MH NORDIC 24%

u

WESTERN EUROPE 56%
EASTERN EUROPE 2%
ASIA 6%

LATIN AMERICA 3%
NORTH AMERICA 4%

EH 0 O OC

PACIFIC 5%

 

8 - ANNUAL REPORT 2609 i MANAGEMENT'S REYES

Secondly, approximately DKK 391 million, net of tax, arising
from amortisation and write-down of customer contracts
recognised at the time of the acquisition of ISS A/S in May
2005. Finally, non-cash accounting losses and amortisation
related to the 2010 and 2014 EMTNs of approximately DKK
110 million, net of tax. Furthermore, the adjusted net result
of DKK 88 million includes expenses of DKK 426 million re-
lated to restructuring projects, comprising mainiy closure of
certain parts of business units or divisions as well as changes
in the organisational setup and other efficiency improve-
ments.

France suffered most in 2009, due mainly to its high expo-
sure to the industrial and manufacturing segments as well
as a relatively high part of non-portfolio-based business par-
ticular within the landscaping business, but also due to the
organisational setup of ISS in France, which was not aligned
according to The ISS Way strategy. Revenue declined from
DKK 9.3 billion in 2008 to DKK 8.39 billion in 2009, while the
operating profit before other items dropped by DKK 233 mil-
lion or 41%. As a result, the operating margin declined from
6.1% in 2008 to 3.8% in 2009. This implies, that if France had
delivered the same operating margin as in 2008, the opera-
ting margin for the Group would have been 5.9%, or the
same level as in 2008. Several actions were taken in 2009 to
turn around the operations in France, including the appoint-
ment of a new regional management team, a new local man-
agement team, a reorganised organisational setup covering
several business units as well as head office, and planned di-
vestments of non-core business activities. While a turnaround
of an operation the size of ISS in France will take time, these
initiatives and the devoted attention from both the Group
and regional management teams during 2009 will help en-
suring that ISS in France strengthens its performance.

In July 2009, ISS successfully issued EUR 525 million of new
Senior Notes due in 2014 (the ”Notes”). The Notes were issued
through ISS Financing Pic, a newly formed special purpose
vehicle. EUR 500 million of the proceeds was used to settle
part of the EUR 850 million Medium Term Notes due to ma-
ture in September 2010 (the "2010 EMTNs”) plus accrued in-
terest. The remaining part of the 2010 EMTNs is expected to
be settled via a receivables-backed securitisation programme
that was launched in five countries in 2009 and will continue
to be rolled out to additional countries in 2010.

The global Corporate Client organisation followed up on the
HP contract win in 2008 by entering into two new interna-
tional IFS contracts with EDS, a global IT company, and Shell.
The contract with EDS covers 28 countries in Europe, Middle
East, Asia, Pacific and Africa. The Shell contract covers Facility
Management and substantial self-delivery functions in eight
countries in Asia and Pacific covering up to 33 million square
metres. These contract wins confirm ISS's strategic direction,
as a number of global customers perceive ISS as one of the
only companies that can deliver services in an integrated way
globally. The focus on iFS contracts with large multinational or
globalt clients is fully in line with our corporate vision of being
the leading global Facility Services provider.

Atthe end of the year, ISS had more than 485,000 employees
worldwide. Therefore, since year-end 2008, a net increase of
roughly 13,000 employees joined the company as a result of
either organic growth or through acquisitions.

2009 REVENUE NORDIC

DENMARK 23%
FINLAND 22%
NORWAY 32%
SWEDEN 22%

Em O CO OM

OTHER 1%

 

 

REGIONAL DEVELOPMENT

The ”1SS world” consists of seven regions: Nordic, Western
Europe, Eastern Europe, Asia, Latin America, North America
and Pacific. The key principle for the regional grouping is
that those operations share market conditions and culture
to the largest possible extent. The grouping also reflects the
differences between developed regions and emerging re-
gions.

Nordic

The Nordic region, comprising Denmark, Finland, Green-
land, Iceland, Norway and Sweden, is among the most de-
veloped. ISS is the leader within the facility services market
throughout the region.

In early 2009, the Nordic region launched a strategy fo-
cused on growing organically through service delivery in
individual countries combined with sales of services across
the region. A Nordic sales organisation was established that
going forward will focus mainly on large complex custom-
ers within certain segMments in the Nordic region. The aim
is to match customers” geographical footprints and deliver
services across borders. In addition, the strategy focuses on
improving efficiency through increased standardisation and
harmonisation. During the year, the region has also re-evalu-
ated its service capabilities in light of The ISS Way strate-
gy and as a result will be considering if further capabilities
should be acquired, divested or grown organically.

In 2009, revenue in the Nordic region grew organically by
1% with Sweden and Finland contributing most. Despite
the positive organic growth, revenue decreased by 4% from
DKK 17,071 million in 2008 to DKK 16,367 million in 2009

2009 REVENUE WESTERN EUROPE

AUSTRIA 4%
BELGIUM 8%
FRANCE 23%
GERMANY 6%
ISRAEL 4%
NETHERLANDS 9%
SPAIN 12%
SWITZERLAND 7%
TURKEY 4%
UNITED KINGDOM 18%
OTHER 5%

BOSOSOOQOOODOO BE

g

D i.

NAMNAGEMEMT'S REVJEGY £ ANNUAL REPORT 2099 . 9

due mainly to currency adjustments which reduced revenue
for the region by approximately 4%, and stemmed mainly
from depreciation of NOK and SEK against DKK. Further-
more, acquisitions, net, decreased revenue by 1% following
the divestment of certain non-core business units.

Operating profit before other items in the Nordic region
increased to DKK 1,219 million from DKK 1,189 million in
2008. The operating margin in the region increased to 7.4%
in 2009, compared with 7.0% in 2008. This was due main-
ly to operating margin increases in Norway, Denmark and
Finland that were partly offset by slight margin decreases
in Sweden and Iceland. This was due primarily to a strong
response to the economic downturn, including adaptation
of cost structures, an increased focus on customer retention
and the divestment of certain non-core business units.

Western Europe

The Western European region comprises Austria, Belgium &
Luxembourg, France, Germany, Greece, Ireland, Israel, Italy,
the Netherlands, Portugal, Spain, Switzeriand, Turkey and
the United Kingdom.

The markets included in the Western European region are
generally characterised as developed markets, and the re-
gion has been able to partly offset the economic downturn
experienced in certain countries by focusing more clearly on
implementing The ISS Way strategy. This includes increased
attention to the commercial and sales pianning process and
fully utilising our strong delivery model to ensure that the
operational processes and concepts are in place to support
our chosen customer segments.

In 2009, revenue in the Western European region decreased
by 2% from DKK 39,337 million in 2008 to DKK 38,632 mil-
lion. Organic growth was negative by 1%, while currency
adjustments reduced revenue for the region by approxi-
mately 3%, and stemmed mainly from depreciation of GBP
against DKK. Acquisitions, net, increased revenue by ap-
proximately 2%. The organic growth rates decreased as a
number of countries in the region are exposed to the indu-
strial segments (e.g. automotive and manufacturing) which
were negatively impacted by the global economic slow
down. This resulted in some customers downsizing certain
portfolio-based services as well as a significant drop in non-
portfolio based services such as projects and once-only jobs
within the construction-based industries (e.g. construction
of buildings and grounds). The main contributors, France,
Spain, Austria and the Netherlands, all realised negative or-
ganic growth rates. This negative effect was partly offset by
Turkey, Greece and Italy all delivering double-digit organic
growth rates.

10 - ANNUAL REPORT 2009 | MANAGEMEMT'S REVIEW

Operating profit before other items in Western Europe
amounted to DKK 2,056 million in 2009, down from DKK
2,356 million in 2008. The operating margin of 5.3% was 0.7
percentage-point lower compared with 2008. The decline in
operating margin was due primarily to France and partly due
to Germany and Spain. In France the operating margin de-
creased from 6.1% in 2008 to 3.8% in 2009, leading to a DKK
233 million decline in operating profit. In France, as well as
a number of other countries in the region, ISS is negatively
impacted by the global economic slowdown which especial-
ly impacted the European industrial segments in particular
(e.g. automotive and manufacturing) as well as reduced the
demand for non-portfolio-based services. This reduced ISS's
revenue and operating profit in countries with significant
exposure to these industries. As a consequence of the per-
formance gaps, turnaround plans were initiated to increase
efficiencies and restore profitability. Organisational setups
and business processes were changed, headcount reduced to
adjust to the lower customer demand and non-core business
units were divested. Finally, ISS has continuously adapted the
cost structure in the affected countries to suit the changed
market conditions. Despite the economic downturn, Israel,
the Netherlands, Switzerland, Portugal, Italy and the United
Kingdom all realised higher margins than in 2008.

Eastern Europe
The Eastern European region comprises Croatia, the Czech
Republic, Estonia, Hungary, Poland, Romania, Russia, Slova-
kia and Slovenia.

The Eastern European region, which has delivered double
digit growth rates during previous years, experienced nega-
tive organic growth of 2% in 2009 caused by a strong eco-
nomic recession climate throughout the region. The major-
ity of the decline can be attributed to a substantial decrease
in demand for non-portfolio services such as projects and
once-only jobs, whereas the portfolio business declined only
slightly. In 2009, our focus was on strict contract manage-
ment in response to many customers requesting reduced
prices and scope of services. The consolidation and transfor-
mation of ISS's business platform and services in the Eastern
European region were also stepped up substantially in line
with the ISS Way strategy to ensure a strong basis for future
growth.

Revenue in Eastern Europe decreased by 6% to DKK 1,561
million in 2009. Organic growth was negative by 2%, and
stemmed mainly from the Czech Republic, Slovakia and Slov-
enia. This was partly offset by double digit organic growth
rates in Romania and Poland. Currency adjustments reduced
revenue for the region by approximately 6%, as a result of
depreciation of several Eastern European currencies com-

pared with DKK. Acquisitions, net, increased revenue by ap-
proximately 2%.

Operating profit before other items in Eastern Europe de-
creased by 15% to DKK 106 million in 2009. The operating
margin was 6.8% in 2009, 0.6 percentage point lower than
in 2008. This was due mainly to operating margin decreases
in Slovakia, the Czech Republic, Slovenia and Hungary where
ISS has been negatively impacted by the effect of the gene-
ral sowdown in the Eastern European economies, which has
caused demand for non-portfolio services in particular to
decline.

Asia

The Asian region comprises Brunei, China, Hong Kong, In-
dia, Indonesia, Japan, Malaysia, the Philippines, Singapore,
Taiwan and Thailand.

Asia is the fastest-growing region in the ISS Group. Hong
Kong and Singapore account for over 50% of the region's
revenue. Double-digit organic growth in the region secured
ISS a stronger market share and targeted acquisitions ex-
panded the service offering in these countries. In 2009, six
acquisitions were completed, adding competencies within
catering, security and pest control services.

Revenue in Asia increased by 31% from DKK 3,147 million in
2008 to DKK 4,120 million in 2009. The increase was driven
by organic growth of 15% and acquisition-driven growth of
13% as well as a positive impact of 3% from currency ad-
justments. All countries in the region, except the Philippines
and Malaysia, contributed to the organic growth. Indonesia,
Hong Kong, Singapore, Taiwan, India and Brunei all deliver-
ed double-digit organic growth rates.

Operating profit before other items in Asia increased by
47% to DKK 308 million in 2009 compared with DKK 210
million in 2008. The operating margin increased to 7.5%
compared with 6.7% in 2008. All countries in the region,
with the exception of the Philippines, Thailand, Taiwan and
Malaysia generated higher margins than in 2008.

Latin America
The Latin American region comprises Argentina, Brazil,
Chile, Mexico and Uruguay.

" ISS has a geographical presence in the region, which is well
suited for exploiting the growth potential that categorises
Latin America as one of the world's emerging markets. The
market for complex Multi-Service and IFS solutions in Latin
America is growing, and ISS continued to focus on consoli-
dating and expanding its service mix and especially FM capa-

bilities to drive the request for service delivery through FS.

Revenue in Latin America increased by 10% from DKK 1,890
million in 2008 to DKK 2,077 million in 2009. Organic growth
was 12% and growth from acquisitions, net, amounted to
5%. All countries in the region delivered double-digit orga-
nic growth rates except for Brazil. Currency adjustments de-
creased the region's revenue by approximately 7%.

Operating profit before other items in Latin America in-
creased by 20% to DKK 131 million in 2009. The operating
margin was 6.3%, compared with 5.8% in 2008. All coun-
tries in the region realised higher year-on-year operating
margins in 2009.

North America

The North American region comprises the USA, which ISS
entered in 2007, and Canada which ISS entered through a
greenfield establishment in 2009 via its US operations.

Outsourcing of facility services is already well accepted by
US corporations. Through two acquisitions in the USA, ISS
has achieved good geographical coverage in several of the
economical growth areas and is continuing to focus on en-
hancing its geographical footprint to grow the business and
gain critical mass where it has yet to be achieved. Further-
more, IFS sales represent a significant opportunity for ISS,
and a dedicated team is now in place to capitalise on the
market opportunities.

Revenue in North America increased by 18% to DKK 2,515
million in 2009, with growth from acquisitions contributing
13% that related primarily to the acquisition of BGM Indu-
stries in April 2008, which added approximately DKK 510
million in annual revenue. Currency adjustments increased
revenue from the region by approximately 5%. Organic
growth was negative by 1%.

Operating profit before other items in North America
amounted to DKK 134 million in 2009 compared with DKK
128 million in 2008. The operating margin in 2009 was 5.3%
compared with 6.0% in 2008, a decrease caused mainly by
lower demand for non-portfolio services.

Pacific
The Pacific region comprises Australia, which ISS entered
in 2002 and New Zealand, which ISS entered in 2005. ISS
in Australia delivers more than 90% of the revenue in this
region.

2009 was a year of consolidation and alignment with a fo-
cus on margin improvement, acquisition integration and re-

MANAGEIMEMT 5 REVIEW | ANNUAL REPORT 2908 - 91

gionalisation projects in the Pacific region. In Australia, ISS
won a number of important contracts that form a platform
for growth in 2010. Furthermore, ISS implemented a region-
alisation project to increase service efficiency and create a
more customer-oriented operation, as this will ensure that
it sells and delivers IFS locally in the states and territories of
Australia. In New Zealand, ISS spent 2009 fully integrating
the acquired manned guarding and mobile patrolling activi-
ties acquired from Chubb in December 2008, and has now
secured a nationwide coverage in the security market.

Revenue in the Pacific region increased by 4% from DKK
3,614 million in 2008 to DKK 3,768 million in 2009. This
growth was driven primarily by 6% growth from acquisi-
tions. Organic growth was 0%, while currency adjustments
reduced revenue by approximately 2%.

Operating profit before other items in the Pacific region
amounted to DKK 259 million in 2009 compared with DKK
230 million in 2008. The region's operating margin amount-
ed to 6.9% in 2009 compared with 6.4% in 2008, in line with
expectations.

BUSINESS DEVELOPMENT IN 2009

During 2009, in line with The ISS Way strategy, ISS enhanced
its response to customer needs and targeted customer seg-
ments that are most receptive to !5SS's value propositions. ISS
also focused on securing service excellence in suitable services
that are most relevant for integration and thereby consistent
with ISS's IFS strategy.

DEVELOPMENT IN REVENUE BY SERVICE

2009

CLEANING 52%
CATERING 9%
PROPERTY SERVICES 21%

U 0 cd oa

SUPPORT SERVICES 7%

SECURITY 7%

Lu

 

12 - ANNUAL REPORT 2099 | MANAGENENT'S REVIEW

EH FACIUTY MANAGEMENT 4%

 

Cleaning

ISS's Cleaning offering encompasses a range of services with-
in daily office cleaning, hospital cleaning, food hygiene, in-
dustrial cleaning, cleaning in transport systems, dust control,
washroom services and specialised cleaning e.g. of windows,
communication equipment etc.

In 2009, Cleaning remained ISS's largest business area, re-
presenting 52% of total Group revenue, or DKK 36.0 billion
compared with 53% in 2008. In line with the strategy to
broaden the service platform, Cleaning's relative share of
ISS's total revenue was continuously diluted, while the re-
venue share from Catering and Security in particular con-
tinued to increase. In 2009, Cleaning, which is characterised
by recurring portfolio-based services, was impacted by re-
ductions in volume on contracts, price pressure and low in-
cremental spendings by customers. This negative effect was
offset by increased efficiency on contracts and cross-selling
of other services to existing customers.

Property Services

ISS's Property Services offering encompasses building main-
tenance, technical maintenance, landscaping, pest control
and damage control.

In 2009, revenue from Property Services amounted to DKK
14,5 billion, representing 21% of total Group revenue com-
pared with 23% in 2008. In 2009, Property Services which
encompasses non-portfolio-based services was negatively
impacted by the downturn in the construction-based indus-
tries (e.g. building and grounds construction) leading to few-
er building installation projects and landscaping projects.

2008

CLEANING 53%
CATERING 8%
PROPERTY SERVICES 23%

JO 0 0 OC

SUPPORT SERVICES 6%
SECURITY 6%

4

EH FACILITY MANAGEMENT 4%

Support Services

ISS's Support Services offering encompasses the operation
of receptions, internal mail handling, scanning and other
office logistics, call centres, manpower supply and outplace-
ment services.

In 2009, Support Services accounted for approximately 7%
of total Group revenue, up 1 percentage point compared
with 2008. In absolute figures, revenue in Support Services
increased from DKK 4.1 billion in 2008 to DKK 5.0 billion in
2009. In 2009, Support Services was positively impacted by
higher demand for outplacement services and cross selling
of services to mainly Cleaning customers offset by lower de-
mand for manpower supply services.

Catering

ISS's Catering offering includes in-house restaurants, cater-
ing services e.g. for meetings and events, executive dining
and coffee solutions.

Catering accounted for about 9% of total Group revenue
in 2009, or DKK 6.2 billion, up by DKK 0.5 billion or 1 per-
centage point compared with last year. In 2009, Catering
was positively impacted by completion of three acquisitions
within Catering in Asia which added approximately DKK 0.1
billion in annual revenue as well as the full year effect of ac-
quisitions within Catering completed in 2008. Furthermore,
cross selling of Catering services to existing customers had a
positive effect on revenue in 2009 while revenue from non-
portfolio-based services within Catering (e.g. event cater-
ing) was negatively impacted by the downturn in the global
economy.

Security
ISS's Security offering includes primarily manned guarding,
access control and patrolling.

Annual revenue amounted to DKK 4.7 billion, equivalent to
7% of total revenue in 2009, 1 percentage point up from
2008. ISS's service offering within Security was strength-
ened in 2009 through six acquisitions spanning five coun-
tries, which added approximately DKK 0.4 billion in annual
revenue.

Facility Management (FM)

ISS's Facility Management offering includes on-site manage-
ment of facility services, change management, space man-
agement and consulting.

In 2009, Facility Management generated revenue of DKK 2.6
billion, equivalent to 4% of total revenue, the same relative
share as the year before.

ACQUISITIONS

Following several years with a high number of acquisitions,
ISS has the strategically required representation in services
and geographies and therefore slowed down the pace of
acquisitions in 2009. Instead, ISS increased its focus on in-
tegrating acquired companies and harvesting synergies and
decided not to extend or renew its acquisition facilities,
which expired in May 2009.

The acquisition activities had three primary objectives in
2009: firstly to expand ISS's presence in emerging markets,
secondly to continue building up the Security services plat-
form, and thirdly to gain critical mass in the USA. During
2009, ISS completed 22 acquisitions spanning 15 countries.
Five of these acquisitions had annualised revenue of more
than DKK 100 million. With the acquisitions, ISS gained an-
nualised revenue of approximately DKK 1 billion and more
than 14,000 employees.

The acquisitions completed in 2009 were carried out at an
average multiple of 5.8x EBITA compared with an average
multiple of 7.6x EBITA for acquisitions completed in 2008.

In 2009, ISS completed the following large strategic acquisi-
tions:

Mettek — Turkey

In January, ISS expanded its business in the Turkish market
through the acquisition of Mettek, a well recognised Facility
Services provider in Turkey. Mettek is a bolt-on acquisition
that will ensure critical mass within Cleaning and Security
for ISS in Istanbul and the surrounding region. The acquisi-
tion of Mettek will enable ISS in Turkey to further target
specific customers and segments, thereby enabling a bet-
ter platform for cross-selling and IFS sales. The acquisition
added approximately DKK 137 million in annual revenue
and 2,178 employees.

Central Property Services — USA

In January, ISS acquired Central Property Services (CPS), the

largest commercial cleaning company in the Pittsburgh,
Pennsylvania metropolitan area. The acquisition of CPS sup-
ports ISS's strategy in the USA on three vital dimensions:
geography, services and customers. CPS increased ISS's criti-
cal mass in Pittsburgh as well as the volume in the Clean-
ing and Security service areas. The acquisition also in-
creased the volume in the office and education customer
segments. The acquisition added approximately DKK 182
million in annual revenue and 917 employees.

MAN SGIMENT'S REVIEW 1 ANNUAL BREPGAT 2909 - 13

Sunparking — Indonesia

In February, ISS expanded its Indonesian operations into the
growing security business segment by acquiring Sunparking,
the second largest car park management service provider in
Indonesia. ISS in Indonesia has achieved a competitive ad-
vantage through the acquisition, as ISS is the only facility
services provider in the Indonesian market offering car park
management services. This enhanced ISS's service platform
in Indonesia and improved its scope for winning IFS con-
tracts. The acquisition added approximately DKK 109 million
in annual revenue and 5,000 employees.

Chubb — Ireland

In May, ISS acquired the manned guarding activities from
the international security provider Chubb in Ireland. To-
gether with the existing Security business, the acquired
activities provide ISS in Ireland with nationwide coverage
within the security segment. Furthermore, acquiring Chubb
has significantly increased ISS's size and presence in Ireland
and supports ISS as a national Multi-Service provider. The
acquisition added approximately DKK 134 million in annual
revenue and 635 employees.

DIVESTMENTS

From 2004-2009, ISS completed over 450 acquisitions rang-
ing from small bolt-on acquisitions to platform-developing
acquisitions and entries into new geographies. The vast ma-
jority of these acquisitions are already fully integrated and
performing as planned, and their positive impact may be
further enhanced as they become part of The ISS Way stra-
tegy process. As part of this process, the strategic rationale
behind selected acquisitions was reviewed in 2009, which
has led to the identification and evaluation of certain activi-
ties that are either non-core to The ISS Way strategy or lack
critical mass.

Some of these activities were either divested in 2009 or are
planned for divestment in 2010. This includes the completed
divestment of project-based landscaping activities in Swe-
den, contact centres in the Netherlands and laundry activi-
ties in Norway and Sweden. In addition, certain non-core
activities in France, Spain and Norway that are expected to
be divested in 2010 have been classified as held for sale at 31
December 2009. The divestments completed in 2009 and the
businesses classified as held for sale on 31 December 2009
resulted in non-cash charges recognised in the income state-
ment of DKK 983 million before tax, mainly related to write-
down of goodwill and customer contracts.

14 - ANNUAL REPORT 2009 | MANAGER'ENT $ REVIEVY

FINANCING

ISS has committed long-term financing in place, part of
which will be refinanced in the second half of 2010. In July
2009, ISS successfully issued EUR 525 million of new Senior
Notes due 2014. The Notes were issued through ISS Finan-
cing Pic, a newly formed special purpose vehicle, and are list-
ed on the Luxembourg Stock Exchange. The proceeds from
these Notes have been lent on to ISS Global and were used
to settle the completed tender offer for EUR 500 million of
the 2010 EMTNs plus accrued interest. The 2010 EMTNs were
acquired at nominal! value but had a carrying amount lower
than their nominal value due to the fair-value adjustment
made in connection with ISS Holding A/S's acquisition of ISS
A/S. Consequently, an accounting loss of DKK 59 million was
recognised in 2009.

A receivables-backed securitisation programme was launched
in five major countries in the second half of 2009 and addi-
tional countries are intended for inclusion in the programme
in 2010. The proceeds from the securitisation programme
will be used to refinance the remaining EUR 350 million of
the EMTNs due in 2010. After the reporting date, the Group
completed a tender offer for an additional EUR 150 million
of the outstanding notes, leaving EUR 200 million in notes
for refinancing before maturity in September 2010.

MANAGEMENT CHANGES

On 24 May 2009, Marcus Brennecke joined as a new member
of the Board of Directors of ISS.

On 9 December 2009, Casper von Koskul! joined as a new
member of the Board of Directors of ISS, replacing Sanjay
Patel who stepped down from the Board.

SUBSEQUENT EVENTS

On 22 January 2010, ISS Global completed the tender offer
for EUR 150 million of the outstanding 2010 EMTNs plus ac-
crued interest. The notes were acquired at a purchase price
of EUR 1,020 per EUR 1,000 principal amount and resulted in
an accounting loss of approximately DKK 30 million, which
has been recognised in 2010. The accounting loss results pri-
marily from the purchase price being above nominal value,
and also from the carrying amount being below nominal
value due to the fair value adjustment made in connection
with ISS Holding A/S's acquisition of ISS A/S.

On 2 February 2010, ISS announced that Jørgen Lindegaard
will step down as Group CEO as of 31 March 2010 and that
the current Group COO, Jeff Gravenhorst, will take over the
responsibility as Group CEO on 1 April 2010.

Divestments completed subsequent to 31 December 2009
are listed in note 12, Acquisitions and divestements of busi-
nesses.

With the exception of the above and the events described
in this Annual Report, ISS is not aware of events subsequent
to 31 December 2009 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 de-
scription of Risk management on pages 38-39 of this report.

The continued successful implementation of The ISS Way
strategy is the foundation for robust and profitable growth
in the years to come. The ISS Way is oriented around a
number of key strategic priorities, especially focus and align-
ment. In 2010, the initiatives include the continued deve-
lopment of value propositions tailored to specific customer
segments, development of services within which we deliver
service excellence and strengthening of our Integrated Faci-
lity Service capabilities. Furthermore, we will pursue stand-
ardisation, best-practice and knowledge sharing across the
organisation, while increasing our focus on Group-wide sales
driven by a central sales and commercial team that includes

FORWARD-LOOKING STATEMENTS

the global Corporate Client organisation. Simultaneously,
ISS will maintain its focus on key operational objectives (i)
cash flow; (ii) operating margin; and (iii) profitable organic
growth.

Some of ISS's customers have been severely affected by
the global economic slowdown. During 2009, ISS actively
worked with those customers to help them adjust service
levels. This has resulted in reduced service levels in a number
of contracts and much less non-portfolio work being carried
out. As a result, customer retention was satisfactory in 2009,
though demand for ISS's services depends to some extent
on an improved economic climate.

ISS expects some improvements in the economic climate in
its main markets in 2010, which combined with the efforts
carried out in 2009, are expected to lead to an increased de-
mand for services provided by ISS. Consequently, at the pre-
vailing currency rates, ISS expects revenue to grow organi-
cally at an increasing pace throughout 2010. During the last
two quarters of 2009, ISS also restored profitability to the
levels realised in the last two quarters of 2008. Combined
with the generally flexible cost base, the extensive restruc-
turing initiatives and the Group-wide fixed cost-reduction
initiative carried out in 2009, ISS expects its operating Mar-
gin for 2010 to be slightly above the level realised in 2009.

ISS will continue to prioritise cash fiow and a healthy ba-
lance sheet. We will focus on managing the absolute level
of debt supported by significantly less acquisition spending
and continued high cash conversion. ISS expects to make
only a small number of acquisitions in the short term, prima-
rily in the growth regions of Asia and Latin America.

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-looking statements and from the past performance of ISS. Although ISS
believes that the estimates and projections reflected in the forward-looking statements are reasonable, they may prove materiaily 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-look-
ing statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

MIAMAGEMENHT'S REVISYØ | ANNUAL REPORT 2063 - 45

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COUNTRY OVERVIEW

2009 2008
DKK million DKK million

Operating Operating
profit Number of profit Number of
Total before Operating Organic employees Total before Operating Organic employees
Country revenue other items margin % growth % at year-end revenue other items margin % growth % at year-end
France 8,879 337 3.8 (6) 39,329 9,336 569 6.1 (0) 41,284
United Kingdom 6,948 477 6.9 2 41,881 7,565 511 6.8 9 42,848
Norway 5,246 416 7.9 (2) 13,773 5,683 394 6.9 7 13,114
Spain 4,534 244 5.4 (7) 28,775 4,603 287 6.2 6 28,855
Denmark 3,731 259 6.9 (0) 9,194 3,702 232 6.3 0 11,073
Finland 3,678 304 8.3 4 11,434 3,517 285 8.1 4 11,842
Sweden 3,536 228 6.4 6 9,491 3,920 257 6.6 6 10,276
Netherlands 3,420 128 3.7 (2) 18,511 3,540 103 2.9 (3) 20,175
Australia 3,419 235 6.9 (0) 12,770 3,381 220 6.5 4 13,763
Belgium and Luxembourg 3,190 194 6.1 2 10,823 3,094 220 7.1 3 11,192
Switzerland 2,643 226 8.5 2 10,522 2,463 192 7.8 8 10,639
USA 2,514 134 5.3 (1) 14,943 2,131 128 6.0 6 14,696
Germany 2,417 43 1.8 0 11,220 2,406 84 3.5 8 11,968
Turkey 1,459 103 7.1 13 21,047 1,221 94 7.17 20 17,799
Israel 1,411 83 5.9 1 11,518 1,454 73 5.0 11 11,723
Austria 1,387 76 5.5 (4) 6,698 1,662 94 5.7 Q 7,254
Hong Kong 1,216 100 8.2 12 14,532 968 73 7.5 15 12,897
Brazil 1,069 64 6.0 9 17,588 967 52 5.4 12 16,235
Singapore 858 59 6.9 15 6,786 702 47 6.7 19 6,503
Greece 818 52 6.4 12 5,250 712 50 7.0 22 4,942
Ireland 596 24 4.1 8 3,067 471 25 5.2 4 2,649
Indonesia 595 58 9.8 38 47,660 336 33 9.8 38 35,293
Portugal 551 43 7.7 (3) 7,260 549 40 7.3 5 8,425
Thailand 514 36 6.9 5 25,186 363 25 7.0 11 23,431
Czech Republic 422 29 6.8 (8) 4,518 484 40 8.3 3 6,211
Mexico 403 27 6.7 19 14,155 393 23 5.9 12 12,552
Italy 375 25 6.7 10 1,258 262 17 6.4 6 1,046
New Zealand 349 24 6.9 8 2,284 234 10 4.3 10 3,063
Chile 317 23 7,1 13 9,270 267 19 7.1 29 8,403
Slovakia 293 14 4.9 (8) 4,435 320 23 7.2 (0) 5,082
India 271 23 8.6 18 16,132 194 10 5.2 74 12,634
China 241 11 4.7 7 10,653 211 12 5.6 24 10,526
Argentina 227 13 5.5 15 3,988 217 12 5.4 32 3,549
Taiwan 217 15 7.1 19 2,193 181 16 9.0 5 2,041
Poland 191 9 4.8 12 2,639 186 9 4.9 17 2,529
Slovenia 153 6 4.0 (9) 1,204 164 9 5,5 13 1,269
Romania 150 29 19.5 26 2,330 137 24 17.4 23 2,734
Hungary 144 5 3.5 6 1,894 141 8 5.4 24 1,882
Estonia 130 14 10.7 (5) 1,538 137 8 6.1 9 1,793
Greenland 100 7 7.2 (5) 252 106 8 7.1 16 306
Philippines 79 (2) (2.9) (16) 2,523 96 3 3.5 15 2,564
Iceland 76 6 7.3 (3) 670 134 10 7.6 14 739
Malaysia 68 4 6.4 (7) 1,961 73 5 7.4 9 2,246
Uruguay 62 5 78 20 1,151 46 3 7.4 61 1,277
Russia 51 1 2.1 (3) 716 64 3 4.0 36 663
Japan 41 2 5.1 534 44 6 (0) (1.4) - 2
Croatia 27 (1) (2.5) (8) 339 30 (0) (0.7) 21 419
Brunei 20 5 22.7 15 330 17 3 15.3 7 293
South Africa 5 1 19.1 - - - - - - -
Canada 1 0 7.0 - 2 - - - - -
Faroe Islands - - - - - 9 0 1.0 15 -

Regional! cost / eliminations (2) (5) (1) (17)
Total regions 69,040 4,213 6.1 1 485,737 68,853 4,346 63 5 472,699
Corporate functions / eliminations (36) (339) (0.5) - 110 (24) (285) (0.4) - 102
Total 69,004 3,874 5.6 1 485,847 68,829 4,061 5.9 5 472,801

CDUNTRY OVERVIEW i ANNUAL REPORT 2209 - 47

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FINANCIAL REVIEW

INCOME STATEMENT

Revenue

Revenue amounted to DKK 69,004 million representing year-
on-year revenue growth of 3%, excluding foreign exchange
adjustments. Revenue growth was driven by 1% organic
growth and 3% growth from acquisitions. This was partly
offset by divestments of 1% and adverse currency exchange-
rate movements of 3%. Four of seven regions delivered posi-
tive organic growth rates, with Asia and Latin America once
again delivering double-digit organic growth rates.

Staff costs

Staff costs increased by DKK 625 million, or 1%, from DKK
44,156 million in 2008 to DKK 44,781 million in 2009. This
increase was due primarily to an increase in the overall!
number of employees as a result of acquisitions and organic
growth that were partly offset by currency exchange-rate
movements. Staff costs as a percentage of revenue increased
from 64.2% in 2008 to 64.9% in 2009.

Cost of sales

Cost of sales decreased by DKK 90 million, or 1%, from DKK
6,134 million in 2008 to DKK 6,044 million in 2009. Cost of
sales as a Percentage of revenue amounted to 8.8% in 2009,
a slight decrease compared with 8.9% in 2008.

Other operating expenses

Other operating expenses decreased by DKK 172 million, or
1%, from DKK 13,609 million in 2008 to DKK 13,437 million in
2009. Other operating expenses as a percentage of revenue
totalled 19.5%, down slightly compared with 19.8% in 2008.

Depreciation and amortisation

Depreciation and amortisation excluding amortisation of
brands and customer contract portfolios and related cus-
tomer relationships (customer contracts) decreased by DKK
1 million, from DKK 869 million in 2008 to DKK 868 million
in 2009, which as a percentage of revenue was unchanged
at 1.3% compared with 2008.

Operating profit before other items

Operating profit before other items amounted to DKK 3,874
million in 2009 representing a decrease of 2%, excluding
foreign exchange adjustments, compared with 2008. Includ-
ing the negative effect from foreign exchange adjustments,
operating profit before other items decreased by DKK 187

20 - ANMUAL REFORT 2009 | FINANCIAL REVIEW

million, or 5%, from DKK 4,061 million in 2008 to DKK 3,874
million in 2009. Operating profit before other items as a per-
centage of revenue, i.e. the operating margin before other
items, was 5.6% in 2009 compared with 5.9% in 2008. This
was due mainly to lower earnings in France, Germany and
Spain. Corporate overhead costs increased from 0.4% of re-
venue in 2008 to 0.5% in 2009.

Other income and expenses, net

Other income and expenses, net, represented a net expense
of DKK 551 million in 2009 compared with a net expense of
DKK 242 million in 2008. This related primarily to restructur-
ing projects amounting to DKK 426 million in France, Ger-
many, Spain, Australia, Belgium, Finland, the United King-
dom and Denmark, as well as write-down attributable to
businesses classified as held for sale on 31 December 2009
totalling DKK 159 million. The restructuring projects com-
prised mainly closure of certain parts of business units or
divisions as well as changes in the organisational setup and
other efficiency improvements. Write-downs attributable to
businesses classified as held for sale related mainly to net
assets other than intangibles of certain non-core activities
in France that are expected to be sold in 2010. Other income
and expenses included costs related to divestments of non-
strategic landscaping activities in Norway and Sweden as
well as the call centre activities in the Netherlands and re-
dundancy and severance payments relating to senior man-
agement changes. This was partly offset by a gain on divest-
ments relating to the sale of non-core laundry activities in
Sweden and Norway that amounted to DKK 102 million.

Other income and expenses, net, in 2008 represented a net
expense of DKK 242 million and included losses on divest-
ments of non-core activities, including the energy activities
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 se-
nior management changes.

Integration costs
Integration costs decreased by DKK 20 million, or 30%, from
DKK 66 million in 2008 to DKK 46 million in 2009. The de-

OPERATING RESULTS

Operating profit Operating margin before
Revenue before other items other items
DKK millions DKK millions
2009 2008 Change "— 2009 2008 Change 2009 2008
Nordic ” 16,367 17,071 (4)% 1,219 1,189 3 % 7.4 % 7.0 %
Western Europe ” 38,632 39,337 (2)% 2,056 2,356 (13)% 5.3 % 6.0 %
Eastern Europe I 1,561 1,663 (6)% 106 124 (15)% 6.8 % 7.4 %
Asia ” 4,120 3,147 31% 308 210 47 % 7.5 % 6.7 %
Latin America ? 2,077 1,890 10 % 131 109 20 % 6.3 % 5.8 %
North America & 2,515 2,131 18 % 134 128 5 % 5,3 % 6.0 %
Pacific” 3,768 3,614 4 % 259 230 13 % 6.9 % 6.4 %
Corporate / eliminations (36) (24) (339) (285) 19% (0.5)% (0.4)%

 

” 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, South Africa, Spain, Switzerland, Turkey and the United Kingdom.
” Eastern Europe comprises Croatia, the Czech Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia and Slovenia.

” Asia comprises Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, SIngapore, Taiwan and Thailand.

9 Latin America comprises Argentina, Brazil, Chile, Mexico and Uruguay.

North America comprises Canada and the USA.

” Pacific comprises Australia and New Zealand.

REVENUE GROWTH 2009

Revenue growth, % |

Total growth |
Organic ” Aca./Div., net exd. currency Currency Total growth
Nordic 1 (1) 0 (4) (4)
Western Europe (1) 2 1 (3) (2)
Eastern Europe (2) 2 0 (6) (6)
Asia 15 13 28 3 31
Latin America 12 5 17 (7) 10
North America (1) 14 13 5 18
Pacific 0 6 6 (2) 4

LK O2:I! 1 Pi 3 (€)) 0

1 See page 135 for a definition of organic growth.

FINANCIAL REVIEW | ANNUAL REPORT 2009 - 21

crease in integration costs in 2009 was due to the comple-
tion of fewer acquisitions in 2009 compared with previous
years. Integration costs in 2009 related primarily to redun-
dancy payments and termination of rental obligations with
respect to acquired companies in Italy and Spain.

Operating profit

Operating profit decreased by DKK 476 million, or 13%,
from DKK 3,753 million in 2008 to DKK 3,277 million in 2009
and was negatively impacted by a lower operating margin
before other items and an increase in other expenses.

Share of result from associates

The share of result from associates increased by DKK 1 mil-
lion from a profit of DKK 3 million in 2008 to DKK 4 million
in 2009.

Net finance costs

Net finance costs dropped by DKK 423 million, or 15%, to:

DKK 2,308 million in 2009 from DKK 2,731 million in 2008.
The main reason for the decrease was a net gain on foreign
exchange in 2009 compared with a loss on foreign exchange
in 2008 as well as lower interest expenses, net in 2009.

In 2009, net finance costs included DKK 2,168 million of
net interest expenses, DKK 61 million in net gains on for-
eign exchange, DKK 57 million in amortisation of financing
fees and a loss of DKK 59 million related to repayment of
the 2010 EMTNs acquired at nominal value with a carrying
amount lower than nominal value due to the market value
adjustment made in connection with ISS Holding A/S's ac-
quisition of ISS A/S.

Profit before tax and goodwill impairment/
amortisation of brands and customer contracts

Profit before tax and goodwill impairment/amortisation of
brands and customer contracts decreased by DKK 52 million
from DKK 1,025 million in 2008 to DKK 973 million in 2009.

Income taxes

Income taxes increased from DKK 531 million in 2008 to DKK
588 million in 2009. The effective tax rate was 60.4% in 2009
compared with 51.8% in 2008, calculated as the consolidated
tax provision of DKK 588 million divided by the profit before
tax and goodwill impairment/amortisation of brands and cus-
tomer contracts totalling DKK 973 million. The tax expense in
2009 was adversely impacted by the Danish interest limita-
tion deductions. Due to the limitation to interest deductions,
the Group is subject to limitations on the deductibility of fi-
nancial expenses of approximately DKK 559 million in 2009.
The net effect on the tax expense in 2009 is estimated to be
DKK 137 million.

22 - SNNUAL REPORT 2099 ? FINANCIAL REVIEW

In addition, the tax expense in 2009 was adversely impacted
by withholding taxes that are non-proportional to the profit
before tax. The level of withholding taxes increased in 2009
due mainly to the terminated tax treaties between Denmark
and respectively France and Spain.

Profit before goodwill impairment/amortisation

of brands and customer contracts

Profit before goodwill impairment/amortisation of brands
and customer contracts decreased by DKK 109 million or
22%, from DKK 494 million in 2008 to 385 million in 2009.

Goodwill impairment and write-down

The intangibles of the Group relate partly to the intangibles
in the purchase price allocation following the takeover of
ISS on 9 May 2005. At the date of the takeover, the value in
use of all individual cash generating units (CGUs) was close
to the carrying amount. Consequently, a decline in value in
use of an individual CGU subsequent to the purchase price
allocation will trigger impairment. Goodwill impairment and
write-downs amounted to DKK 1,246 million. Impairment
losses of DKK 450 million related to ISS's business in France,
and DKK 100 million related to ISS's business in Germany. The
impairment losses resulted from weakening market condi-
tions within certain business activities in which ISS operates,
especially the industrial segments, combined with an increase
in the discount rate applied at the time of recognition of the
impairment loss in May 2009. Write-downs totalling DKK 696
million related to the write-down of DKK 248 million as a re-
sult of divestment of a number of businesses and the write-
down of DKK 448 million on certain businesses classified as
held for sale on 31 December 2009. The write-down of com-
pleted divestments of DKK 248 million related mainly to the
sale of ISS's non-strategic landscaping business in Sweden of
DKK 137 million, the sale of the call centre activities in the
Netherlands of DKK 69 million and the sale of the pest control
activities in the United Kingdom of DKK 42 million. The DKK
448 million write-down on businesses classified as held for
sale on 31 December 2009 related mainly to the expected sale
of certain non-core activities in France, Spain and Norway.

In 2008, goodwill impairment and write-downs amounted
to DKK 399 million, of which DKK 250 million related to ISS's
business in Germany, and DKK 20 million related to ISS's
business in Italy, which was recognised following impair-
ment tests. The remaining DKK 129 million related to divest-
ments.

Amortisation of brands and customer contracts

Amortisation of brands and customer contracts amounted to
DKK 1,129 million in 2009, up from DKK 1,008 million in 2008.
The increase was a result of a DKK 210 million write-down

on customer contracts that related mainly to classification of
non-core activities in France as held for sale. The amortisa-
tion 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, ISS 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 361 million in 2009 and DKK 282
million in 2008.

Net loss

Net loss increased from a loss of DKK 631 million in 2008
to a loss of DKK 1,629 million in 2009, and was negatively
impacted by a lower operating profit and higher non-cash
charges related to goodwill impairment of DKK 550 million
and DKK 983 million before tax related to divestments and
businesses classified as held for sale. This was partly offset
by lower net finance costs. In 2009, a loss of DKK 1,647 mil-
lion was attributable to the owners of ISS, whereas a profit
of DKK 18 million was attributable to non-controlling inter-
ests.

CASH FLOW STATEMENT

Cash flow from operating activities

Cash ftow from operating activities was a net inflow of DKK
3,732 million in 2009, down DKK 602 million from DKK 4,334
million in 2008. The development was due primarily to a cash
outflow of DKK 137 million from working capital compared
with a cash inflow of DKK 109 million in 2008 and an increase
in cash outflow of DKK 190 million from payments related to
other income and expenses, net, as well as the decrease in
operating profit before other items of DKK 187 million.

Cash outflow from changes in provisions decreased from
DKK 96 million in 2008 to DKK 50 million in 2009. The amount
comprised the effect of net changes in provisions charged to
the income statement during 2009 and payments made in
relation to such provisions.

Income taxes paid, net, amounted to DKK 394 million in
2009 compared with DKK 363 million in 2008.

Payments related to other income and expenses, net,
amounted to DKK 371 million in 2009, up DKK 190 million
compared with 2008. Payments of DKK 283 million related

to restructuring projects in France, Germany, Spain, Austra-
lia, Belgium, Denmark, Finland and the United Kingdom.

Cash flow from investing activities

Cash flow from investing activities in 2009 was a net cash
outflow of DKK 1,832 million, of which DKK 914 million re-
lated to acquisitions completed during 2009 and payment of
earn-outs and deferred payments on acquisitions completed
in previous years. Acquisitions completed in 2009 comprised
investments primarily in India, the USA, Indonesia, Italy and
Turkey. The cash outflow from acquisitions was partly offset
by proceeds from divestments of DKK 22 million that related
primarily to the divestment of the landscaping activities in
Sweden. Investments in intangible assets and property, plant
and equipment, net, (excluding acquisition-related intangi-
bles) totalled DKK 897 million in 2009, representing 1.3%
of revenue. Investments in financial assets, net, totalled an
outflow of DKK 43 million in 2009.

In 2008, the net cash flow from investing activities represent-
ed an outflow of DKK 2,543 million due mainly to payments
of DKK 2,095 million related to acquisitions and investments
in intangible assets and property, plant and equipment, net,
(excluding acquisition-related intangibles) of DKK 718 mil-
lion.

Net cash flow from financing activities

Cash flow from financing activities in 2009 was a net cash out-
flow of DKK 1,547 million. This was mainly a result of interest
payments of DKK 2,205 million and repayment of borrowings
of DKK 5,177 million due primarily to settlement of EUR 500
million of the 2010 EMTNs in July 2009 as well as amortisa-
tion on senior facilities. This was partly offset by drawings on
credit facilities of DKK 5,849 million stemming mainly from
the issuance of new Senior Notes due in 2014 in July 2009,
the launch of a securitisation programme in the last quarter
of 2009 as well as drawings on the acquisition facility up until
11 May 2009 when the acquisition facility expired.

In 2008, the net cash flow from financing activities amount-
ed to a cash outflow of DKK 1,348 million. This was mainly
a result of DKK 2,267 million in interest payments that was
partly offset by net drawings on credit facilities primarily to
fund acquisitions of DKK 941 million.

Cash conversion

Changes in working capital represented a cash outflow of
DKK 137 million that resulted in a cash conversion of 96% in
2009 compared with 103% in 2008.

Cash conversion ratios for individual years may vary. The cash
fiows from operations for the individual periods depend on

FIMAMZIAL REVIEW | ANNUAL 359GRT 2008 . 23

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 135.

BALANCE SHEET

Total assets

Total assets amounted to DKK 54,354 million at 31 December
2009, of which DKK 38,272 million represented non-current
assets, primarily intangible assets, and DKK 16,082 million
represented current assets, primarily trade receivables of
DKK 10,130 million.

Intangible assets

Intangible assets decreased by DKK 549 million from DKK
36,001 million at 31 December 2008 to DKK 35,452 million
at 31 December 2009. Intangible assets comprise primarily
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 DKK 31,844 million in intangible
assets, 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 most of 2009, including increased mar-
ket fluctuations and volatility, has continued to make the
valuation of intangible assets subject to greater uncertain-
ties than in recent years.

At 31 December 2009, goodwill amounted to DKK 27,434
million, an increase of DKK 175 million, or 1%, from DKK
27,259 million in 2008. Additions related to acquisitions in
2009 amounted to DKK 595 million while currency adjust-
ments increased goodwill by DKK 875 million. Goodwill was
reduced by impairment and write-down of DKK 1,246 mil-
lion that related to ISS's impairment of DKK 450 million in
France and DKK 100 million in Germany and write-downs
totalling DKK 696 million related to completed divestments
and businesses classified as held for sale. The write-down on
completed divestments of DKK 248 million mainly related to
the sale of 1$S's non-strategic landscaping business in Swe-
den of DKK 137 million, the sale of the call centre activities
in the Netherlands of DKK 69 million and the pest control
activities in the United Kingdom of DKK 42 million. The DKK
448 million write-down on businesses classified as held for
sale on 31 December 2009 related mainly to the expected
sale of certain non-core activities in France, Spain and Nor-
Way.

Goodwill is related to acquisitions, including the acquisition
of ISS A/S, carried out under varying circumstances and at

24 - ANNUAL R2203T 2009 1 FINANCIAL REVIEW

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
16% of the total carrying amount of goodwill.

Customer contracts decreased by DKK 798 million to DKK
6,120 million at 31 December 2009, from DKK 6,918 million
at 31 December 2008. Amortisation of DKK 910 million and
write-downs of DKK 210 million were partly offset by DKK
252 million in positive foreign exchange adjustments.

Assets and liabilities held for sale

Assets and liabilities held for sale amounted to DKK 614 mil-
lion and DKK 379 million, respectively, and include the as-
sets and liabilities attributable to certain non-core activities
in France, Spain and Norway for which a sales process has
been initiated. The businesses in Norway and Spain were
subsequently sold on 26 February 2010.

Other non-current assets

Non-current assets other than intangible assets amounted to
DKK 2,820 million at 31 December 2009, a slight decrease
from DKK 3,010 million at 31 December 2008. The decrease
related mainly to property, plant and equipment and was
partly offset by an increase in deferred tax assets and other
financial assets.

Trade receivables

Trade receivables increased slightly from DKK 10,097 million
at 31 December 2008 to DKK 10,130 million at 31 December
2009. This was a result of an increase in revenue and despite

a decrease in debtor days from 46.7 in 2008 to 45.3 in 2009.

Cash and cash equivalents

Cash and cash equivalents increased from DKK 2,961 million
at 31 December 2008 to DKK 3,364 million at 31 December
2009, of which DKK 2,053 million resided at Group level with
the remainder at country level. The cash position was posi-
tively impacted by working capital inflow in Q4 2009. The
cash position may fluctuate significantly over the months
due to the frequency and timing of cash collection and out-
going payments, e.g. salary Payments.

Other current assets

Other current assets, comprising inventories, contract work in
progress, tax receivables, other receivables and securities,
amounted to DKK 1,974 million at 31 December 2009 (DKK
1,536 million at 31 December 2008). Other receivables in-

creased from DKK 776 million at 31 December 2008 to DKK
1,071 million at 31 December 2009. Other receivables com-
prised mainly prepayments and receivable sales prices rela-
ted to divestments.

Total equity

Total equity decreased from DKK 3,533 million at 31 De-
cember 2008 to DKK 2,213 million at 31 December 2009, of
which DKK 2,190 million was equity attributable to the eq-
uity 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 1,308 million.

Net income and expenses recognised in equity reduced eq-
uity by DKK 1,290 million. This included a net loss of DKK
1,629 million for the year and actuarial losses, net, including
the effect of the asset ceiling on defined benefit pension
schemes that amounted to DKK 27 million. Partly offsetting
this was positive currency adjustments of DKK 364 million
relating to investments in foreign subsidiaries.

The equity ratio, defined as total equity relative to total as-
sets, decreased from 6.6% at 31 December 2008, to 4.1% at
31 December 2009.

Long-term debt

The decrease in long-term debt from DKK 31,210 million in
2008 to DKK 28,486 million in 2009 was due primarily to re-
classification to short-term debt in accordance with the debt
maturity profile,

Other long-term liabilities

Other long-term liabilities comprise pensions and similar ob-
ligations, deferred tax liabilities and other provisions, and
amounted to DKK 3,572 million at 31 December 2009 (DKK
3,729 million at 31 December 2008).

Pensions and similar obligations amounted to DKK 837 mil-
lion at 31 December 2009, compared with DKK 834 million
at 31 December 2008. The majority of the Group's pension
plans are defined contribution plans. The Group's contribu-
tions to such plans are accrued and expensed on an ongo-
ing basis. In certain countries, mainly France, Germany, the
Netherlands, Sweden, Switzerland and the United Kingdom,
ISS has defined benefit plans. As mentioned above, actu-

arial losses of DKK 27 million, including the net effect from
the asset ceiling, were taken directly to equity. The losses
stemmed mainly from the United Kingdom and Norway and
were partly offset by a gain in France, Due to the current
market conditions, the determination of the discount rates
in the individual countries is subject to uncertainty.

Other provisions amounted to DKK 802 million at 31 De-
cember 2009, of which DKK 379 million had an estimated
maturity of more than one year. Comparative figures at 31
December 2008 were DKK 832 million and DKK 397 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 2,498 million in
2008 to DKK 2,356 million in 2009, and were attributable
mainly to the tax effect related to the amortisation of the
brands and customer contracts.

Other current liabilities

Other current liabilities, comprising short-term debt, trade
payables, tax payables and other provisions, amounted to
DKK 8,970 million at 31 December 2009 (DKK 4,672 million
at 31 December 2008).

Other liabilities amounted to DKK 10,734 million at 31 De-
cember 2009 compared with DKK 10,461 million at 31 De-
cember 2008. Other liabilities consist mainly of accrued wag-
es and holiday allowances, tax withholdings, VAT and other
payables and accrued expenses.

Carrying amount of net debt

Carrying amount of net debt amounted to DKK 30,630 mil-
lion at 31 December 2009, up DKK 1,245 million from DKK
29,385 million at 31 December 2008. The increase was due
primarily to acquisitions in 2009 and payment of earn-outs
and deferred payment on acquisitions completed in previ-
ous years. At 31 December 2009, long-term debt was DKK
28,486 million, short-term debt amounted to DKK 5,617
million while securities, cash and cash equivalents and re-
ceivables from companies within the ISS Group totalled DKK
3,473 million. '

Fi hl Ari CIAL SEVIEW | ANNUZL REPORT 2099 - 25

LOUANNA PHILLIPS

gå 458438 Ass

HP STEL.

AUSTRALIA
dn f Australia's mineral wealth is found in its most remote regions.
mr SEE gE ni n a well
maintained and pleasant BE rscLsmE USE
to help and now
ank, delicatessen, post of
lic swimmin j awonica lownship, the most remote of the
EN contract, ISS has proven its ability to en-
thusiastically pursue any opportunity - even in the most remote parts

of the world.

 

STRATEGY — THE ISS WAY

ISS — BUSINESS AND STRATEGY

ISS is one of the world's largest commercial providers of Fa-
cility Services, operating in over 50 countries in Europe, Asia,
Pacific, North America and Latin America. ISS has been ope-
rating in the service industry for more than 100 years and
began offering cleaning services in 1934. Since that time, ISS
has significantly expanded its business through acquisitions
and organic growth.

ISS's business model is based on creating value for our cus-
tomers by offering a range of business support services
within Cleaning, Support Services, Property Services, Cater-
ing, Security and Facility Management. 1S95's Facility Man-
agement approach represents a unique offering whereby
the service delivery can be integrated into one seamless so-
lution.

The ISS Way strategy, launched in 2008, is based on our four
cornerstones; customer focus, people management, the IFS
strategy and a multi-local approach. Combined with our cor-
porate values and leadership principles, these cornerstones
provide the foundation on which we pursue our vision to
”Lead Facility Services giobally — by leading Facility Services
locally”.

Implementation of The ISS Way is well under way and is ori-
ented around a number of key strategic priorities, especially
focus and alignment. After a period of platform building
through acquisitions, we are focusing on extracting the full
value inherent in our business by concentrating our efforts on
specific customer segments. Another key priority is to ensure
the continued alignment of the organisation to fully support
the strategic direction we have set for ISS going forward.

The continued successful implementation of The ISS Way
strategy is the foundation for robust and profitable growth
in the years to come.

Values

Ultimately, The ISS Way strategy is founded on our four val-
ues on which we base our strategic, operational and finan-
cial plans and actions.

Leadership principles and development

As part of The ISS Way strategy, the way we act as leaders
has also been scrutinized. In 2009, a set of common inter-
national leadership principles was established defining the
attitudes and behaviours ISS expects from its leaders. This
resulted in the following nine principles:

CORPORATE VALUES N

>

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.

STRATEGY - THE ISS WAY | ANHUAL REPORT 2008 - 27

In ISS we put the customer first

In ISS we have passion for performance

In ISS we encourage innovation

In ISS we treat people with respect

In ISS we lead by example

In ISS we lead by empowerment

In ISS we develop ourselves and others

In ISS teamwork is at the heart of our performance
ISS is one company with shared values, one brand
and one strategy

0 0 0 0 0 0 0 0 0

These principles, which are currently being integrated in the
processes surrounding recruitment, appraisals, development
and talent management, are applicable for all 1SS leaders. As
the principles translate our values into actions and behaviours
by describing successful leaders, this initiative will enhance
our leadership capabilities on an ongoing basis.

Our four cornerstones

The ISS Way is built on four cornerstones: customer focus,
people management, the IFS strategy, and a multi-local ap-
proach.

oa Customer focus. At ISS, we put customers in focus. We
serve our chosen customers locally, regionally and globally
with specific value propositions while focusing on identify-
ing customer needs and wants. We build enduring partner-
ships with customers who value our approach to service.

o People management. At ISS, people management is our
core competence. We excel in people management in order
to deliver excellence in our service offerings. We mitigate
risks and volatility transferred from our customers, by apply-
ing leadership skills, HR and EHS policies, employee training
and labour legislation insight. To obtain these benefits we
share knowledge and best practices.

o /FS strategy. At ISS, IFS is our strategic aim. We advance
our service offering towards IFS by building the ISS House of
services and developing our FM capabilities. We self-deliver
multiple site-based services as defined by the "ISS House"
and we integrate our service deliveries seamlessly in our cus-
tomers' organisations.

o Multi-local approach. At ISS, we strike a balance between
autonomy and alignment. We operate with strong local
leadership and autonomy to ensure timely responses to de-
mands and requests. We also reflect the overall Group fun-
damentals and strategic direction to allow us to exploit best
practices and leverage our geographical footprint. We are
disciplined and use tight financial controls.

28 - ANNUAL REPORT 2203 | STRATEGY — TÅe ISS WAY

Our service offering

ISS's service offering has been developed to meet customer
needs. Our fundamental offering is illustrated by the "ISS
House", which has five pillars: Cleaning, Support Services,
Property Services, Catering and Security. The "roof", Faci-
lity Management, represents the sixth service and our ca-
pabilities within the integration of service deliveries, The
ISS House is built on a strong foundation of Service Excel-
lence, which means that our customers enjoy the benefits
of partnering with a service expert — a company that truly
understands customer needs and has the services required
to support them.

Service concepts are being developed to address the specific
needs of customer segments. This entails defining versions
of the ISS House that are built on ISS's fundamental com-
petencies and presenting an integrated solution customised
for a given segment. As an example, the ISS House for the
Healthcare segment is illustrated at the right.

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-
based services, such as pest control and washroom services,
Not all country operations necessarily offer all services within
the six service areas, which comprises more than 100 individu-
al services. Local offerings depend on factors such as custom-
er demand, market conditions and access to qualified staff.

If a country does not self-deliver all six service areas, the use
of subcontractors ensures one-stop shopping for custom-
ers. 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 components of the
full ISS House of services.

The delivery model

ISS distinguishes between services offered and the way in
which these services are delivered. The three delivery mod-
els are: Single Service, Multi Services and Integrated Facility
Services. In 2009, ISS continued to develop and strengthen
its Single-Service excellence concepts and Integrated Facility
Services capabilities.

With Single-Service outsourcing, customers buy one service
solution from ISS, for instance outsourcing of cleaning, and
can then 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, customers
achieve the same benefits as with Single-Service outsourcing
with the benefits of service integration where possible.

THE ISS HOUSE
— for the Healthcare segment

FACILITY MANAGEMENT

ERE ERE ERNE N EH

SKIEN 4

HEALTHCARE CLEANING

+ Bed Space Cleaning

t Clinical Cleaning

" Non-Clinical Cleaning

+ Decontamination

 Disinfection

e Barrier Cleaning

 Washroom Services

" Dust Control

" Laundry Services

Window Cleaning

" Pavement & Sidewalk
Services (Sweeping/
Snow Removal)

” Ah år gr

SUPPORT STMICES

HEALTHCARE LOGISTICS

+ Transportation of
Patients

- Transportation of Blood
& Medical Samples

" Transportation of
Laboratory Test/Results

« Shipping & Receivables
(Non-core items)

. Moves, Adds & Changes
(Internal Moves)

. Switchboard (On-site)

+ Information Desk

«+ Printing & Copying

+ Beds Management

+ Furniture & Equipment
Management

e Stationary/Office

t PROPERTY SERVICES

HEALTHCARE EQUIPMENT

MANAGEMENT

Service of Beds
(Replacements/Repairs)

e Service of Patient Trans-
portation Equipment
(Trolleys, Wheelchairs,
Hoists etc)

+ Service of Medica!
Equipment

- Medical Gases

+ Nurse Call Systems &
Panic Alarms

« Pneumatic Tube Systems

s Handyman (Light
Reactive Maintenance)

 Repairs & Replacements

e Lifts & Escalator Services

Supplies s Building Management
+ Document Handfing « Landscaping & Grounds
(On-site)) Maintenance

+ Patient Record
Management
«+ Mail Handling

Pest Control

e Waste & Recycle
Management

" Energy Management

e Water Supply

+ Lighting & Power

+ Legionella Control &
Management
(Water Treatment)

+ HVAC (incl. Cooling)

Bet SK SI AUT ESS

lå

PATIENT CATERING

+ Patient Feeding

+ Dietetic Services

+ Nutrition Services

" Delivered Meal Solutions

+ Beverages incl.
Coffee/Tea

» Restaurant

 Kiosks & Cafes

+ Hospitality Services

" Conference Facilities

+ Fruit & Pastry Provisions

s Installation & Service of
Vending Machines

 

GUARDING
e Patient Escorting
e Visitor Escorting
 Manned Guarding
s Mobile Patrols
+ Admission Control
-— External & Internal
« Keys & Cards
+ Cash in Transit
" Staff Protection
. Monitoring (CCTV)
« Alarm Response
« Emergency Evacuation
e Fire & Gas Detection
 Burglary Detection
+ Alarm Systems
e Lost Property

STRATEGY — THE ISS WAY I ANNUAL REPORT 2009 -

 

29

With Integrated Facility Services solutions, ISS delivers two
or 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, including cost
efficiencies and a more efficient and flexible service set-up.

The ISS Value Chain
The ISS Value Chain management tool drives the implemen-
tation of The ISS Way strategy.

The links of the Value Chain are best illustrated by starting
at the end - Business Growth. The shared purpose of our
existence at ISS is to create shareholder value. This emerges
from profitable growth which in turn is driven by satisfied
customers who expand their business with ISS and renew
their contracts. Customer satisfaction is founded on capable
employees who are engaged in their jobs and motivated by
being part of a strong team. Capable employees are employ-
ees who have been trained in the delivery of clearly defined
and operational service concepts. Strong and attractive
service concepts are the result of informed decisions made

Acquisition
Growth

regarding the business platform, which determines the cus-
tomer segments we should serve and services we choose to
deliver to these segments. Acquisitions are a useful tool in
the continued development of ISS, and will be used selec-
tively to improve I5S's competitiveness, build critical mass
and increase service capabilities and capacity where and
when appropriate.

The ISS Value Chain is used actively at strategic, tactical and
operational levels and forms a central part of The ISS Way
of thinking and working. Management at all levels have
shared points of reference deeply embedded in the organi-
sation that enable them to see their actions from a broader
perspective, thus creating a well-founded, valuable and ho-
mogenous service culture at ISS.

The ISS Way strategy

After years of successfully building our business platform
through acquisitions, The ISS Way is turning our focus to-
wards extracting the full potential in our existing platform.
The implementation of The ISS Way is well under way and is
oriented around a number of key strategic priorities, espe-
cially focus and alignment. We are enhancing our response

THE ISS VALUE CHAIN

TS
Platform

(UEer
Growth

HEKSE
AS

30 - ANNUAL REPORT 2609 | STRATEGY — THE ISS WAY

 

Service
Concept

(Sasso
Engagement

to customer needs and developing value propositions tai-
lored to specific customer segments. We are also develop-
ing services within which we deliver service excellence and
which are most suitable for integration and therefore con-
sistent with our IFS strategy.

We are also pursuing standardisation, best practice and
knowledge sharing across the organisation. Excellence
centres and knowledge forums have been established and
are contributing to further increasing the efficiency of our
service delivery and establishing consistent definitions and
alignment of our services. Experts from corporate, regional
and country levels are working together in various global
forums to further align key business processes and proce-
dures at ISS. The ongoing implementation of this strategy
will allow ISS to continue to enhance its position as a lead-
ing local and global Facility Services company, by delivering
consistent high quality service.

In 2009, ISS expanded its portfolio of multi-national cus-
tomers procuring services in multiple jurisdictions through
two major new contract wins while continuing to invest in
expanding the global Corporate Clients organisation estab-
lished in 2007. The purpose of this organisation is to win
contracts with global and regional customers — fully in line
with the vision of being the leading global Facility Services
provider.

The ISS Way focuses on organic growth and entails a con-
solidation phase after a period of high acquisition volume
in which ISS has built its broad business platform. ISS has
therefore slowed down the pace of acquisitions in 2009 and
increased its focus on integrating acquired companies and
harvesting synergies.

Operational objectives

ISS seeks to maintain and enhance operational efficiency by
focusing on three well-established and prioritised opera-
tional objectives for its local managers: (i) cash flow, (ii) ope-
rating margin, and (iii) profitable organic growth.

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 density,
and by implementing companywide best practices.

PROFITABLE ORGANIC GROWTH

ISS's third objective is to focus on organic growth through
customer retention and sale of service solutions to our cus-
tomers. ISS will 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, including the further
development of the Corporate Clients organisation and en-
hancing our focus on specific customer segments.

CORPORATE RESPONSIBILITY

As a global company with over 485,000 employees serving
200,000 customers in more than 50 countries, ISS influences
the lives of many people and has an extensive interface with
societies around the globe.

More than a century in the service industry has made ISS well
aware that our long-term sustainable business success depends
on a high level of Corporate Responsibility (CR), as economic,
social and environmental issues are inevitably interconnected.
Therefore CR is an integral part of our values and business
strategy and is closely linked to the ISS Value Chain. Developing
our values into concrete actions is also our response to demand
from several stakeholder groups, e.g. existing and potential
employees and customers. It is already clear that securing inter-
national IFS contracts from the world's blue-chip corporations
requires a consistent CR performance, which is a key factor in
winning and retaining contracts in this customer segment.

Our ten-year membership of the Global Compact has taught
us that working with corporate responsibility is not a one-
off event. it is a never-ending journey. We have come a long
way and are proud of offering people work and training
while treating them fairly. By setting high social, environ-
mental and ethical standards, we are paving the way for
profitable growth while demonstrating leadership within
our industry. In the years to come, ISS intends to transform
its CR approach from improving our license to operate into
value-adding propositions and business opportunities.

This CR chapter is ISS's compulsory report on Corporate Social
Responsibility, as per section 99a of the Danish Financial
Statements Act, which covers the financial year ended 31
December 2009. In accordance with instructions from the
UN Global Compact to members of the Compact, this report
also serves as I$S's communication on progress in implement-
ing the ten principles of the Global Compact.

STRATEGY - THE ISS WAY | ANNUAL SEPØRT 2009 - 31

Wu

In ISS we aim to create growth and development for people, the
environment and local societies. We believe that economic, social and
environmental concerns go hand in hand — therefore our value chain
is closely linked to corporate responsibility. We continuously support
the UN Global Compact and its ten principles. ”

- ISS Group CEO, Jørgen Lindegaard

Our CR policies
Conducting business in a responsible and sustainable manner
is a core concept that is embedded in The ISS Way strategy.

ISS has made a strong commitment as a signatory and sup-
porter of the United Nations Global Compact since its in-
ception in 1999, In line with membership regulations, ISS is
committed to complying with the ten Global Compact prin-
ciples on human rights, labour rights, environmental protec-
tion and anti-corruption. ISS's commitment to act respon-
sibly and with integrity is reflected in our Values, Code of
Conduct and International HR Standards. In 2009, we added
Leadership Principles and also established a Group Business
Integrity Committee.

Rights

Responsibility is one of the four ISS Values which founds the
business of ISS. Our Code of Conduct applies to all ISS opera-
tions and is featured in the terms of employment of all our
employees. The Code states, for example, that ISS respects
the United Nations' Declaration of Human Rights, that ISS is
committed to continuously reducing adverse environmental
effects caused by its operations and that ISS is against any
form of corruption and bribery and is committed to combat-
ing such practices.

As ISS employs more than 485,000 employees, managing
people is the heart of our business. Well trained and highly
motivated employees are our primary resource. We there-
fore aim at being the preferred employer in our industry
and care about our employees' conditions at work. ISS's
employee rights are stated in our Code of Conduct, Inter-
national HR Standards and Leadership Principles. These
rights, which observe the Declaration of Human Rights, en-
sure proper working conditions for our employees, includ-
ing training opportunities, and support for introducing and
upholding minimum wages, proper health and safety stan-
dards, non-discrimination against employees and a ban on

32 - ANNUAL REPORT 2099 + STRATEGY — THE ISS WAY

forced, compulsory and child labour. ISS respects freedom
of association, the right to collective bargaining and to join
and form trade unions as an integrated part of our efforts
to ensure long-term business success.

From policies to action

ISS communicates and enforces its standards and policies across
the Group. In an organisation as large as ISS, one culture — one
approach - cannot be dictated. Each level of our organisation
must therefore fully grasp and embody the ISS Values and po-
licies and be empowered to take action on this basis.

Our commitment to doing business in a responsible manner
in line with our policies has been communicated to suppli-
ers, major customers and all employees by means of leaf-
lets, meetings, management training sessions and employee
magazines. When acquiring new companies and entering
new markets and joint venture opportunities, we actively
promote business conducted in compliance with the ISS
Code of Conduct.

All employees are responsible for reporting breaches of the
code to their immediate superior or in special circumstances
to the Head of Group Human Resources at ISS Head Office.

Leadership

The leaders in ISS, ranging from on-site team leaders to man-
agement, play an integral role in promoting and driving the
implementation of policies to all levels of ISS. Resources are
therefore invested in management development and in ISS
University, as described in the Employee section below. In
2009, ISS took another step forward with the launch of our
leadership principles, which serve as a guideline and bench-
mark for leaders.

Employees, environment and business integrity
Following the renewal of the global agreement between
Union Network International (UNI) and ISS in 2008, ISS and

UNI created the Global UNI-ISS Foundation in April 2009.
The purpose of the foundation is to monitor and improve
employment standards within the service industry globally.
The foundation ensures that the annual ISS donation of EUR
100,000 is invested in projects within the industry and coun-
tries in which ISS operates. The agreement and collaboration
since 2008 has prompted UNI to name ISS as an employer
that treats its workers well and is setting a good example for
other global employers.

ISS puts great effort into training employees to enhance
their skilis and encourage upward staff mobility. In the ma-
jority of country operations, IS$ plays an active role in em-
ploying vulnerable groups such as immigrants, ethnic minor-
ities, long-term unemployed individuals and other groups
for whom it is difficult to gain access to the labour market.

The corporate environmental policy provides a Group-wide
framework for running ISS in a sustainable way. In most
countries, the environmental policies and systems are al-

ready in place. By the end of 2009, ISS had developed and -

made Cleaning Excellence available to customers in coun-
tries representing 80% of our Cleaning volume. The Clean-
ing Excellence method is gentler on the environment and
ergonomically better for our employees than conventional
cleaning. Case studies show that Cleaning Excellence results
in significantly reduced water consumption and in less use
of cleaning substances. Furthermore, ISS globally focuses on
sustainable sourcing that leads to reduced COz emissions.
For instance approximately 85% of the entire ISS car fleet is
diesel-fuelled. Another initiative in 2009 involved broaden-
ing the use of environmentally friendly cleaning products
and expanding our agreements with producers of sustain-
able paper, tissues etc.

To support and ensure compliance with ISS's business integ-
rity policies, local operations have appointed ombudsmen
over the last few years. ISS has established a Group Busi-
ness Integrity Committee consisting of our Group CFO, Head
of Group Legal, and Head of Group Human Resources to
strengthen the enforcement of our policies. The Committee
is responsible for investigating reports of possible violations
of the Code of Conduct throughout the Group.

Going forward

ISS's commitment to doing business responsibly and imple-
menting our initiatives will continue steadily in the years
ahead. To keep ISS's CR approach focused, manageable and
tangible, an analysis together with external consultants was
conducted during 2009 to identify key CR focus areas and
establish how ISS can further prioritise its CR efforts.

In 2009, ISS decided to establish a Sustainability Steering
Group to strengthen its CR organisation. The steering group
will be headed by the Group CFO and work under the super-
vision of its Executive Sponsor, the Group CEO. The Steering
Group will coordinate and formulate our CR approach and
prioritise CR issues. A key goal for the steering group is to
use the analysis on key focus areas and other materials to
develop a comprehensive sustainability report for ISS on a
global basis.

EMPLOYEES

In 2009, the number of ISS employees increased by rough-
ly 13,000, an increase of 3% compared with 2008. A large
number of these additional employees joined both as a re-
sult of ISS expanding in the Asian region and through other
acquisitions. At the end of 2009, ISS had more than 485,000
employees in Europe, Asia, Pacific, Latin America and North
America.

Human Resources

The ISS Human Resources vision ”to be the preferred em-
ployer in our industry” supports the Group strategy by fo-
cusing on: upgrading leadership and management capabili-
ties, enhancing customers' service experience, integrating
acquired businesses, and ensuring competitiveness through
cost efficiencies.

The Human Resources strategy is implemented through ”ISS
International HR Standards”, which is the framework for
local HR initiatives. The processes cover:

Recruitment

Employee appraisals and reviews
Motivation and loyalty

Employee relations

Training and development

Talent management

Managing sickness and absenteeism
Reporting and monitoring

HR Support for M&A and contract integration
Health and safety

Remuneration, benefits and incentives
Succession planning

000000000000

Training

Training remains the cornerstone of the Human Resources
strategy. Resources are invested in staff and management
development - ranging from basic skilis training through
middle management programmes to fuli corporate MBAs.

STRATEGY — THE (SS WAY | ANMUAL BEPORT 2909 - 33

The philosophy is to offer tailored training at all functional
levels to enhance employee skills and encourage upward
staff mobility. Much attention is devoted to developing the
first management layer e.g. team leaders, supervisors and
contract managers, who are responsible for their immedi-
ate staff and customer interface. Most training is conducted
at ISS academies and training facilities in national and local
operations.

As in previous years, the ISS University programme portfolio
consisted of internal and external seminars designed in co-
operation with suppliers such as IMD, Henley Management
College and INSEAD. The use of internal trainers intensified
with the roll-out of the Business Process Framework, which
is an initiative to review and improve our processes. The IFS
Academy conducted centralised training in Calculation for
Planners and the ISS Facility Management System introduc-
tion.

The management induction programme, ISS Advantage,
continues for executives throughout the Group. During
2009, approximately 600 senior managers and specialists
from the entire Group attended a total of 41 workshops
and programmes at ISS University. This will be further de-
veloped by adding two additional mandatory management
programmes within strategy and leadership.

Health and safety

We operate on client premises in a number of challenging
environments such as the transport sector, major hospitals,
corporate canteens and public parks and gardens. We pro-
mote the fact that all employees are responsible for their
own safety and the safety of others who may be affected by
their work activities. Our efforts are concentrated on ensur-
ing the right working environment and giving our employ-
ees the training and equipment necessary to perform their
work safely.

We aim for continuous improvement in our health and
safety performance and plan to embrace this area as part
of overall business operations. At global and regional levels,
ISS will further develop its approach to health and safety by
establishing central health and safety functions and align-
ing reporting systems. This will enable regional and global
benchmarking and will challenge current local minimum re-
quirements.

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

34 . ANNUAL R22ORT 2609 | STRATEGY — Frit ISS WAY

full-time and daytime work, multi-task jobs, teamwork, skills
development, career opportunities, leisure activities, etc. In
2009, the share of full-time employees (working 25 hours or
more a week) rose to 71%. 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 for employee loyalty within ISS.
In 2009, 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 re-
cruiting, developing and promoting, ISS focuses on the indi-
vidual capabilities and qualifications of a candidate and not
on the person's gender, age, ethnic origin, religion, political
views, etc.

Thanks to its corporate culture, and aided by language
courses and adapted training materials, ISS is an employer of
choice for many immigrants and ethnic Mminorities. In all re-
gions but especially in countries such as Belgium, Denmark,
France, Norway, Sweden and the United Kingdom, IS$ is
among the largest employers of ethnic minorities. Similarly
ISS in Australia has implemented its indigenous Training and
Employment Strategy and Programme to actively engage
in realising its commitment for equitable indigenous re-
presentation and sustained indigenous participation across
its national workforce. The associated outcome-driven em-
ployment and retention commitment contributes directly to
the Australian Federal Government's undertaking to halve
within a decade the 24% gap between indigenous and non-
indigenous employment and workforce participation rates.

Employee relations

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
ISS employee representatives from across Europe. In June
2009, the EWC and ISS signed a new EWC agreement for the
next four years. The EWC agenda for the meetings includes
information and consultation on matters relating to the ISS
Group in Europe, in particular concerning the structure, fi-
nancial situation, development of the Group, the current
situation and probable trends of employment. Discussions
also involve the introduction of new working methods and
processes, training and health & safety issues, provided that
such issues may affect the interest of the employees of the
ISS Group in more than one country in Europe.

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CORPORATE GOVERNANCE

 

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DD —oisscrrnsrennress IFM SS

1 As described in note 36 to the consolidated financial statements, certain members 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 S.å r.l. (FS Invest), 1S5's Ultimate Parent Company. The total number of shares held by these directors and officers is below 2% of the total share capital.

Note: FS Invest is the ultimate parent company for which Consolidated Financial Statements are prepared. The Consolidated Financial Statements can be obtalned from FS Invest, 2 rue de Fosse, L-1536

Luxembourg.

The Board of Directors regulariy considers the Group's cor-
porate governance in relation to the Group's activities, busi-
ness environment and statutory requirements. Good corpo-
rate governance at ISS is implemented in a dynamic process
that involves the Board of Directors and the Company con-
tinuously assessing the need for adjustments for the benefit
of ISS's stakeholders and the Group itself.

Corporate governance policies and procedures at ISS take into
account the Danish Companies Act, the Danish Financial State-
ments Act, IFRS, the Action Plan for Corporate Social Respon-
sibility (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.

Corporate Responsibility (CR) reporting is included in the
”Strategy” chapter.

Shareholders

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.

36 - ANNUAL RE

 

EQT is a leading private equity group with operations in
Northern and Eastern Europe, Asia and the USA. EQT has
raised approximately EUR 13 billion in twelve funds. In to-
tal, EQT funds have invested approximately EUR 7 billion in
more than 70 companies. EQT Partners, acting as exclusive
investment advisor to EQT, is headquartered in Stockholm
and maintains offices in Copenhagen, Helsinki, Oslo, Frank-
furt, Munich, Zurich, Warsaw, London, New York, Shanghai
and Hong Kong.

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 80 billion of capital (induding actual 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 have no
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 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, under the shareholders' agreement, certain ac-
tions require special approval by the Principal Shareholders.

The Board convenes at least six times a year. Extraordinary
meetings are convened whenever specific matters need at-
tention between scheduled meetings. Twelve Board meetings
were held in 2009. The Board receives a monthly financial 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 recommendations from the
Acquisition Committee (see ”Board Committees” below). The
Board annually performs a self-assessment to assess the com-
petencies of the Board, the effectiveness of its work and how
the Board ensures that good corporate governance is in place.

According to the shareholders' agreement, EQT and GS Cap-
ital 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.

More details on the Board members are available on page
42 of this report and in note 36 to the consolidated financial
statements. Remuneration to the Board of Directors of the
Group is disclosed in note 4 to the Consolidated Financial
Statements.,

Board committees
The Board has established four committees that all report
to the Board.

The Remuneration Committee decides the remuneration
packages and incentive schemes for the Group CEO, and
provides input for other EGM members and certain senior
officers, 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
Steven Sher), and the Group CEO participates in its meet-
ings. Ole Andersen is chairman of the committee. The com-
mittee held one meeting in 2009.

The Audit Committee evaluates ISS's external financial re-
porting, and monitors and challenges ISS's main accounting
policies and estimates, as well as systems of internal controls
and risk management. Its duties also include considering the
relationship with ISS's external auditor and reviewing the
audit process. The committee consists of at least three mem-
bers of the Board (currently Leif Ostling, John Murray Allan,
Christoph Sander and Steven Sher), and meetings are also
attended by the Group CFO, the Head of Group Controlling,
Head of Group Internal Audit and the Group General Coun-
sel. Leif Ostling is chairman of the committee, which held
four meetings in 2009.

The Acquisition Committee considers 1SS's procedures for
acquisitions and divestments, reviews the acquisition and
divestment pipeline, approves certain acquisitions and di-
vestments in accordance with adopted procedures, and
evaluates setected effected acquisitions. The committee
consists of at least three members of the Board (currently
Christoph Sander, Peter Korsholm and Steven Sher), and
meetings are also attended by the Group COO, Group CFO,
Head of Group Strategy and Business Development and
Head of Group M&A. Christoph Sander is chairman of the
committee, which held six meetings in 2009.

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 eight meetings in 2009.

Group Management

The Executive Group Management of ISS (the ”EGM”) con-
sists of Group CEO Jørgen Lindegaard, Group COO Jeff
Gravenhorst and Group CFO Jakob Stausholm. The primary
tasks of the EGM are to carry out day-to-day management of
the Group, develop new strategic initiatives, develop Group
policies, monitor Group performance and evaluate acquisi-
tions and divestments.

The Group Management (the ”GM”) comprises the EGM
and the following Corporate Senior Officers: Regional CEOs
Luis Andrade, Troels Bjerg, Jean-Manuel Bulflukian, Jacob
Gåtzsche, Hans John Oiestad, David Openshaw and Mar-
tin Gaarn Thomsen, Head of Group Human Resources Helle
Havgaard, Head of Group Strategy and Business Develop-
ment Todd O'Neill, Head of Group M&A Jens Ebbe Olesen,
Group General Counsel Bjørn Raasteen, Head of Corporate
Clients Magnus Åkerberg, Head of Group Treasury Barbara
Plucnar Jensen, Head of Group Controlling Peter Harder
Thomsen and Head of Group IT Henrik Trepka. The mem-

COSPORSTE GOVERNANCE | AMNUAL RISORT 2099 - 37

w

bers of the GM have been appointed by the EGM to carry
out day-to-day management within their functional areas,
including providing strategic direction, managerial support
and financial control.

Two functional boards, the Operational Board and Finan-
cial Board, were established in 2009 to ensure develop-
ment, alignment and roll-out of key initiatives within the
Boards' responsibility areas. The Operational Board is head-
ed by the Group COO, and includes the Group CEO, the
Regional CEOs, Head of Corporate Clients and Head of Excel-
lence Centres. The Financial Board is headed by the Group
CFO and includes the Head of Group Controlling, Head of
Group Treasury, Head of Group IT, Head of Group Internal
Audit, Head of Group Risk Management, Head of Group Tax
and Regional CFOs. The primary tasks of the two Boards are
to develop and execute new strategic initiatives, develop and
implement Group policies, monitor Group performance, re-
view operational and financial matters, coordinate and eval-
uate acquisitions and divestments and provide the EGM with
input for decision making.

The members of the GM are remunerated with a combina-
tion of a fixed salary and, for most members, a bonus that
is capped at 60% of their fixed salary. The employment con-
tracts of the GM members are subject to termination periods
of between 12 and 18 months. Directorships in companies in
the ISS Group held by members of the GM are not remuner-
ated separately.

No member of the GM 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 lo-
cal legislation and practice. ISS delegates substantial auton-
omy and considerable powers to the country management
teams including management of operations in their relevant
markets, financial reporting, local tax and compliance with lo-
cal legislation and practices. The country management teams
for each relevant country are described on the ISS website at
www.issworld.com.

Management Participation Programme

The Principal Shareholders have established a Manage-
ment Participation Programme, under which the EGM and a
number of senior officers of the Group can invest. The pro-

 

gramme is structured as a combination of direct and indi-
rect investments in a mix of shares and warrants in FS Invest
based on market values until the Principal Investors" exit. At
the introduction of 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 329,404 were
outstanding as of 31 December 2009.

Further, non-executive members of the Board (except re-
presentatives 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 2009, the net investments were as follows:

Investment
measured at cost
(DKK million)

Group Persons

Board of Directors

Country Management

 

Risk management

ISS continuously seeks to identify and evaluate risk factors
that may have an adverse effect on the ISS Group's activities,
financial performance, financial position and future growth.
For a detailed, non-exhaustive list of the risk factors to which
the Group is subject, reference is made to the Senior Notes
Offering Memorandum dated 16 July 2009 (pages 19-34)
available from the Group's website at www.issworld.com.

Overall, operational and financial risks are managed in
accordance with policies adopted by the Board. In addi-
tion, detailed plans and business procedures for a number
of functions are described in manuals and guidelines. The
policies for operational and financial risk management and
ISS Group standards are documented and distributed to the
operating companies. ISS's Group Internal Audit, Group Risk
Management and Group Treasury departments supervise
compliance with these standards.

OPERATIONAL RISK MANAGEMENT

Operational risk management focuses principally on proce-
dures for cdlaims management, entering into contracts, oc-
cupational 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 accord-
ance 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, liquidity risk, currency risk and credit risk. The ISS
Group's financial risk management is described in note 33 to
the Consolidated Financial Statements.

Main elements of the Group's internal

control environment

OVERALL CONTROL ENVIROMENT

The Board and the EGM acknowledge their responsibility for
the Group's internal control and risk management systems
related to preparation of the Consolidated Financial State-
ments including compliance with applicable laws and other
regulation. The Audit Committee monitors and challenges
the EGM in its assessment of material risks and the internal
controls and risk management systems that are put in place
to manage the identified material risks. The Audit Commit-
tee reports to the Board.

The Group's internal control and risk management systems
are developed to mitigate rather than eliminate risks identi-
fied in relation to the financial reporting process and thus
assist in ensuring that the Consolidated Financial Statements
provide a true and fair view of the financial performance
and financial position of the Group without material errors.
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 envi-
ronment and to manage identified risks.

ISS considers internal 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
as well as the financial reporting. 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 aim of the established control environment is to provide

the Board and the EGM with reasonable assurance that:

> management reporting is reliable and in compliance with
internal policies and procedures and gives a true and fair
view of the financial performance and financial position

> material 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 business and assets

> ISS's business is conducted in compliance with applicable
legistation, regulation and ISS policies

RISK ASSESSMENT

Risks related to the Consolidated Financial Statements are
annually identified and assessed based on a materiality test
including a risk assessment of the impact of quantitative
and qualitative factors. The evaluation of the risks includes
an assessment of the likelihood that an error will occur and
whether such an error may be material.

The risk of errors is relatively higher for accounting areas
that requires management judgement and/or are transac-
tions that are generated through complex accounting proc-
esses. Accounting areas which requires management judge-
ment are described in note 2 to the Consolidated Financial
Statements in the section ”Critical Accounting Estimates and
Judgements”.

On an ongoing basis the Audit Committee discusses:

> material and relevant new accounting pronouncements
and implementation of such

> evaluation of the overall effectiveness of the internal con-
trols for financial reporting

> accounting for material legal and tax issues and signifi-
cant accounting estimates.

CONTROL ACTIVITIES

In order to sustain a sound control environment, specific
control activities are designed to obtain the desired assur-
ance. These measures must ensure that all relevant aspects
of a specific area are covered, and that the combination of
control activities monitors all relevant aspects of the busi-
ness. The control activities are based on the risk assessment
made by EGM. The purpose of the control activities is to en-
sure that material errors in the financial reporting are pre-
vented, detected and corrected.

The Group has implemented a formalised financial report-
ing process that includes:

CORPORATE GOVERNANCE | ANNUAL REPOST 2903 . 39

> reporting of financial performance and financial position
— all countries must report a full income statement, ba-
lance sheet, cash flow statement, portfolio analysis etc.
on a monthly basis. Any significant variance from budgets
must be explained

> reporting of cash flow forecasts — all countries must report
the daily cash flow forecast for a rolling three-month pe-
riod. Subsequently, actual figures are continuously moni-
tored by ISS's Group Treasury department for deviations
from the forecasted figures

> budgets and financial plans — all countries must prepare
budgets and plans for the following financial year in a
pre-defined process and format. Regional management
teams review the proposed budgets and plans with the
countries

> business reviews — monthly meetings between regional
management and country management with a focus on
the current performance and state of the business

> full-year forecasts — all countries must update and report
their full-year estimates twice a year

> strategy reviews — annual meetings with country mana-
gers at which the strategy is discussed, and priorities and
plans for the coming year are agreed

> acquisitions and divestments - all acquisition and divest-
ment proposals must be presented in a predefined acqui-
sition or divestment report and valuation model for ap-
proval. Board or Acquisition Committee approval is re-
quired for large or strategic acquisitions and divestments

INFORMATION AND REPORTING SYSTEMS

All countries use a standardised financial reporting tool.
Due to the decentralised structure, various ERP platforms
exist within the Group. However, the number of different
ERP platforms is continuously being reduced.

Information and communication systems to ensure account-
ing and internal control compliance have been established,
including an Accounting Manual, Reporting Instructions,
Budgeting Manual and other relevant guidelines.

MONITORING

Every month the Group's subsidiaries report financial in-
formation and comments on financial developments to the
Group Finance function. This information is used to prepare
Consolidated Financial Statements and reports submitted to
the Board and EGM. Financial reporting from the subsidiar-
ies is controlled on a monthly basis (see control activities).

The country management teams are responsible for ensur-
ing that the control environment in each operating country
is sufficient to avoid material error in the country's financial
performance and financial position reported for consolida-

40 - ANNUAL RE2C087T 2009 | CORPGRATE GOVERNANCE

tion purposes. The regional management teams provide
governance of the country operations. In order to ensure
that adequate internal control procedures are maintained
locally, Group internal Audit visits the country organisations
regularly. The Group's internal auditors visits take place ac-
cording to a plan for the year approved by the Audit Com-
mittee and in accordance with the control procedures and
standards defined in ISS's control manual. The findings and
conclusions of the visits, which include recommendations on
how to improve the control environment, are presented in
reports addressed to country and regional managements,
representatives of EGM and the external auditor. The Group's
internalauditors perform follow-upreviewstoensurethatthe
recommendations are implemented. The results of the mate-
rial internal audit visits are presented to the Audit Commit-
tee, and the Audit Committee assesses the results reported
and uses this assessment in their assessment of the general
control environment and performance and financial posi-
tion when reviewing the internal Audit Plan for the coming
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
external auditor is essential for the control environment. 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
records and financial statements and recruitment for senior
management positions.

The company collaborates with its external auditor at coun-
try level and at Group level in relation to procedures and
internal controls by exchanging internal audit 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
consolidated financial statements and any other long-form
audit reports. Auditor reports are discussed in detail in the
Audit Committee.

The Board reviews the Annual Report at a Board meeting at-
tended by the external auditor. The findings of the external
auditor and any major issues arising during the course of the
audit are discussed and key accounting principles and audit
judgements are reviewed.

SACHA ROSSINELLI

ers the full house of Integrated Facility Services and with
i argest employers in the country.

 

BOARD OF DIRECTORS

TR

V

 

(OD) Ole Andersen
(1956)
Chairman
Member of the Board since
27 May 2005.
Jointly nominated by EQT and
GS Capital Partners.

G) Peter Korsholm
(1971)
Member of the Board
since 16 April 2008.
Nominated by EQT.
Partner and Head of the
Copenhagen office of
EQT Partners.

ISS BOARDS

GQ Leif Ostiing
(1945)
Vice-Chairman
Member of the Board
since 26 October 2005.
Jointly nominated by EQT
and GS Capital Partners.
President and CEO of Scania AB.

Casper von Koskull

(1960)

Member of the Board

since 9 December 2009.
Nominated by GS Capital
Partners. Managing Director
of Goldman Sachs

International in London.

G John Murray Allan
(1948)
Member of the Board
since 20 June 2008.
Jointly nominated by EQT
and GS Capital Partners.

Christoph Sander

(1962)

Member of the Board

since 6 April 2006.

Jointly nominated by EQT and

GQ

GS Capital Partners.

Q

 

BOARD OF DIRE RS OF ISS HOLDING A/S

Marcus Brennecke
(1961)

Member of the Board
since 27 May 2009.
Nominated by EQT.
Senior Partner and Head
of the Munich office of
EQT Partners.

Steven Sher

(1970)

Member of the Board

since 12 December 2007.
Nominated by GS Capital Partners.
Managing Director for the
Principal Investment Area of
Goldman Sachs International.

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.)

42 - ANNUAL REPORT 2002 |

BOARD C: DIRECTØRS

EXECUTIVE MANAGEMENT

 

Jørgen Lindegaard Jakob Stausholm Jeff Gravenhorst

(1948) (1968) (1962)

Group Chief Executive Officer, Group Chief Financial Officer, Group Chief Operating Officer.
Head of Executive With ISS since 2008. With ISS since 2002.

Group Management.
With ISS since 2006.

 

GROUP MANAGEMENT

Q

 

   
   

JØRGEN LINDEGAARD JEFF GRAVENHORST JAKOB STAUSHOLM

G) Helle Havgaard (1959) GE) Luis Andrade (1960) (GB) Barbara Plucnar Jensen (1971)
Head of Group Human Resources Regionat CEO Head of Group Treasury

QG Jens Ebbe Olesen (1962) d Troels Bjerg (1963) Peter Harder Thomsen (1971)
Head of Group M&A Regional CEO Head of Group Controlling

G) Todd O'Neil! (1966) Jean-Manuel Bullukian (1964) (B) Henrik Trepka (1963)
Head of Group Strategy and Regional CEO Head of Group IT

Business Development
(O) Jacob Gåtzsche (1967)
(0) Bjørn Raasteen (1964) Regional CEO
Group General Counsel ”

Hans John Oiestad (1955)
G) Magnus Åkerberg (1963) Regional CEO
Head of Corporate Clients

(1) David Openshaw (1949)
Regional CEO

(2) Martin Gaarn Thomsen (1970)
Regional CEO

 

CHILE
Chile is the largest co i i lar
ini j Fre
tacama, one of the
k at 3,000 meters above sea level

 

MANAGEMENT STATEMENT

COPENHAGEN, 11 MARCH 2010

The Board of Directors and the Executive Group Manage-
ment have today discussed and approved the Annual Report
2009 of ISS Holding A/S. The Annual Report 2009 has been
prepared in accordance with International Financial Report-
ing Standards (IFRS) as adopted by the EU and additional
Danish disclosure requirements for annual reports.

In our opinion, the Consolidated Financial Statements and
Parent Company Financial Statements give a true and fair
view of the Group's and the Parent Company's assets, liabili-
ties and financial position at 31 December 2009 and of the

     
  

EXECUTIVE GROUP MANAGEMENT

-

Jørgen Uindedaard N

Group Chief Executive Officer

BO OF-DIRECTORS

Ole Andersen
Chairman

l

Marcus Brennecke Peter Korsholm

cm

Christoph Sander

Steve Sher

roup Chief Operating Officer

ZR
C —e

results of the Group's and the Parent Company's operations
and cash flows for the financial year 2009. Furthermore, in
our opinion the Management's review gives a fair review of
the development and performance of the Group's and the
Parent Company's activities and of the Group's and the Par-
ent Company's financial position taken as a whole, together
with a description of the most significant risks and uncer-
tainties that the Group and Parent Company may face. In
addition, the section Capital Structure pages 137-140 gives a
fair review of the development of the Group's capital struc-
ture.

CM Jod

Jakob Stausholm
Group Chief Financial Officer

co
Jiu. sk

John Murray Allan

LÆ KDS

Casper von Koskull

INDEPENDENT AUDITOR'S REPORT

To the shareholders of ISS Holding A/S

We have audited the Consolidated Financial Statements and
Parent Company Financial Statements of ISS Holding A/S
for the financial year 1 January - 31 December 2009 (pages
49-133). The Consolidated Financial Statements and Parent
Company Financial Statements comprise the Income State-
ment, Cash Flow Statement, Statement of Financial Position,
Statement of Comprehensive Income, Statement of Changes
in Equity and Notes to the Financial Statements for the Group
as well as for the parent company. The Consolidated Financial
Statements and Parent Company Financial Statements have
been prepared in accordance with the International Financial
Reporting Standards (IFRS) as adopted by the EU and addi-
tional Danish disclosure requirements.

in addition to our audit, we have read the Management's
review, pages 7-44 and issued a statement in this regard.

Management's responsibility

Management is responsible for the preparation and fair
presentation of the Consolidated Financial Statements and
Parent Company Financial Statements in accordance with the
International Financial Reporting Standards (IFRS) as adop-
ted by the EU and additional Danish disclosure requirements
for Consolidated Financial Statements and Parent Company
Financial Statements. This responsibility includes: designing,
implementing and maintaining internal control relevant to
the preparation and fair presentation of the Consolidated
Financial Statements and Parent Company Financial State-
ments that are free from material misstatement, whether
due to fraud or error; selecting and using appropriate ac-
counting policies; and making accounting estimates that are
reasonable in the circumstances. Further, it is the responsi-
bility of Management to prepare and issue a Management's
review that gives a fair review of the development in the
Group's and the Parent Company's activities and financial
matters, the results for the year and the Group's and the
Parent Company's financial position as well as information
about material risks and uncertainties affecting the Group
and the Parent Company.

Auditor's responsibility

Our responsibility is to express an opinion on the Consoli-
dated Financial Statements and Parent Company Financial
Statements based on our audit. We conducted our audit in
accordance with Danish and International Standards on Au-
diting. Those standards require that we comply with ethi-
cal requirements, and plan and perform the audit to obtain
reasonable assurance regarding whether the Consolidated
Financial Statements and Parent Company Financial State-
ments are free from material misstatement.

    
  

An audit involves performing procedures to obtain audit
evidence on the amounts and disclosures in the Consoli-
dated Financial Statements and Parent Company Financial
Statements. The procedures selected depend on the audi-
tor's judgement, including the assessment of the risks of
material misstatement of the Consolidated Financial State-
ments and Parent Company Financial Statements, whether
due to fraud or error. In making those risk assessments, the
auditors consider internal control relevant to the Company's
preparation and fair presentation of the Consolidated Finan-
cial Statements and Parent Company Financial Statements
in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal con-
trol. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of ac-
counting estimates made by management, as well as evalu-
ating the overall presentation of the Consolidated Financial
Statements and Parent Company Financial Statements.

We believe that the audit evidence we have obtained is suffi-
cient and appropriate to provide a basis for our audit opinion.

Our audit did not result in any qualification.

Opinion

In our opinion, the Consolidated Financial Statements and Par-
ent Company Financial Statements give a true and fair view of
the Group's and the Parent Company's assets, liabilities and fi-
nancial position at 31 December 2009 and of the results of the
Group's and the Parent Company's operations and cash flows
for the financial year then ended in accordance with the In-
ternational Financial Reporting Standards (IFRS) as adopted by
the EU and additional Danish disclosure requirements.

Statement on the Management's review

Pursuant to the Danish Financial Statements Act, we have
read the Management's review, pages 7-44 in the annual
report. We have not performed any additional procedures
in addition to the audit of the Consolidated Financial State-
ments and Parent Company Financial Statements. On this
basis, it is our opinion that the information given in the Man-
agement's review is consistent with the Consolidated Finan-
cial Statements and Parent Company Financial Statements.

KPMG
Statsautoriseret Revisionspartnerselskab

UeE 4 Jåralet
er Olsen laus Krånba

tate Authorised State Authorised
ublic Accountant Public Accountant

- 47

BEGTIVNTS
TeliaSonera offers both landline and mobile communications services to
i i i TA NAP

BR RER Russia and Turkey, and in Spain.
TeliaSonera Finfand With catering, janitorial services, maintenance of out-
door areas, Maintenance of t i ion facilities as well as techni-

He: ii Våatåinen works at lehaSonera's staff restaurant, which
serves about meals every day. i

(SIRIVA'ATAINEN

 

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

1 January —

Note

4,5
20

14, 16

10, 14, 15
14
9, 18

31 December. Amounts in DKK million

2009
Revenue 69,004
Staff costs (44,781)
Cost of sales (6,044)
Other operating expenses (13,437)
Depreciation and amortisation ” (868)
Operating profit before other items ” 3,874
Other income and expenses, net (551)
Integration costs (46)
Operating profit ” 3,277
Share of result from associates 4
Net finance costs (2,308)
Profit before tax and goodwill impairment/amortisation of brands and customer contracts 973
Income taxes (588)
Profit before goodwill impairment/amortisation of brands and customer contracts 385
Goodwill impairment and write-down (1,246)
Amortisation of brands and customer contracts ” (1,129)
Income tax effect ? 361
Net profit/(loss) for the year (1,629)
Attributable to:
Owners of ISS Holding (1,647)
Non-controlling interests 18
Net profit/(loss) for the year (1,629)

1” Excluding 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.
” Excluding tax effect of Goodwill impairment and write-down and Amortisation of brands and customer contracts,

1) Includes customer contract portfolios and related customer relationships.

” Income tax effect of Goodwill impairment and write-down and Amortisation of brands and custorner contracts.

2008
68,829
(44,156)

(6,134)

(13,609)

(869)
4,061

(242)
(66)

3,753

3
(2,731)

1,025
(531)
494
(399)
(1,008)

282

(631)

(641)
10

(631)

COMSOLIDATED FIMAMCIAL STATEMEMTS 1 ANNUAL REPORT 2909 - 49

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

1 January —

Note

35
35
29
29

31 December. Amounts in DKK million

Net profit/(loss) for the year

Other comprehensive income

Foreign exchange adj. of subsidiaries and non-controlling interests
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 regarding other comprehensive income

Other comprehensive income
Total comprehensive income for the year

Attributable to:

Owners of ISS Holding
Non-controlling interests

 

2009
(1,629)
364

(327)
325

(45)
18

339

(1,290)

(1,308)
18

(1,290)

2008

(631)

(792)
(266)
(147)
(182)

25

5

36

(1,321)

(1,952)

(1,961)
9

(1,952)

CONSOLIDATED STATEMENT OF CASH FLOWS

1 January -

Note

14, 16
11

23

12
12
13
13

25

31 December. Amounts in DKK million

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

Non-controlling interests

Cash flow 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

2009

3,874
868
(137)
(50)
(371)
(58)
(394)

3,732
(914)
22
(897)
(43)
(1,832)
5,849
(5,177)
(2,205)
(14)
(1,547)
353
2,961
353
50

3,364

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

CONSOLIDATED FINANCIAL STATEMEMTS | ANNUAL REPORT 2009 - 54

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December. Amounts in DKK million

Note

14, 15
16
17
18
19

20
21
22
23
24
25
25
26

27

28
29
18
30

28

23
31
30
26

Assets

Intangible assets

Property, plant and equipment
Investments in associates
Deferred tax assets

Other financial assets

Total non-current assets

Inventories

Trade receivables
Contract work in progress
Tax receivables

Other receivables
Securities

Cash and cash equivalents
Assets held for sale

Total current assets

Total assets

Equity and liabilities

Total equity attributable to owners of ISS Holding
Non-controlling interests

Total equity

Long-term debt

Pensions and similar obligations
Deferred tax liabilities

Other provisions

Total long-term liabilities

Short-term debt

Trade payables

Tax payables

Other liabilities

Other provisions

Liabilities related to assets held for sale
Total current liabilities

Total liabilities

Total equity and liabilities

52 - ANNUAL REPORT 2029 1 CONSOLIDATED FIMANCIAL STATEMENTS

2009

35,452
2,004
21
514
281

38,272

303
10,130
195
308
1,071
97
3,364
614

16,082

54,354

2,190
23

2,213

28,486
837
2,356
379

32,058
5,617
2,624
306
10,734
423
379
20,083

52,141

54,354

2008

36,001
2,276
24

472
238

39,011

264
10,097
182
228
776

" 86
2,961

14,594

53,605

3,498
35

3,533
31,210
834
2,498
397
34,939
1,279
2,835
123
10,461
435
15,133
50,072

53,605

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 31 December. Amounts in DKK million

Attributable to owners of ISS Holding

Non-

Share  Retained Translation Hedging controlling Total
2009 capital earnings reserve reserve Total interests equity
Equity at 1 January 100 4,729 (1,047) (284) — 3,498 35 3,533
Total comprehensive income for the year - (1,668) 364 (4) (1,308) 18 (1,290)
Impact from acquired and divested companies, net - - - - - (16) (16)
Dividends paid - - - - - (14) (14)
Total changes in equity - (1,668) 364 (4) (1,308) (12) (1,320)
Equity at 31 December 100 3,061 (683) (288) 2,190 23 2,213
2008
Equity at 1 January 100 5,486 (256) 129 5,459 59 5,518
Total comprehensive income for the year - (757) (791) (413) (1,961) g (1,952)
Impact from acquired and divested companies, net - - - - - (11) (11)
Dividends paid - - - - - (22) (22)
Total changes in equity - (757) (791) (413) (1,961) (24) (1,985)
Equity at 31 December 100 4,729 (1,047) (284) 3,498 35 3,533

Translation reserve

The translation reserve comprises ali 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 balances which are considered part of the investment in
subsidiaries/joint ventures, loans in foreign currency and derivatives hedging net investments in foreign subsidiaries/joint ventures.

Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change after tax in fair value of cash flow hedging instruments
when the hedged transactions have not yet occurred.

Dividends
No dividends have been proposed or declared before the Annual Report was issued.

CONSOLIDATED FINANCIAL STATEMENTS 1 ANNUAL REPORT 2009 - 53

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note

DODOS dB W

==

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
38
39

Accounting policies
Significant accounting policies
Critical accounting estimates and judgements

Income statement

Segment reporting

Staff costs

Share-based payments

Fees to auditors

Other income and expenses, net

Net finance costs

Income taxes

Goodwili impairment and write-down

Statement of cash flows

Changes in working capital

Acquisition and divestment of businesses
Investments in non-current assets

Statement of financial position
Intangible 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

Securities, cash and cash equivalents
Assets and Liabilities held for sale
Share capital

Borrowings

Pensions and similar obligations
Other provisions

Other liabilities

Other

Contingent liabilities

Financial risk management

Financial assets and liabilities

Derivatives

Related parties

Interests in joint ventures

Subsequent events

Subsidiaries, associates, joint ventures and SPEs

54 - ANNUAL REPORT 2099 | CONSOLIDATED FINANCIAL STATEIENTS

Page

55
65

68
72
73
74
74
75
76
77

77
78
83

85
88
88
89
91
91
91
92
93
93
94
94
95
95
97
101
102

102
104
107
109
111
113
113
114

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 2009 comprise ISS Holding A/S and
its subsidiaries (together referred to as ”the Group”), jointly control-
led entities and associates.

STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in ac-
cordance with International Financial Reporting Standards (IFRS) as
adopted by the EU and additional Danish disclosure requirements
(class C large size) 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 ASB.

BASIS OF PREPARATION
The consolidated financial statements are presented in Danish kro-
ner (DKK) (rounded to nearest DKK million), which is ISS Holding
A/S's functional currency.

The consolidated financial statements have been prepared on the
historical cost basis 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.

The accounting policies set out below have been applied consistently
to all periods presented in these consolidated financial statements
except for the changes as explained below in ”Changes in account-
ing policies”,

CHANGES IN ACCOUNTING POLICIES
With effect from 1 January 2009 the Group has implemented:

> JAS 1 (revised 2007) ”Presentation of Financial Statements”;

> IAS 23 (revised 2007) ”Borrowing Costs”;

> IFRS 2 ”Share-based Payment: Vesting Conditions and Cancella-
tions”;

> Amendments to IAS 32 and IAS 1: ”Puttable Financial Instruments
and Obligations Arising on Liquidation”;

> Amendments to IFRS 1 and IAS 27: ”Cost of an investment in a
Subsidiary, Jointly Controlled Entity or Associate”;

> Amendment to IFRS 7: ”Improving Disclosures about Financial In-
struments”;

> Parts of ”Improvements to IFRSs May 2008”.

In 2009, IFRIC 15 "Agreement for the Construction of Real Estate"
and IFRIC 16 "Hedges of Net Investments in a Foreign Operation"
have been approved with different effective dates in the EU than the

corresponding effective dates under IASB. Consequently, the Group
has early adopted these with effect from 1 January 2009 so that the
implementation follows the effective dates under 1AS8B.

The adoption of these Standards and !Interpretations did not affect
the recognition and measurement. The new Standards and Interpre-
tations only resulted in changes to the presentation and disclosure in
the notes. Comparative figures have been adjusted accordingly.

IAS 1 "Presentation of Financial Statements" introduces the term to-
tal comprehensive income, which represents changes in equity dur-
ing a period other than those changes resulting from transactions
with owners in their capacity as owners. Total comprehensive income
may be presented in either a single statement of comprehensive
income (effectively combining both the income statement and all
non-owner changes in equity in a single statement), or in an income
statement and a separate statement of comprehensive income. The
Group has chosen the latter of the two alternatives. Furthermore,
changes in equity resulting from transactions with owners must be
presented in a separate statement.

IAS 23 ”Borrowing Costs” requires capitalisation of borrowing costs
directly attributable to the acquisition, construction or production
of a qualifying asset as part of the cost of that asset. The Group does
not have any qualifying assets and consequently the adoption of IAS
23 did not impact the Group's consolidated financial statements.

BASIS OF CONSOLIDATION

The consolidated financial statements comprise the parent company
ISS Holding A/S and subsidiaries in which ISS Holding A/S has control
of financial and operating policies in order to obtain a return or
other benefits from its activities. Control is presumed to exist when
ISS Holding A/S owns, directly or indirectly, more than 50% of the
voting rights of an entity or otherwise has a controlling interest.

Special purpose entities (SPEs) The Group has established a number
of SPEs with the purpose of raising external funding to the Group.
The Group does not have any direct or indirect shareholdings in
these entities. An SPE is consolidated if, based on an evaluation of
the substance of its relationship with the Group and the SPE's risk
and rewards, the Group concludes that it controls the SPE. SPEs con-
trolled by the Group were established under terms that impose strict
limitations on the decision-making powers of the SPEs' management
and that result in the Group receiving the majority of the benefits
related to the SPESs' operations and net assets, being exposed to the
majority of risks incident to the SPEs' activities, and retaining the
majority of the residual or ownership risks related to the SPEs or
their assets.

Associates Entities in which the Group has a significant influence,
but which it does not control, are considered associates. Significant

influence is presumed to exist when the Group owns directly or indi-
rectly more than 20% of the voting rights but less than 50%. When

continues

CONSOLIDATED FINANCIAL STATEMENTS | ANHUAL REPORT 2009 - 55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

assessing whether ISS Holding A/S has control or significant influ-
ence, potential voting rights that are exercisable at the reporting
date are taken into account. Investments in associates are accounted
for using the equity method.

Joint ventures The Group's interests in jointly controlled entities are
regarded as joint ventures and are consolidated proportionally, and
the individual accounting entries are recognised in proportion to the
ownership share.

A group chart is included on page 114.

The consolidated financial statements have been prepared as a con-
solidation of the financial statements of ISS Holding A/S, subsidiaries,
SPEs and proportionally consolidated entities prepared according to
the Group's accounting policies. On consolidation, intra-group in-
come and expenses, shareholdings, intra-group balances and divi-
dends and realised and unrealised gains and losses on intra-group
transactions are eliminated. Unrealised gains on transactions with
associates and proportionally consolidated entities are eliminated in
proportion to the Group's ownership share of the entity. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that impairment has not taken place.

Investments in subsidiaries and proportionally consolidated entities
are set off against the proportionate share of the subsidiaries' fair
value of identifiable net assets, including recognised contingent li-
abilities, at the acquisition date.

The accounting items for subsidiaries are included in full in the con-
solidated financial statements. The non-controlling interest's share
of the net profit/loss for the year and of the equity of subsidiaries,
which are not wholly owned are included in the Group's net profit/
loss and equity respectively, but is disclosed separately.

Business combinations Acquired businesses or entities formed dur-
ing the year are recognised in the consolidated financial statements
from the date of acquisition or formation. Businesses which are
divested or wound up are recognised in the consolidated income
statement until the date of divestment or winding-up. Comparative
figures are not restated for businesses acquired, divested or wound

up.

In acquisitions where the Group obtains control of the acquired busi-
ness the purchase method is used. The identifiable assets, liabilities
and contingent liabilities of acquired businesses are recognised in
the statement of financial position at fair value at the acquisition
date. 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. Deferred tax related to fair value
adjustments is recognised.

On initial recognition non-controlling interests are recognised in

56 - ANNUAL REPORT 2008 I CONSOLIDCATED FINANCIAL STATEMENTS

the consolidated financial statements at the proportionate share
of identifiable assets, liabilities and contingent liabilities of the ac-
quired business.

The acquisition date is the date when the Group effectively obtains
control of the acquired business.

Any excess of the cost of acquisition over the fair value of identi-
fiable assets, fiabilities and contingent liabilities acquired is recog-
nised as goodwill under intangible assets. Goodwill is not amortised
but tested for impairment annually. The first impairment test is per-
formed no later than at the end of the acquisition year. Upon acqui-
sition, goodwill is allocated to the cash-generating units, which sub-
sequently form the basis for the impairment test. Goodwill and fair
value adjustments in connection with the acquisition of a foreign en-
tity with a functional currency other than the presentation currency
used in the Group are treated as assets and liabilities belonging to
the foreign entity and translated into the foreign entity's functional
currency at the exchange rate at the transaction date. Negative dif-
ferences (negative goodwill) are recognised in the income statement
at the acquisition date.

The cost of a business combination comprises the fair value of the
consideration agreed upon and costs directly attributable to the ac-
quisition. If parts of the consideration are conditional upon future
events, these parts are included in the cost to the extent that the
events are probable and the consideration can be measured reli-
ably.

If uncertainties regarding measurement of acquired identifiable as-
sets, liabilities and contingent liabilities exist at the acquisition date,
initial recognition will take place on the basis of provisionally de-
termined fair values. If identifiable assets, liabilities and contingent
liabilities are subsequently determined to have a different fair value
at the acquisition date from that first assumed, goodwill is adjusted
up until 12 months after the acquisition. The effect of the adjust-
ments is recognised in the opening balance of equity and the com-
parative figures are restated accordingly. Subsequently, goodwill is
only adjusted as a result of changes in estimates of contingent con-
siderations, except in cases of material error. However, subsequent
realisation of the acquired entity's deferred tax assets not recognised
at the acquisition date will require recognition of the tax benefit in
the income statement and simultaneous write-down of the carrying
amount of goodwill to the amount which would have been recog-
nised if the deferred tax asset had been recognised as an identifiable
asset at the acquisition date.

Gains or losses on the divestment or winding-up of subsidiaries, as-
sociates or joint ventures are measured as the difference between
the sales or winding-up amount adjusted for directly related divest-
ment 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 exchange rate adjustments on divested

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

or wound up subsidiaries, associates or joint ventures recognised in
equity are included in the income statement under Net finance costs
at the time of divestment or winding-up.

Foreign currency For each of the reporting entities in the Group,
a functional currency is determined. The functional currency is the
primary currency used for the reporting entity's operations. Transac-
tions denominated in currencies other than the functional currency
are considered transactions denominated in foreign currencies.

On initial recognition, transactions denominated in foreign currencies
are translated to the functional currency at the exchange rates at the
transaction date. Foreign exchange differences arising between the
exchange rates at the transaction date and at the date of payment are
recognised in the income statement under Net finance costs.

Receivables, payables and other monetary items denominated in for-
eign currencies are translated at the exchange rates at the reporting
date. The difference between the exchange rates at the reporting
date and at the date at which the receivable or payable arose or the
exchange rate in the latest annual report is recognised in the income
statement under Net finance costs.

On recognition in the consolidated financial statements of entities
with a functional currency other than the presentation currency of
ISS Holding A/S (DKK), the income statements and statements of cash
flows are translated at the exchange rates at the transaction date
and the statements of financial position are translated at the ex-
change rates at the reporting date. An average exchange rate for
the month is used as the exchange rate at the transaction date to
the extent that this does not significantly deviate from the exchange
rate at the transaction date. Foreign exchange differences arising on
translation of the opening balance of equity of foreign entities at
the exchange rates at the reporting date and on translation of the
income statements from the exchange rates at the transaction date
to the exchange rates at the reporting date are recognised directly
in equity under a separate translation reserve.

Foreign exchange adjustment of balances with foreign entities
which are considered part of the investment in the entity is recog-
nised in the consolidated financial statements directly in equity. For-
eign exchange gains and losses on the part of loans and derivative
financial instruments which are designated as hedges of investments
in foreign entities with a functional currency different from ISS
Holding A/S's and which effectively hedge against corresponding for-
eign exchange gains and losses on the investment in the entity are
also recognised directly in a separate translation reserve in equity.

On recognition in the consolidated financial statements of associates
with a functional currency other than the presentation currency of
ISS Holding A/S, the share of profit/foss for the year is translated at
average exchange rates and the share of equity, including goodwill,
is translated at the exchange rates at the reporting date. Foreign

exchange differences arising on the translation of the share of the
opening balance of equity of foreign associates at the exchange
rates at the reporting date, and on translation of the share of profit/
loss for the year from average exchange rates to the exchange rates
at the reporting date, are recognised directly in a separate transla-
tion reserve in equity.

On complete or partial disposal of a foreign entity or on repayment
of balances which constitute part of the net investment in the for-
eign entity, the share of the cumulative amount of the exchange dif-
ferences recognised directly in equity relating to that foreign entity
is recognised in the income statement under Net finance costs at the
time of divestment or winding-up.

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
as the Income tax effect hereof are presented in separate line items
after Operating profit. This income statement presentation is consid-
ered to reflect the Group's profitability most appropriately.

Revenue from rendering services is recognised in the income state-
ment in proportion to the stage of completion of the transaction
at the reporting date. Revenue is recognised when the amount of
revenue can be measured reliably, the recovery of the consideration
is probable, the stage of completion can be measured reliably and
the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably.

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; (til) 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.

Contract revenue is recognised in the income statement in propor-
tion to the stage of completion of the contract when the outcome
of the contract can be estimated reliably. Contract revenue includes
the initial amount agreed in the contract plus any variations in the
contract work, claims and incentive payments, to the extent that it is
probable that they will result in revenue and can be measured reli-
ably. Contract expenses are recognised as incurred unless they create
an asset related to future contract activity. When the outcome of
a contract can not be measured reliably, contract revenue is recog-
nised only to the extent of contract costs incurred that are likely to
be recoverable. An expected loss on a contract is recognised immedi-
ately in the income statement.

Revenue is measured at fair value of the consideration received less

continues

CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2609 » 57

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VAT and duties as well as price and quantity discounts.

Government grants mainly comprise wage subventions and invest-
ment grants.

Grants that compensate the Group for expenses incurred are recog-
nised directly in the income statement on a systematic basis in the
same periods in which the expenses are incurred.

Grants for acquisition of assets are recognised in the statement of
financial position as a reduction of the cost of the asset and trans-
ferred to the income statement on a systematic basis over the useful
life of the asset.

Staff costs comprises salaries and wages, pensions, social security ex-
penses and other employee related expenses.

Cost of sales comprises material consumption related to the recog-
nised revenue, e.g. chemicals, cloths, uniforms etc.

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.

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, remeasurement of disposal groups clas-
sified as held for sale, the winding-up of operations, disposals of
property, restructurings and certain acquisition related costs, etc.

Integration costs include 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 the associates'
result after tax and non-controlling interests. Share of result from
associates is recognised in the income statement after elimination of
the proportionate share of unrealised intra-group profits/losses.

Net finance costs comprises interest income and expense, gains and

losses on securities, foreign exchange gains and losses, amortisation
of financial assets and liabilities, including finance lease and unwind-

58 - ANNUAL REPORT 2009 | CONSOLIDATED FINANCIAL STATEMENTS

ing of discount. Additionally realised and unrealised gains and losses
on fair value hedges (currency swaps) and derivatives which are not
designated as hedging arrangements are included.

Income taxes consists of current tax and changes in deferred tax. The
tax expense relating to the profit/loss for the year is recognised in
the income statement and the tax expense relating to items recog-
nised directly in equity is recognised directly in equity.

ISS Holding A/S is jointly taxed with all Danish resident subsidiar-
ies. The Danish income tax payable is allocated between the jointly
taxed Danish companies based on their proportion of taxable in-
come (full absorption including reimbursement of tax deficits). The
jointly taxed companies are included 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 and classification of disposal groups as
held for sale.

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
and classification of disposal groups as held for sale.

Income tax effect of Goodwill impairment and write-down and
amortisation of brands and customer contracts is presented in a sep-
arate line item in connection with these two line items.

STATEMENT OF CASH FLOWS

The statement of cash flows shows the Group's cash fiows from op-
erating, investing and financing activities for the year, 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 liquidity effect of acquisition and divestment of businesses is
shown separately under Cash flow from investing activities. The
statement of cash flows 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 is calculated using the indirect
method and comprises Operating profit before 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 payments in connec-
tion with acquisition and divestment of businesses and the purchase
and sale of intangible assets, property, plant and equipment and
other non-current assets as well as acquisition and disposal of securi-

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ties not recognised as cash and cash equivalents.

Acquisition of assets by means of finance leases are treated as non-
cash transactions.

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 non-controlling interests. Further-
more, interest paid and received is included in cash flow from financ-
ing 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 flows relating to assets held under finance leases are recog-
nised as Payment of interest and repayment of debt.

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 that are subject to an insignificant
risk of changes in value.

Cash flows in currencies other than the functional currency are trans-
lated using average exchange rates unless these deviate significantly
from the exchange rate at the transaction date.

STATEMENT OF FINANCIAL POSITION

Goodwill is initially recognised in the statement of financial position
at cost as described under "Business combinations”. Subsequently,
goodwill is measured at cost less accumulated impairment losses and
write-downs. Goodwill is not amortised, but tested for impairment
annually and whenever there is an indication that goodwill may be
impaired.

The carrying amount of goodwill is allocated to the Group's cash-
generating units at the acquisition date. Identification of cash-gen-
erating units is based on the management structure and internal
financial control, i.e. generally equal to country level.

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 accumulat-
ed 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.

A deferred tax liability is calculated at the local tax rate on the dif-
ference between the carrying amount and the tax value. The ini-
tial recognition of this deferred tax liability increases the amount
of goodwill.

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 his-
torically 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.

A deferred tax liability is calculated at the local tax rate on the dif-
ference between the carrying amount and the tax value. The ini-
tial recognition 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 are measured at cost less ac-
cumulated amortisation and write-downs.

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 benefits will flow to the Group are recognised in
the income statement as and when incurred.

Amortisation is provided on a straight-line basis over the expected
useful lives of the assets. The amortisation methods and useful lives
are reassessed annually. When changing the amortisation period due
to a change in the useful life, the effect on the amortisation is recog-
nised prospectively as a change in accounting estimates.

Expected useful life
Max. of 5-10 years
Max. of 5-10 years

Software and other intangible assets
Software
Other intangible assets

Property, plant and equipment is measured at cost less accumulated
depreciation and write-down.

Cost of assets comprises the purchase price and any costs directly
attributable to bringing the asset to the location and condition nec-
essary for it to operate in the manner intended. The net present

continues

CONSOLIDATED FINAMCIAL STATEMENTS | ANNUAL R3P02RT 2009 - 59

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

value of estimated liabilities related to dismantling and removing
the asset and restoring the site on which the asset is located is added
to the cost of the asset to the extent that this cost is recognised as
a provision.

The cost of assets held under finance leases is stated at the lower of
fair value of the asset and the net present value of future minimum
lease payments. When calculating the net present value, the interest
rate implicit in the lease or an approximated rate is applied as the
discount rate.

Subsequent costs of replacing part of an item are recognised as an
asset if it is probable that the future economic benefits embodied
by the item will flow to the Group. The remaining carrying amount
of the replaced item is de-recognised in the statement of financial
position and transferred to the income statement. All other costs
for common repairs and maintenance are recognised in the income
statement as and when incurred.

Property, plant and equipment, including assets held under finance
leases are depreciated on a straight-line basis over the expected use-
ful lives of the assets. The expected useful lives are as follows:

Tangible assets Expected useful life

Buildings 20-40 years
Leasehold improvements (the lease term) 8-12 years
Plant and equipment 3-10 years

Land is not depreciated.

Depreciation is calculated over the depreciable amount, which is the
cost of an asset less its residual value. The residual value is deter-
mined at the acquisition date and reassessed annually. If the residual
value exceeds the carrying amount depreciation is discontinued.

When changing the depreciation period or the residual value, the
effect on the depreciation is recognised prospectively as a change in
accounting estimates.

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.

Investments in associates are recognised in accordance with the eg-
uity method and measured at the proportionate share of the enti-
ties' net asset values calculated in accordance with the Group's ac-
counting policies minus or plus the proportionate share of unrealised
intra-group profits and losses plus the carrying amount of goodwill.

Investments in associates with a negative net asset value are measured
at zero. If the Group has a legal or constructive obligation to cover a

60 + ANNUAL REPORT 290% | CONSCLIDATED FINANCIAL STATERSINTS

deficit in the associate, the deficit is recognised under provisions.

Receivables from associates are measured at amortised cost. A provi-
sion is made for doubtful debt.

Other financial assets Costs related to tenders for public offers for
PPP (Public Private Partnership)/PFI (Private Finance Initiative) con-
tracts 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
Other 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 are recognised in the income statement.

Impairment of non-current assets Goodwill and brands with an in-
definite useful life are subject to annual impairment tests, initially
before the end of the acquisition year.

The carrying amount of goodwill is tested for impairment together
with the other non-current assets in the cash-generating unit to
which goodwill is allocated and written down to the recoverable
amount through the income statement if the carrying amount is
higher. The recoverable amount is generally calculated as the present
value of the expected future cash flows (value in use) from the cash-
generating unit to which goodwill is allocated. Impairment of good-
will is recognised in a separate line item in the income statement.

Deferred tax assets are subject to impairment tests annually and
recognised only to the extent that it is probable that they will be
utilised.

The carrying amount of other non-current assets is tested annually
for indications of impairment. If such an indication exists, the recov-
erable amount of the asset is determined. The recoverable amount
is the higher of the fair value of the asset less anticipated costs of
disposal and its value in use. The value in use is calculated as the
present value of expected future cash flows from the asset or the
cash-generating unit to which the asset belongs.

An impairment loss is recognised if the carrying amount of an asset
or its cash-generating unit exceeds its estimated recoverable amount.
Impairment losses are recognised in the income statement.

An impairment loss in respect of goodwill is not reversed. In respect
of other assets, impairment losses are only reversed if there has
been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation and amortisation,
if no impairment loss had been recognised.

Inventories are measured at the lower of cost under the FIFO princi-
ple and net realisable value.

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Finished goods and work in progress are measured at the lower of
cost plus attributable overheads and net realisable value. The cost
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 com-
pletion and selling costs and is determined taking into account mar-
ketability, obsolescence and development in expected sales price.

Receivables are measured at amortised cost less a provision for
doubtful debt. A provision for doubtful debt is recognised when
objective evidence indicates that a receivable or a portfolio of re-
ceivables is impaired. Objective evidence of impairment can include
default or delinguency of a debtor, restructuring of an amount due
to the Group on terms that would not otherwise be considered or
indications that a debtor will enter bankruptcy.

The Group considers evidence of impairment at both a specific re-
ceivable and portfolio level. All individually significant receivables
are assessed for specific impairment. Receivables, that are found not
to be specifically impaired, are collectively assessed for impairment
on portfolio level by grouping together receivables with similar risk
characteristics.

In assessing collective impairment the Group uses historical trends of
the probability of default, timing of recoveries and the amount of
loss incurred, adjusted for management's judgement as to whether
current economic and credit conditions are such that the actual losses
are likely to be greater or less than suggested by historical trends.

Provision for doubtful debt is calculated as the difference between
the carrying amount of the receivables and the realisable value, in-
cluding the expected net realisable value of any collateral received.
Provisions and realised losses during the year are recognised under
Other operating expenses.

Contract work in progress is measured at the contract revenue of the
work completed less progress biilings and anticipated losses.

The contract revenue is calculated based on the stage of completion
at the reporting date and the total contract revenue to be received
for each individual contract. The stage of completion is determined
on the basis of an assessment of the work performed, which is meas-
ured as the proportion of contract costs incurred for work performed
on each individual contract relative to the total estimated contract
costs.

When it is probable that the total contract costs will exceed the total
contract revenue, the anticipated loss on the contract is immediately
recognised as an expense and a provision.

When the outcome of a contract cannot be determined reliably, the
realisable value is measured as the contract costs incurred that are
likely to be recovered.

Where the realisable value of work performed exceeds progress bill-
ings and anticipated losses, the excess is recognised under Contract
work in progress. If progress billings and anticipated losses exceed
the realisable value of a construction contract, the deficit is recog-
nised under Other liabilities.

Prepayments from customers are recognised under Other liabilities.

Costs relating to sales work and securing contracts are recognised in
the income statement as incurred.

Securities that are designated as fair value through the income state-
ment are measured at fair value at the reporting date, with any re-
sulting gains or losses recognised in the income statement.

Equity

Translation reserve The translation reserve comprises all foreign ex-
change differences arising from the translation of financial state-
ments of foreign subsidiaries/joint ventures and investments in as-
sociates as well as from the translation of long-term balances which
are considered part of the investment in subsidiaries/joint ventures,
loans in foreign currency and derivatives hedging net investments in
foreign subsidiaries/joint ventures.

On complete or partial disposal of net investments in foreign sub-
sidiaries, joint ventures and associates, the foreign exchange adjust-
ments are recognised in the income statement.

Hedging reserve The hedging reserve comprises the effective portion
of the cumulative net change after tax in the fair value of cash flow
hedging instruments which fulfil the criteria for hedging of future
cash flows, when the hedged transactions have not yet occurred.

Treasury shares Proceeds related to the acquisition or disposal of
treasury shares are recognised directly in equity.

Dividends proposed are recognised as a liability at the date when they
are adopted at the Annual General Meeting (declaration date).

Interim dividends are recognised as a liability at the date when the
decision to pay interim dividend is made.

Retirement benefit obligations and similar obligations The Group has
entered into retirement benefit schemes and similar arrangements
with the majority of the Group's employees.

Contributions to defined contribution plans are recognised in the
income statement in the period to which they relate. Any contribu-
tions outstanding are recognised in the statement of financial posi-
tion as Other liabilities.

For defined benefit plans an annual actuarial calculation (the Pro-
jected Unit Credit Method) is made of the present value of future
benefits payable under the plan. The present value is determined

continues

CONSOLIDATED FINANCIAL STATEMENTS | ANMUAL REFORT 2602 - 61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

on the basis of assumptions about the future development in vari-
ables such as salary levels, interest rates, inflation and mortality. The
present value is determined only for benefits earned by employees
from their employment with the Group. The actuarial present value
less the fair value of any plan assets is recognised in the statement of
financial position under Pensions and similar obligations.

Pension costs for the year are recognised in the income statement
on the basis of actuarial estimates and financial expectations at the
beginning of the year. Differences between the expected develop-
ment in pension assets and liabilities and the realised amounts at
the end of the year are designated actuarial gains or losses and are
recognised directly in equity.

If changes in benefits relating to services rendered by employees in
previous years result in changes in the actuarial present value, the
changes are recognised as historical costs. Historical costs are recog-
nised immediately if employees have already earned the changed
benefits. if employees have not earned the benefits, the historical
costs are recognised in the income statement over the period in
which the changed benefits are earned by the employees.

If a pension plan constitutes a net asset, the asset is only recognised
to the extent that it represents future refunds from the plan, or it
will lead to reductions in future contributions to the plan.

Interest on defined benefit plans and the expected return on plan
assets are recognised under Staff costs.

Other long-term employee benefits are recognised similarly based
on an actuarial calculation. All actuarial gains and losses are recog-
nised in the income statement immediately under Staff costs. Other
long-term employee benefits comprise jubilee benefits, long-service
or sabbatical leave etc.

Share-based payments The value of services received in exchange
for granted warrants is measured at the fair value of the these war-
rants.

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 corresponding in-
crease in equity.

The fair value of the warrants granted is measured using the Black-
Scholes option pricing model based on the terms and conditions on
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 reporting date, the Group revises the estimate of number of

warrants expected to vest. The impact of this revision, if any, is rec-
ognised in the income statement, and a corresponding adjustment is

62 - ANNUAL REPORT 2909 ! CONSCIIDATE

 

made to equity over the remaining vesting period. Accordingly, total
recognition is based on the number of warrants ultimately vested.
Adjustments relating to prior years are included in the income state-
ment in the year of adjustment.

Current tax receivable/payable and deferred tax Current tax payable
and receivable is recognised in the statement of financial position as
tax computed on the taxable income for the year, adjusted for tax on
the taxable income for previous years and for tax paid on account.

Deferred tax is measured in accordance with the liability method
and comprises all temporary differences between accounting and
tax values of assets and liabilities. However, deferred tax is not rec-
ognised on temporary differences relating to goodwill which is not
deductible for tax purposes and on office premises and other items
where temporary differences, apart from business combinations,
arose at the time of acquisition without affecting either profit/loss
for the year or taxable income. Where alternative taxation rules can
be applied to determine the tax base, deferred tax is measured ac-
cording to management's intended use of the asset or settlement of
the liability, respectively.

Deferred tax assets, including the tax base of tax losses carried for-
ward, are recognised under non-current assets at the expected value
of their utilisation: either as a set-off against tax on future income
or as a set-off against deferred tax liabilities in the same legal tax
entity and jurisdiction.

Deferred tax assets and liabilities are offset if the Group has a legal
right to offset current tax assets and tax liabilities or intends to settle
current tax assets and tax liabilities on a net basis or to realise the
assets and settle the liabilities simultaneously.

Deferred tax is adjusted for elimination of unrealised intra-group
profits and losses.

Deferred tax is measured according to the taxation rules and tax
rates in the respective countries applicable at the reporting date
when the deferred tax is expected to be realised as current tax. The
change in deferred tax as a result of changes in tax rates is recog-
nised in the income statement.

Other provisions comprise obligations concerning legal cases, self-
insurance, acquisition and integration costs, contingent liabilities re-
lated to acquisitions, dismantling costs and various other operational
issues. Provisions are recognised if the Group, as a result of a past
event has a present legal or constructive obligation that can be esti-
mated reliably, and it is probable that an outflow of economic bene-
fits will be required to settle the obligation. The amount recognised
as a provision is management's best estimate of the amount required
to settle the obligation.

When measuring provisions, the costs required to settle the obliga-
tion are discounted if this significantly impacts the measurement of

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

the liability. The entity's average borrowing rate is used as discount
rate, The unwinding of discount is recognised under Net finance
costs.

Restructuring costs are recognised under Other provisions when a
detailed, formal restructuring plan is announced to the affected par-
ties on or before the reporting date. On acquisition of businesses,
restructuring provisions in the acquiree are only included in good-
will when the acquiree has a restructuring liability at the acquisition
date.

A provision for onerous contracts is recognised when the expected
benefits to be derived by the Group from a contract are lower than
the unavoidable costs of meeting the obligations under the contract.

When the Group has a legal obligation to dismantle or remove an
asset or restore a site or rented facilities when vacated, a provision
is recognised corresponding to the present value of expected future
costs. The present value of the obligation is included in the cost of
the relevant tangible asset and depreciated accordingly.

Financial liabilities are recognised at the date of borrowing at the
amount of proceeds received less related transaction costs paid. Sub-
sequently, financial liabilities are measured at amortised cost using
the effective interest method. Any difference between the proceeds
initially received and the nominal value is recognised in the income
statement under Net finance costs over the term of the loan.

Financial liabilities also include the capitalised residual obligation on
finance leases, which are measured at amortised cost. -

Leasing For accounting purposes lease obligations are divided into
finance leases and operating leases.

A finance lease is a lease that transfers substantially all risks and re-
wards incident to ownership to the lessee. Other leases are classified
as operating leases.

The accounting treatment of assets held under a finance lease and
therelated obligation are described under Property, plant and equip-
ment and Financial liabilities, respectively.

Payments made under operating leases are recognised on a straight-
line basis over the term of the lease.

Derivative financial instruments are recognised in the statement
of financial position on the transaction date and measured at fair
value. Positive and negative fair values of derivative financial instru-
ments are included in other receivables and payables, respectively.
Positive and negative values are only offset when the Group has the
legal right and the intention to settle several financial instruments
net. Fair values of derivative financial instruments are calculated on
the basis of current market data and according to generally accepted
valuation methods.

Changes in the fair value of derivative financial instruments des-
ignated as and qualifying for recognition as a fair value hedge of
recognised assets and liabilities are recognised in the income state-
ment together with changes in the value of the hedged asset or lia-
bility as far as the hedged portion is concerned. Hedging of future
cash flows in accordance with a firm commitment, except for foreign
currency hedges, is treated as a fair value hedge of a recognised as-
set or liability.

Changes in the portion of the fair value of derivative financial instru-
ments designated as and qualifying as a cash flow hedge, and which
effectively hedges changes in the value of the hedged item, are re-
cognised in equity in a separate hedging reserve until the hedged
transaction is realised. At this time, gains or losses concerning such
hedging transactions are transferred from equity and recognised un-
der the same line item as the hedged item.

For derivative financial instruments that do not qualify for hedge
accounting, changes in fair vafue are recognised in the income state-
ment under Net finance costs.

Assets held for sale comprises non-current assets and disposal groups
held for sale. A disposal group is defined as a group of assets to be
disposed of by sale or otherwise together as a group in a single trans-
action. Liabilities relating to assets held for sale are those directly as-
sociated with the assets that will be transferred in the transaction.
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 in accordance with a formal plan rather than through
continuing use.

Immediately before classification as held for sale, the assets or dis-
posal groups are remeasured in accordance with the Group's ac-
counting policies. Assets held for sale are subsequently 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 classification as held for sale, and sub-
sequent gains and losses on remeasurement are recognised in the
income statement. Gains and losses are disclosed in the notes.

Assets held for sale and related liabilities are presented in separate
lines in the statement of financial position and the main elements
are specified in the notes to the consolidated financial statements.

Presentation of discontinued operations Discontinued operations
comprises a component of the Group's business that represent a
separate major line of business or geographical area of which the
operations and cash flows can be clearly distinguished, i.e. as a Mini-
mum a cash-generating unit. Classification as discontinued opera-
tion 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
statement of financial position, and the cash flows from operating,

continues

CONSOLIDATED FIMANCIAL STATEMENTS | ANNUAL REPORT 2609 - 63

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

investing and financing activities are disclosed in the notes to the
consolidated financial statements. When an operation is classified
as discontinued operation, the comparative income statement is re-
presented as if the operation had been discontinued from the begin-
ning 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 reportable segments. The
regions have been identified based on a key principle of grouping
countries that share market conditions and cultures.

The accounting policies of the reportable segments 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 well as Net finance costs and Income taxes.

For IFRS 8 purposes, segment profit has been identified as Operating
profit (before Goodwill impairment and write-down and Amortisa-
tion of brands and customer contracts). Segment assets and segment
liabilities have been identified as Total assets and Total liabilities,
respectively.

When presenting geographical information segment revenue and
non-current assets are based on the geographical location of the in-
dividual subsidiary from which the sales transaction originates.

NEW STANDARDS AND INTERPRETATIONS NOT YET IMPLEMENTED
IASB has published the following new standards, amendments to
existing standards and interpretations that are not yet mandatory
for the preparation of the consolidated financial statements of the
Group for the year ended 31 December 2009:

> IFRS 3 (revised) "Business Combinations”;

> Amendments to IAS 27 "Consolidated and Separate Financial
Statements"”;

> Amendments to IAS 32 "Financial Instruments: Presentation”;

> Amendments to IAS 39 ”Financial Instruments: Recognition and
Measurement”;

> Amendments to IFRIC 9 ”Reassessment of Embedded Deriva-
tives”;

> IFRIC 17 ”Distributions of Non-cash Assets to Owners”;

> IFRIC 18 "Transfers of Assets from Customers”;

> Parts of "Improvements to IFRSs May 2008".

64 - AMNUAL REFORT 2909 | COMSGOLDATED FINANCIAL STATEMENTS

In addition the following standards are published by IASB, but not
yet adopted by the EU:

> Amendments to IFRS 1 ”First-time Adoption of International Fi-
nancial Reporting Standards”;

> Amendments to IFRS 2 ”Share-based Payment”;

> Improvements to IFRS (April 2009);

> IFRIC 19 ”Extinguishing Financial Liabilities with Equity Instru-
ments”;

> Amendments to IFRIC 14 ”IAS 19 - The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their interaction”;

> Revised IFRS 9 ”Financial Instruments (replacement of IAS 39)
project”;

> Revised IAS 24 ”Related Party Disclosures”.

The Group expects to adopt the new standards and interpretations
when they become mandatory. The standards and interpretations
that are approved with different effective dates in the EU than the
corresponding effective dates under IASB will be early adopted so
that the implementation follows the effective dates under JASB.

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 chang-
es of which the following are expected to be most relevant to the
Group's operations:

> Contingent consideration will be measured at fair value at the
acquisition date, with subsequent changes therein recognised in
the income statement

> Acquisition 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 non-controlling interest of acquired busi-
nesses. However, the possibility will be evaluated case by case on
basis of the circumstances in the individual business combinations.

IFRS 3 (Revised) becomes mandatory for the Group's 2010 consoli-
dated financial statements and will be applied prospectively, and will
therefore have no impact on prior periods in the Group's 2010 con-
solidated 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the consotidated financial statements of the
Group requires management to make judgements, accounting es-
timates and assumptions that affect the application of accounting
policies and the reported amounts of the Group's assets and liabili-
ties, income and expenses.

The most significant accounting estimates and judgements are pre-
sented below.

ESTIMATION UNCERTAINTY
Determination of the carrying amount of certain assets and liabilities
requires estimates and assumptions concerning future events.

The estimates and assumptions are based on historical experience
and other factors which management assesses to be reliable, but
which by their nature are associated with uncertainty and unpredict-
ability. These assumptions may prove incomplete or incorrect, and
unexpected events or circumstances may arise. Further, the Group
is exposed to a number of risks and uncertainties as a result of its
operating, investing and financing activities. These risks may lead
to actual results differing from estimates, both positively and nega-
tively. Specific risks for the Group are discussed in the Management
Review (on page 7) and in the notes.

Assumptions about the future and estimation uncertainty on the re-
porting date are described in the notes where there is a significant
risk of changes that could result in material adjustments to the carry-
ing amount of assets or liabilities within the next financial year.

The international financial markets showed extraordinary fluctua-
tions in both 2008 and 2009, including fluctuations in interest and
currency exchange rates and with a derived effect on the general
economic situation. Consequently, estimates and assessments have
been given special attention to ensure that one-off effects which
are not expected to exist in the long term do not affect estimates
and assessed factors including discount rates and expectations to the
future,

Management believes the following are the areas involving signifi-
cant accounting estimates in the preparation of the consolidated fi-
nancial statements of the Group:

Business combinations When acquiring businesses the purchase
method is applied for recognition of assets, liabilities and contingent
liabilities of the acquiree. The most significant assets acquired gen-
erally comprise goodwill, brands, customer contract portfolios and
related customer relationships and trade receivables.

Generally there are uncertainties related to the identification of as-
sets, liabilities and contingent liabilities as well as to the measure-
ment of their fair value at the acquisition date. As no active market
exists for the majority of acquired assets, liabilities and contingent
liabilities, in particular in respect of acquired intangible assets, man-

agement makes estimates of the fair value. Determination of assets,
liabilities and contingent liabilities may be subject to subsequent ad-
justment within 12 months.

The unallocated purchase price (positive amounts) is recognised as
goodwill, which is allocated to the Group's cash-generating units.
Management makes estimates of cash-generating units and the al-
location of goodwill.

Considering the uncertainties associated with the determination of
the cash flows of acquired cash-generating units, it is the assessment
of management that the allocation made is based on documented
estimates. The difference between the carrying amounts in the ac-
quired entities and the fair value of identifiable assets and liabilities
is specified in note 12, Acquisition and divestment of businesses.

Brands In business combinations, the fair value of the brands ac-
quired and their expected useful lives are assessed based on the
brands' market position, expected long-term developments in the
relevant markets and the brands' profitability.

Generally, the Group's strategy is based on the ISS brand, which
means that all acquired brands are either immediately converted to
the ISS brand or co-branded with the ISS brand for a longer or short-
er period of time. Whether the conversion is effected immediately
or implemented over a period of time depends on the assessment of
the fair value of the acquired brand, i.e. whether the acquired brand
is expected to separately generate future economic benefits.

When an acquired brand is assessed to separately generate future
economic benefits, measurement of the fair value is based on a dis-
counted 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 flow is increased with an estimated
portion of the tax amortisation benefit applicable for a potential
buyer based on the local tax amortisation opportunity 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.

Customer contracts In business combinations the fair value of cus-
tomer contracts is based on an evaluation of the conditions relating
to the acquired contract portfolio and related customer relationships
in terms of local market conditions, terms and conditions of the un-
derlying contracts and historical experience relating to churn rates.

Measurement is based on a discounted cash flow model based on
key assumptions about the estimated split of the acquired revenue

in business segments and the related churn rates and profitability
of the revenue at the time of the acquisition. A contributory asset

continues

CONSOIIBATED FINANCIAL STATEMENTS | ANNUAL REPORT 2009 - 65

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

charge as a cost or return requirement for assets supporting the in-
tangible asset has been included in the model. Cash flows are dis-
counted on an after tax basis using the local Weighted Average Cost
of Capital (WACC) plus a risk premium for the assumed risk inherent
in customer contracts.

The net present value of the cash flow is increased with an estimated
portion of the 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 cus-
tomer contracts equals the fair value at the date of acquisition.

Impairment test Goodwill, brands and customer contracts are tested
for impairment at least annually or whenever there is an indication
that the intangibles may be impaired. In performing the impairment
test management makes an assessment of whether the cash gener-
ating unit to which the intangibles relate will be able to generate
positive net cash flows sufficient to support the value of intangibles
and other net assets of the entity.

The recoverable amount of each cash-generating unit is determined
on the basis of its value-in-use. The value-in-use is established using
certain key assumptions. The key assumptions are revenue growth,
operating margin (before other items) and discount rate.

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 re-
garding the development in growth and operating margin. The ter-
minal growth rates do not exceed the expected long-term average
growth rate including inflation for the business in which the cash-
generating units operate.

Uncertainties reflecting historical performance and possible varia-
tions in the amount or timing of the future cash flow are reflected
in the discount rate.

In determining the country specific discount rates, which are cafcu-
lated 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 as-
sociated with each cash-generating unit.

The Group's impairment tests are presented in note 15, Impairment
tests.

Defined benefit plans and similar obligations When calculating the
net present value of the retirement benefit obligation a number of
significant actuarial assumptions are made, including discount rates,

66 - ANHUAL REPORT 2009 i CONSCL:DATEG IRANKGAL

 

expected return on plan assets, expected increases in future wages,
salary and retirement benefits. All the assumptions are assessed at
the reporting date. The range and weighted average for these as-
sumptions are disclosed in note 29, Pensions and similar obligations.

The value of the Group's defined benefit plans and other long-term
employee benefits are based on valuations from external actuaries.

In certain countries, the Group participates in multi-employer pen-
sion schemes, which by their nature are defined benefit plans. The
funds, however, are currently not able to provide the necessary
information in order for the Group to account for the schemes as
such. The pension schemes are therefore accounted for as defined
contribution plans. There is a risk that the plans are not sufficiently
funded. However, information on surplus or deficit in the schemes is
not available.

Provisions and contingencies Management assesses provisions, con-
tingent assets and liabilities and the likely outcome of pending or
probable lawsuits etc. on an ongoing basis. The outcome depends
on future events that are by nature uncertain. In assessing the likely
outcome of lawsuits and tax disputes etc., management bases its as-
sessment on external legal assistance and established precedents.

Provisions are disclosed in note 30, Other provisions and contingent
liabilities are disclosed in note 32, Contingent liabilities.

Deferred tax assets The recognition of deferred tax assets regard-
ing tax losses carried forward is supported by expected future prof-
itability in the foreseeable future. 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. This judgement is made on the reporting date based
on budgets and estimates.

The Group's tax assets are presented in note 18, Deferred tax.

Receivables are measured at amortised cost less a provision for
doubtful debt. Provisions for doubtful debt are based on manage-
ment's assessment of the customer's ability to make the required
payments. Management performs analysis of impairment at both
specific receivable and portfolio level.

All individually significant receivables are assessed for specific im-
pairment. Receivables, that are found not to be specifically impaired,
are collectively assessed for impairment on portfolio level by group-
ing together receivables with similar risk characteristics.

In assessing collective impairment the Group uses historical trends of
the probability of default, timing of recoveries and the amount of

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

loss incurred, adjusted for management's judgement as to whether
current economic and credit conditions are such that the actual losses
are likely to be greater or less than suggested by historical trends.

Receivables are disclosed in note 21, Trade receivables.

Assets held for sale mainly comprises disposal groups and is meas-
ured at the lower of the carrying amount and fair value less costs to
sell. Consequently, management makes estimates of the fair value of
the disposal group. Depending on the nature of the disposal group's
activity, assets and liabilities, the estimated fair value may be associ-
ated with uncertainty and possibly adjusted subsequently. Manage-
ment considers impairment both on initial classification as held for
sale and subsequently. The estimation uncertainty relating to impair-
ment is described above.

Assets held for sale are disclosed in note 26, Assets and Liabilities
held for sale.

Divestments When divesting businesses management makes esti-
mates of the final sales price. Additionally, management assesses the
appropriate level of provisions to cover claims from purchasers or
other parties in connection with divestments and representation and
warranties given in relation to divestments.

SJUDGEMENT IN RELATION TO APPLICATION OF ACCOUNTING POLICIES
In applying the Group's accounting policies, management makes
judgements which may significantly influence the amounts recog-
nised in the consolidated financial statements.

On business combinations and establishing new entities assessment
is made in order to classify the acquired business as a subsidiary, joint
venture or associate. The assessment is made on basis of the agree-
ment entered into on the acquisition of ownership interest or voting
rights in the entity etc.

The classification is significant, as the recognition of proportionally
consolidated joint ventures impacts the consolidated financial state-
ments differently than full consolidation of subsidiaries or recogni-
tion of associates recognised according to the equity method.

Revenue is primarily generated by rendering of services or from con-
struction contracts. Management makes judgements to distinguish
between revenue generated from rendering of service and revenue
from construction contracts for the purpose of classification of rev-
enue either in accordance with IAS 18 ”Revenue” or IAS 11 ”Con-
struction Contracts".

The classification is significant, as the recognition of revenue and
related receivables in accordance with the above standards impacts
the consolidated financial statements differently.

Other income and expenses, net The use of Other income and ex-
penses, net entails management judgement in the separation from
the normal ordinary operations of the Group. When using Other in-
come and expenses, net it is crucial that these constitute items that
can not be attributed directly to the Group's ordinary operating ac-
tivities. Other income and expenses, net, comprises both recurring
and non-recurring items.

Management carefully evaluates each item to ensure the correct
distinction between the Group's ordinary operating activities and
Other income and expenses, net.

Integration costs include costs regarding the acquiring ISS company
and the acquired business that are of no value for the continuing
business and are an unavoidable consequence of the integration.
The use of Integration costs entails management judgement in the
separation of these costs as direct costs arising from the integration,
which are those that are both necessary and required to perform
the integration and not associated with the ongoing activities in the
Group.

Management carefully evaluates each item to ensure the correct
distinction between the Group's ordinary operating activities and
Integration costs.

Leases The Group has entered into a number of leases and for each
lease agreement an assessment is made as to whether the lease is a
finance lease or an operating lease. The Group primarily enters into
operating lease agreements. Operating leases consist of leases and
rentals of properties, vehicles (primarily cars), production equipment
and other equipment.

Financial instruments When entering into financial instruments,
management assesses whether the instrument is an effective hedge
of recognised assets and liabilities and expected future cash flows.
The hedge effectiveness of recognised hedge instruments is assessed
on a monthly basis and any ineffectiveness is recognised in the in-
come statement.

Assets held for sale Non-current assets and disposal groups are clas-
sified as held for sale when the carrying amount of the assets or
disposal groups are expected to primarily be recovered through a
sale within 12 months in accordance with a formal plan rather than
through continuing use.

Management makes judgement to make the correct classification.
The classification is significant as the classification as held for sale
changes the measurement basis of the non-current assets and dis-
posal groups as well as the presentation in the statement of financial
position.

TONSOLIDATED FINANCIAL STATEMERITS | ANMUAL REPORT 2009 - 67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. 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, Support Services, 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 cultures.

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.

DKK million
2009

Income statement
Revenue ”
Depreciation and amortisation ”

Operating profit before other items

Other income and expenses, net
Integration costs

Operating profit ”

Goodwill impairment and write-down
Amortisation of brands and customer contracts

Statement of financial position
Total assets

Additions excluding acquisitions/divestments
Additions from acquisitions/divestments

Additions to non-current assets ”

Total liabilities

Nordic

16,367
(237)
1,219

52
(4)

1,267
(235)
(226)

14,151

319
(196)

123

9,550

Western
Europe

38,632
(444)
2,056

(567)
(31)

1,458
(1,011)
(715)

30,833

526
295

821

20,432

Eastern
Europe

1,561
(23)
106

(2)
(1)

103

- (28)

1,318

20

728

4,120

(58)

308

(4)
(5)

299

(53)

3,107

88
336

424

1,588

Latin
America
2,077

(23)

131

(1)

130

(17)

1,309

41
(10)

31

1,099

North
America

2,515

(15)

134

(2)

132

12
84

96

1,108

" Segment revenue comprises total revenue of each segment, Due to the nature of the business internal revenue is insignificant and is therefore not disclosed.
” Excluding 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.

68 - AMHUAL REPORT 2009 | CONSGLIDATER FINANCIAL STATEMENTS

Pacific

3,768
(35)
259

(20)
(2)

237
(44)

2,942

58
45

103

2,311

Total
reportable
segments

69,040
(835)
4,213

(541)
(46)

3,626
(1,246)
(1,129)
55,204

1,061
557

1,618

36,816

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SEGMENT REPORTING (CONTINUED)

DKK million

"2008

Income statement
Revenue ”

Depreciation and amortisation
Operating profit before other items

Other income and expenses, net
Integration costs

Operating profit

Goodwill impairment and write-down
Amortisation of brands and customer contracts

Statement of financial position
Total assets

Additions excluding acquisitions/divestments
Additions from acquisitions/divestments

Additions to non-current assets ”

Total liabilities

1 Segment revenue comprises total revenue of each segment. Due to the nature of the business internal revenue is insignificant and is therefore not disclosed.

Nordic

17,071

(229)

1,189

(20)
(6)

1,163

(25)

(244)
12,971

318
104

422

8,570

Western
Europe

39,337
(462)
2,356

(199)
(37)

2,120
(374)
(580)

31,660

565
1,195

1,760

20,324

” Excluding Goodwill impairment and write-down and Amortisation of brands and custorner contracts. .
” Other iterns comprise Other income and expenses, net, Integration costs, Goodwili 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.

Grouping of countries into regions

Nordic: Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden

Eastern
Europe

1,663

(26)

124

(2)

122

(32)

1,352

18
120

138

896

Asia

3,147

(41)

210

(0)
(6)

204

(45)

2,564

70
334

404

1,261

Latin
America
1,890
(19)

109

(6)

103

(17)

1,014

26
121

147

799

North
America

2,131

(13)

128

(4)

124

(43)

1,612

18
282

300

1,165

Pacific

3,614

(33)

230

(5)

225

(47)

2,404

35
176

211

1,945

Total
reportable
segments

68,853
(823)
4,346

(219)
(66)

4,061
(399)
(1,008)

53,577

1,050
2,332

3,382

34,960

Western Europe: Austria, Belgium & Luxembourg, France, Germany, Greece, Ireland, Israel, Italy, the Netherlands, Portugal, Spain, South

Africa, Switzerland, Turkey and the United Kingdom

Eastern Europe: Croatia, the Czech Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia and Slovenia

Asia: Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, Taiwan and Thailand
Latin America: Argentina, Brazil, Chile, Mexico and Uruguay

North America: Canada and the USA

Pacific: Australia and New Zealand

continues

CONSOLIDATED FiMANCIAL STATEMENTS | ANNUAL REPORT 2009 - 69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SEGMENT REPORTING (CONTINUED)

Products and services
The Group's revenue relates to the following service types:

DKK million

Cleaning

Support Services
Property Services
Catering

Security

Facility Management

Total revenue

Geographical information

2009

36,050
4,981
14,503
6,201
4,672
2,597

69,004

Revenue and non-current assets (excluding deferred tax assets) is specified betow for each of the Group's significant countries ”:

2009

Non-

current

DKK million Revenue assets
France 8,879 5,493
United Kingdom 6,948 3,074
Norway 5,246 2,977
Spain 4,534 2,058
Denmark (country of domicile) 3,731 2,396
Finland 3,678 3,298
Sweden 3,536 1,814
Netherlands 3,420 2,289
Other countries ” 29,032 14,359
Total 69,004 37,758

"Hn this context significant countries are defined as countries representing 5% or more of the Group's revenue.
1 Including unallocated items and eliminations.

Major customers
No customer comprises more than 10% of the Group's external revenue.

70 - ANNUAL REPORT 2068 | CONSOLIDATED HNANCIAL STATEMENTS

2008

Revenue

9,336
7,565
5,683
4,603
3,702
3,517
3,920
3,540
26,963

68,829

2008

36,528
4,146
15,410
5,727
4,344
2,674

68,829

Non-
current
assets

6,904
2,972
2,686
2,198
2,491
3,373
1,907
2,431
13,577

38,539

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SEGMENT REPORTING (CONTINUED)

Reconciliations
DKK million

Revenue
Revenue for reportable segments
Elimination of internal revenue

Revenue according to the income statement

Operating profit

Operating profit for reportable segments
Elimination of internal profit

Unallocated corporate costs

Unallocated other income and expenses, net

Operating profit according to the income statement

Unallocated:
Share of result from associates
Net finance costs

Profit before tax and goodwill impairment/amortisation of brands
and customer contracts according to the income statement

Total assets

Total assets for reportable segments
Elimination of internal assets ”
Unallocated assets

Total assets according to the statement of financial position

Additions to non-current assets %

Additions to non-current assets for reportable segments

Unallocated additions to non-current assets

Total additions to non-current assets according to the statement of financial position
Total liabilities

Total liabilities for reportable segments

Elimination of internal liabilities ”

Unallocated liabilities

Total liabilities according to the statement of financial position

” Eliminations mainly relate to intra-group balances.
 Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment.

2009
69,040
(36)
69,004
3,626
0
(339)

(10)

3,277

(2,308)

973

55,204
(30,536)
29,686
54,354

1,618
33
1,651
36,816
(30,111)

45,436

52,141

2008

68,853

(24)

68,829

4,061

(285)
(23)

3,753

(2,731)

1,025

53,577
(19,846)
19,874
53,605

3,382

51
3,433
34,960
(19,447)

34,559

50,072

CSNSOUDBATED FINANGIAÅL STATEMENTS : ANNUAL REPORT 2099 + 71

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. STAFF COSTS

DKK million ' . 2009 2008
Wages and salaries 35,111 34,188
Pension costs, defined benefit plans 150 126
Pension costs, defined contribution plans 1,573 1,492
Social charges and other costs 7,947 8,350
Staff costs 44,781 44,156
Average number of employees 482,531 455,947

Remuneration to the Board of Directors, the Executive Group Management and Corporate Senior Officers

2009 2008
Executive Corporate Executive Corporate
Board of Group Senior Board of Group Senior
DKK thousand Directors Management Officers Directors Management Officers
Salaries (including benefits) and fees 1,969 20,027 37,036 1,856 18,102 26,413
Bonus - 5,703 7,409 - 5,148 8,713
Severance payments ” - - 7,091 - - 11,965
Share-based payments ” - 233 2,021 - 1,976 2,805
1,969 25,963 53,557 1,856 25,226 49,896

The Board of Directors received remuneration for duties performed in ISS Holding A/S and other companies within the ISS Group. The
remuneration is a fixed annual amount. The Board of Directors does not participate in the warrant programme described in note 5, Share-
based payments. However, the members have been offered to invest in a mix of shares and warrants as part of the Directors Participation
Programme described in note 36, Related parties.

The members of the Executive Group Management and Corporate Senior Officers received remuneration for duties performed in ISS Holding
A/S and other companies within the ISS Group. The remuneration consists of a combination of a fixed salary and, for most of these, a bonus,
which in 2009 is capped at 60% of their fixed salary. Furthermore, the Executive Group Management and certain Corporate Senior Offic-
ers participate in the warrant programme as well as the Management Participation Programme described in note 5, Share-based payments.

Corporate Senior Officers comprises members of Group Management, other than members of the Executive Group Management. Members
of Group Management have authority and responsibility for planning, implementing and controlling the Group's activities and are together

with the Board of Directors considered as the Group's key management personnel.

The members of the Executive Group Management and Corporate Senior Officers are, in the event of termination, entitled to severance
payment of between 12 and 18 months salary including benefits.

Remuneration to the Board of Directors, the Executive Group Management and Corporate Senior Officers is paid by ISS A/S.

”Included in Other income and expenses, net.

72 - ANNUAL REPORT 20C$ | CONSOLIDATED FINANCIAL STATERIENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. 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 the Executive Group 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 the Executive Group Management and a number of Corporate 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 36, Related parties. The warrants
granted to the Executive Group Management and a number of Corporate 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.

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 at grant date of these warrants will be expensed in the income
statement over the vesting period from July 2006 to June 2014. in 2009, DKK 3 million were recognised under Other income and expenses,
net in respect of warrants granted (2008: DKK 5 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, 90% of the warrants vested can be exercised. The proportion of exercisable warrants decreases in intervals down to 10% at

a share price of 2,039. At share prices below 2,039, no warrants are exercisable.

Warrants outstanding at 31 December 2009 and movements during 2008 and 2009 were:

Executive Group Management Corporate Officers ” Total

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 2008 -… 125,424  125,424 29,852  376,736 406,588 29,852  502,160  532,012
Warrants settled during 2008 -… (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 2009 - - - -… (67,536) (67,536) -… (67,536) (67,536)
Outstanding at 31 December 2009 - 57,888 57,888 29,852  241,664  271,516 29,852  299,552  329,404

Warrants settled relates to cash settlement by FS Invest of warrants in connection with termination of employment.

” Senior officers of the Group comprises Corporate Senior Officers ( 's of Group other than s of the Executive Group Management) and other Corporate Officers as well as
certain members of Country Management of each country.

” Corporate Officers of the Group comprises Corporate Senior Officers (members of Group Management other than members of the Executive Group Management) and other Corporate Officers.

CONSOL:DATED FINANCIAL STATEMENTS . ANNUAL REPORT 2305 - 73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FEES TO AUDITORS

DKK million 2009 2008
KPMG

Audit fees 40 42
Other assurance services 7 5
Tax and VAT advisory services 10 13
Other services 10 16
Total KPMG 67 76

Audit fees comprised audit of the consolidated and local financial statements. Other services mainly comprised work related to acquisitions
such as financial and tax due diligence etc.

7. OTHER INCOME AND EXPENSES, NET

DKK million 2009 2008
Gain on divestments 102 6
Gain on sale of properties 8 0
Other 6 19
Other income 116 25
Restructuring projects (426) (131)
Redundancy and severance payments relating to senior management changes (44) (21)
Loss on divestments (19) (43)
Write-down regarding businesses classified as held for sale (159) -
Close-down and subsequent surveillance of landfill site in France - (28)
Adjustment to accounting estimate in Belgium - (17)
Consolidation projects in the United Kingdom - (4)
Other (19) (23)
Other expenses (667) (267)
Other income and expenses, net (551) (242)

Other income
Gain on divestments in 2009 related to the sale of the non-core laundry activities in Sweden and Norway.

Other expenses

Restructuring projects in 2009 related to costs for projects in France, Germany, Spain, Australia, Belgium, Finland, the United Kingdom and Denmark.
In France a re-organisation of the organisational setup covering several business units as well as head office was initiated amounting to DKK 212 mil-
lion. In Germany a re-organisation of a business unit including close-down of two divisions and efficiency improvements was initiated amounting to
DKK 84 million. In Spain a close-down of certain project-based activities within the Building Maintenance division was completed amounting to DKK
27 million. In Australia a consolidation of office locations within New South Wales was initiated. In Finland and the United Kingdom close-down of
certain project-based activities across certain business units were completed, and in Belgium a margin improvement project covering primarily head
office was completed. In Denmark a merger of the route-based back office organisation into the site-based organisation was completed.

Restructuring projects in 2008 related to costs for projects in the Netherlands, Norway, France, Austria and various other countries. In the Nether-
lands 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.

Generally, restructuring projects include primarily redundancy payments, termination of leaseholds and relocation costs. continues

74. ENNUAL REPORT 2209 | CONSCUDAT

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. OTHER INCOME AND EXPENSES, NET (CONTINUED)

Loss on divestments in 2009 primarily related to the non-strategic landscaping activities in Norway and Sweden as well as the cali centre ac-
tivities in the Netherlands. In 2008, losses mainly related to the remaining part of the non-core energy activities in France and non-strategic
landscaping activities in Austria.

Write-down regarding businesses classified as held for sale mainly related to write-down of net assets (excluding goodwill, brands, customer

contracts and the related tax effect) of certain non-core activities in France, which are expected to be sold and consequently have been clas-
sified as held for sale at 31 December 2009.

Close-down and subsequent surveillance of landfill site in France in 2008 related to additional costs regarding closure and subsequent supervi-
sion for 30 years of a landfill site, which was managed by ISS France and closed in 2008. The additional costs are mainly a result of changed
expectations and administrative requirements for handling of landfill sites as well as an unfavourable climatic and geological evolution.

Adjustment to accounting estimate in Belgium in 2008 related to adjustment of prior years estimate regarding work in progress.

8. NET FINANCE COSTS

DKK million 2009 2008
Interest income etc. 81 153
Interest income from companies within the ISS Group 0 0
Amortisation of gain from settlement of interest rate swaps 14 27
Foreign exchange gain 128 62
Financial income 223 242
Interest expenses etc. ” (2,245) (2,465)
Interest expenses to companies within the ISS Group (4) (3)
Amortisation of fair value adjustment of bond loans (99) (125)
Amortisation of financing fees (57) (63)
Foreign exchange loss (67) (317)
Loss related to partial redemption of EMTNs (59) -
Financial expenses (2,531) (2,973)
Net finance costs (2,308) (2,731)

Win all material aspects related to long-term debt.

Amortisation of 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
settled 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 partial
redemption in July 2009. The remaining unrecognised net gain of DKK 1 million at 31 December 2009 (DKK 28 million at 31 December 2008)
will be recognised in the income statement in the financial years 2010 - 2014 corresponding to the remaining term of the EMTNSs, see note 28,
Borrowings.

Loss related to partial redemption of EMTNs

In July 2009, the EMTNs due in 2010 were partially refinanced, when EUR 500 million of the outstanding EUR 850 million were redeemed. The
notes were acquired at nominal value, however, due to the fair value adjustment of the EMTNs in connection with ISS Holding A/S's acquisi-
tion of ISS A/S in 2005 the carrying amount was lower than the redemption value resulting in a loss of DKK 59 million.

CONSOLIDATID FINANC:AL STATEMENTS | ANNUAL REPORT 2309 - 75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9. INCOME TAXES
DKK million

Current tax regarding profit before impairment/amortisation of intangibles ”
Deferred tax regarding profit before impairment/amortisation of intangibles ”

Tax on profit before impairment/amortisation of intangibles ”

Adjustments relating to prior years, net

Income taxes

Tax effect of impairment/amortisation of intangibles ”

Total tax recognised in the income statement

Income tax recognised in other comprehensive income

DKK million

Foreign exchange adjustment of subsidiaries and

non-controlling interests
Fair value adjustment of hedges, net
Fair value adjustment of hedges, net,
transferred to Net finance costs

Limitation to interest deduction in Denmark

Actuarial gains/(losses)
Impact from asset ceiling
Share-based payments

Total income tax recognised in other comprehensive income

Computation of effective tax rate

Statutory income tax rate in Denmark
Foreign tax rate differential, net

Non-tax deductible expenses less non-taxable income

Adjustments relating to prior years, net
Change of valuation of net tax assets
Effect of changes in tax rates

Other taxes ”

Limitation to interest deduction in Denmark

Before tax

364
(327)

325

(45)
18

338

2009

Effective tax rate (excluding effect from impairment/amortisation of intangibles) ”

" In this context intangibles comprise the value of goodwill, brands and customer contracts.

» Other taxes mainly comprise withholding tax.

76 - ANNUAL REPORT 23209 | CONSOUDATED

Fr

INANZIAL STATEMENTS

Tax

82
(81)

(3)
4

(1)

Net of tax

364
(245)

244
(3)
(41)
18
2

339

2009 2008
542 361
23 203
565 564
23 (33)
588 531
(361) (282)
227 249

2008
Before tax Tax Net of tax
(792) - (792)
(266) 66 (200)
(147) 37 (110)
- (103) (103)
(182) 37 (145)
25 - 25
5 (1) 4
(1,357) 36 (1,321)
2009 2008
25.0 % 25.0 %
(1.5) % 1.9 %
23.5 % 26.9 %
5.4-% 3.8 %
2.3 % (3.2)%
9.6 % 9.7 %
(0.2) % (0.8) %
5.7 % 5.3 %
14.1 % 10.1 %
60.4 % 51.8 %

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. GOODWILL IMPAIRMENT AND WRITE-DOWN

 

DKK million 2009 2008
Impairment 550 270
Write-down 696 129
Goodwill impairment and write-down 1,246 399

Goodwill impairment of DKK 550 million in 2009 related to ISS France of DKK 450 million and ISS Germany of DKK 100 million while goodwill
impairment of DKK 270 million in 2008 related to ISS Germany of DKK 250 million and ISS Italy of DKK 20 million. For further description see
note 15, Impairment tests.

Write-down of DKK 696 million in 2009 consisted of DKK 248 million regarding divestment of a number of businesses and of DKK 448 million
regarding classification of certain businesses as held for sale on 31 December 2009. The write-down on completed divestments of DKK 248
million mainly related to the sale of ISS's non-strategic landscaping business in Sweden of DKK 137 million, the sale of the call centre activities
in the Netherlands of DKK 69 million and the pest control activities in the United Kingdom of DKK 42 million. The write-down on businesses
classified as held for sale on 31 December 2009 of DKK 448 million mainly related to the expected sale of certain non-core activities in France,
Spain and Norway. The write-down of DKK 129 million in 2008 mainly related 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.

11. CHANGES IN WORKING CAPITAL

DKK million 2009 2008
Changes in inventories (25) (28)
Changes in receivables (20) (111)
Changes in payables (92) 248
Changes in working capital (137) 109

CONSCHDETED FINANCIAL STATEMENTS | ANHUAL SEPORT 2095 - 77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES

Acquisition of businesses

Aquisitions in 2009

The Group made 22 acquisitions during 2009 (66 during 2008). The total purchase price amounted to DKK 680 million (DKK 2,139 million in
2008). The total annual revenue of the acquired businesses (approximate figures extracted from unaudited financial information) is estimated
at DKK 997 million (DKK 3,887 million in 2008) 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-

EE acquisition Current Prior Recognised
DKK million carrying year year values on
2009 amounts  acquisitions  acquisitions acquisition
Customer contracts 0 165 - 165
Other non-Ccurrent assets 18 5 9 32
Trade receivables 124 (2) (15) 107
Other current assets 33 1 0 34
Other provisions (1) (8) (20) (29)
Pensions, deferred tax liabilities and non-controlling interests 7 (36) (4) (33)
Long-term debt (2) (1) - (3)
Short-term debt (16) - (2) (18)
Other current liabilities (113) (10) (15) (138)
Net identifiable assets and liabilities 50 114 (47) 117
Goodwill 66 589
Acquisition costs, net of tax 2 (26)
Purchase price 21 680
Cash and cash equivalents in acquired businesses (15)
Cash purchase price 665
Changes in deferred payments and earn-outs 223
Changes in prepaid purchase price (3)
Acquisition costs paid, net of tax 29
Total payments regarding acquisition of businesses 914

In 2009, 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 2009, certain opening balances have only been provisionally
determined. Consequently, fair value adjustments may be recognised against goodwill within 12 months of the acquisition date.

The purchase price of prior years' acquisitions increased by DKK 21 million, mainly due to revised estimates relating to earn-outs for the
acquisitions of Inbuilt in Singapore of DKK 74 million and Sardunya in Turkey of DKK 36 million, offset mainly by Carlos Rocha in Spain of DKK
21 million, Loghis Logistica in Brazil of DKK 13 million, Ryvola in the Czech Republic of DKK 10 million, Hunt/Ondes in Belgium of DKK 8 mil-
lion and Gastronomia in Spain of DKK 7 million. Furthermore, net assets of prior years' acquisitions were reduced by DKK 47 million relating
to various acquisitions. Accordingly, goodwill has been adjusted.

continues

78 - ANMUSL REPORT 26009 . CONSILIDATED FINANCIAL STATEM

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)

Acquisition of businesses (continued)
Acquisition costs mainly comprise fees to lawyers, auditors and consultants (paid in relation to the acquisition).

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.

The 22 acquisitions ” made by the Group during 2009 are listed below:

Consolidated

in the income Percentage Annual Number of
Company Country Service type statement interest revenue ? employees ?
Industriservice Danmark A/S Denmark Cleaning January 100% 7 13
Vaasan LVI-Huolto Finland Property January 100% 14 13
Mettek Hizmet Turkey Cleaning, Support, Security January 100% 137 2,178
Central Property Services USA Cleaning, Security January Activities 182 917
Aplytec Spain Property January 100% 13 24
Soumala Finland Cleaning February 100% 19 105
Agria-Ved Hungary Cleaning, Security February 100% 7 25
Karmak Italy Cleaning February 100% 100 412
ECO Servis Bosnia Cleaning February 100% 6 89
Sunparking Indonesia Security February Activities 109 5,000
Cleansweep Australia Property March 100% 11 24
Paprika Corporate Services India Catering March Activities 5 149
Andrawina Indonesia Catering March Activities 68 1,130
Grossjung Germany Property April 100% 4 6
Barassa Switzerland Property May Activities 9 7
Godrej HiCare India Property May 100% 61 722
Securiguard Denmark Security May Activities 24 60
Chubb Security Ireland Security May 100% 134 635
Adelaide Sweeping Services Australia Property May Activities 5 8
Shielas Corporate Catering India Catering June Activities 5 100
WHF Property & Mine Maintenance Australia Property August Activities 40 45
Best Indonesia Security November Activities 37 2,872
Total 997 14,534

" ndudes all acquisitions completed prior to 1 January 2010.
2 Approximate fiqures based on information available at the time of acquisition extracted from unaudited financial information.

continues

CONSOUDATED FINANCIAL STATEMENTS | ANNUAL REPOST 2009 - 79

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)

Acquisition of businesses (continued)
Aquisitions in 2008
The acquisitions made in 2008 (including adjustments to acquisitions in prior years) had the following effect on the Group's assets and liabili-
ties on the acquisition date:
Total acquisitions

Fair value adj.

Pre-

. acquisition Current Prior  Recognised
DKK million carrying year year values on
2008 amounts  acquisitions — acquisitions acquisition
Goodwili 7 Q) - -
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 non-controlling interests (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)
Acaquisition 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.

The purchase price of prior years' acquisitions increased by DKK 129 million, mainly due to revised estimates relating to earn-outs for the ac-
quisitions of Carlos Rocha in Spain of DKK 80 million, Ryvola in the Czech Republic of DKK 12 million and CMC in Turkey of DKK 10 million.

Acquisition costs mainfy comprise fees to lawyers, auditors and consufltants (paid in relation to the acquisition).
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

80 - ANNUAL REPORT 20609 | CONSOLIDATED FIMANCIAL STATEMERNTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)

Divestment of businesses

The Group made 8 divestments during 2009 (12 during 2008). The total sales price amounted to DKK 240 million (DKK 316 million in 2008).
The total annual revenue of the divested businesses (approximate figures extracted from unaudited financial information) is estimated at
DKK 640 million (DKK 1,281 million in 2008) 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 2009 2008
Goodwill (34) (15)
Customer contracts (44) (6)
Other non-current assets (63) (10)
Trade receivables (51) (43)
Other current assets (11) (20)
Assets held for sale ” . - (619)
Other provisions 0 3
Pensions, deferred tax liabilities and non-controlling interests 8 12
Long-term debt 5 -
Short-term debt 2 1
Other current liabilities 45 19
Liabilities related to assets held for sale ” ” - 351
Net identifiable assets and liabilities . (143) (327)
Loss/(gain) on divestment of businesses, net (83) 37
Divestment costs, net of tax (14) (26)
Sales price (240) (316)
Cash and cash equivalents in divested businesses 5 12
Cash sales price (235) (304)
Changes in receivable sales price 200 1
Divestment costs paid, net of tax 13 31
Net proceeds regarding divestment of businesses (22) (272)
" The amount in 2008 related to 155 Energie in France which at 31 December 2007 was recognised as held for sale and subsequently divested in fanuary 2008.
The 8 divestments ” made by the Group during 2009 are listed below:
Excluded from

the income Percentage Annual Number of
Company/activity Country Service type statement interest revenue employees ”
Asker Norway Property January Activities 31 40
Base Care Ltd. New Zealand Property June Activities 2 5
Landscaping Sweden Property July Activities 328 325
Shun Tak Hong Kong Cleaning August 50% 13 162
Pest Control Services United Kingdom Property October Activities 22 70
Contact Centres Netherlands Support October 100% 117 650
Laundry Services Norway/Sweden Cleaning December Activities 100 120
FS South Italy Cleaning December Activities 27 177
Total 640 1,549
» includes all divestments completed prior to 1 January 2010.
»” Approximate figures based on information available at the time of divestment extracted from unaudited financial information. continues

CONSCLIDATED FINANCIAL STATEMENGS | ANNUAL REPORT 2609 + 81

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)

Pro forma revenue and operating profit before other items
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 2009 2008
Pro forma revenue

Revenue recognised in the income statement 69,004 68,829
Acquisitions 184 1,641

Revenue adjusted for acquisitions 69,188 70,470

Divestments (403) (230)
Pro forma revenue 68,785 70,240

Pro forma operating profit before other items

Operating profit before other items recognised in the income statement 3,874 4,061
Acquisitions 19 113
Operating profit before other items adjusted for acquisitions 3,893 4,174
Divestments (5) (0)
Pro forma operating profit before other items 3,888 4,174

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. The estimates are
based on unaudited financial information.

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. This information does not represent the results the Group would have
achieved had the acquisitions and divestments 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

82 - ANNUAL REPORT 2005 | CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACQUISITION AND DIVESTMENT OF BUSINESSES (CONTINUED)

Acquisitions and divestments subsequent to 31 December 2009

The 2 divestments made by the Group in the period 1 January to 28 February 2010 are listed below. On 31 December 2009 the businesses were

classified as held for sale. No Aquisitions were completed in the period.

Excluded from

Companyr/activity Country Sevice type
Industriservice Norway Property
Refrigeration Spain Property

Divestments

the income Percentage Annual Number of
statement interest revenue ” employees ”
March 100% 163 254
March Activities 156 163
319 434

In accordance with usual Group procedures, divestment balances are prepared during the first months following the divestment. Conse-
quently, the final divestment balances are not available for divestments completed from 1 January to 28 February 2010.

” Approximate figures based on unaudited financial information available at the time of divestment.

13. INVESTMENTS IN NON-CURRENT ASSETS
DKK million

Purchase of intangible assets and property, plant and equipment
Sale of intangible assets and property, plant and equipment

Investments in intangible assets and property, plant and equipment, net"
Purchase of financial assets
Sale of financial assets

Changes in financial receivables

Investments in financial assets, net

" Excluding goodwill, brands and custorner contracts as well as additions related to assets under finance leases.

2009 2008
(1,007) (938)
110 220
(897) (718)
(15) (4)

6 8

(34) (6)
(43) (2)

CONSOL:DATED FINAMCIAL STATEMEMTS | ANNUAL REPORT 2003 - 83

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. INTANGIBLE ASSETS

Software and
Customer other intan-

DKK million Goodwiil Brands contracts gible assets Total
2009

Cost at 1 January 27,783 1,540 10,596 447 40,366

Foreign exchange adjustments 875 44 376 15 1,310

Adjustment relating to prior years - - - 121 121

Additions 595 - - 139 734

Additions from acquired companies, net (34) - 78 (5) 39

Disposals (702) - (370) (7) (1,079)
Transfer to Assets held for sale (15) - (89) (12) (116)
Cost at 31 December 28,502 1,584 10,591 698 41,375

Impairment, write-down and amortisation at 1 January (524) (14) (3,678) (149) (4,365)
Foreign exchange adjustments 0 1 (124) Q (123)
Adjustment relating to prior years - - - (121) (121)
Amortisation - (4) (910) (107) (1,021)
Amortisation from acquired companies, net . - - 46 2 48

Impairment (550) - - - (550)
Write-down ” (696) - (210) - (906)
Disposals 702 - 370 - 1,072

Transfer to Assets held for sale - - 35 8 43

Impairment, write-down and amortisation at 31 December (1,068) (17) (4,471) (367) (5,923)
Carrying amount at 31 December 27,434 1,567 6,120 331 35,452

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

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 SS 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 costs attached.

"write-down of customer contracts was mainly related to a write-down of DKK 179 million related to non-core activities In France which were classified as held for sale on 31 December 2009. Write-down
of goodwill is described in note 10, Goodwill impairment and write-down.

84 - ANNUAI REPORT 2005 | CONSOLIDATED FINANCIAL STATEMENT3

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. IMPAIRMENT TESTS

Impairment test procedure

The Group performs impairment tests on intangibles ” annually and whenever there is an indication that intangibles may be impaired. 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 relates 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.

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 op-
erating margin (before other items) 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
(before other items). The terminal growth rates do not exceed the expected long-term average growth rate including inflation for the busi-
ness 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
each CGU.

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.

Impairment test results

The carrying amount of intangibles and the key assumptions ” used in the impairment testing as per 31 December 2009 are presented below
for each CGU representing more than 3% of the carrying amount of intangibles or where the recoverable amount is close to the carrying
amount of intangibles. No impairment losses were identified as per 31 December 2009.

The impairment tests as per 31 May 2009 resulted in recognition of impairment losses of DKK 550 million, of which DKK 450 million related
to ISS France and DKK 100 million related to ISS Germany. The impairment losses resulted from declining market conditions within certain
business activities in which ISS operates, especially the industrial segments, as well as a slight increase in the discount rate applied for ISS
Germany. The impairment tests for ISS France and ISS Germany as per 31 May 2009 were based on business plans prepared by local manage-
ment. As per 31 December 2009 the business plans have been evaluated and updated as part of the annual impairment testing. No additional
impairment losses were identified.

"In this context intangibles cover the value of goodwill, brands and customer contracts resulting from the acquisition of companies.
2 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 af 1995 and similar laws in other countries regarding expectations to the future development.

continues

CONSOLIDATED FINANCIAL STATEMIEMNTS | ANNUAL REPORT 200$ - 85

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. IMPAIRMENT TESTS (CONTINUED)

2009

France
Finland
United Kingdom
Norway
Netherlands
Denmark
Belgium
Spain
Australia
Switzerland
Sweden

USA

Austria
Germany
Ireland

New Zealand
Italy
Philippines
Other

Total carrying amount at 31 December 2009

2008

France
Finland
United Kingdom
Norway
Netherlands
Denmark
Spain
Belgium
Switzerland
Sweden
Australia
Austria
Germany
Ireland

Italy

Mexico
Other

Total carrying amount at 31 December 2008

Carrying amount (DKK million)

Goodwill

4,253
2,304
2,158
2,012
1,872
1,744
1,563
1,465
1,453
1,100
1,017
917
706
634
312
161
109
28

3,626

27,434

Brands

300
120
158
130
121
131
85
90
10
51
102
1
49
66
16

7

130

1,567

Customer
contracts

610
627
599
567
198
297
304
369
303
266
169
293
237
88
68
41
74
2

1,008

6,120

Total
intangibles

5,163
3,051
2,915
2,709
2,191
2,172
1,952
1,924
1,766
1,417
1,288
1,211
992
788
396
202
190
30

4,764

35,121

Carrying amount (DKK million)

Goodwill

4,999
2,297
2,042
1,767
1,943
1,790
1,528
1,573
1,090
1,090
1,128
707
732
295
77

83
4,118

27,259

Brands

302
120
148
110
121
131
90
86
51
9%
8
49
67
16
7

124

1,526

Customer
contracts

932
699
634
564
258
341
432
348
318
216
259
268
101
61
68
22
1,397

6,918

Total
intangibles

6,233
3,116
2,824
2,441
2,322
2,262
2,050
2,007
1,459
1,402
1,395
1,024

900

372

152

105
5,639

35,703

” In this context intangibles cover the value of goodwill, brands and customer contracts resulting from the acquisition of companies.

” Based on Operating profit before other items.

86 - ANNUAL REPORT 2099 1 CONSOLIDATED FINANCIAL STATEMENTS

Applied expected
long-term rate

" Growth

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%

Margin ”

6.2%
7.9%
6.8%
7.4%
6.5%
7.2%
6.7%
6.4%
6.6%
7.6%
6.8%
6.0%
6.4%
4.4%
6.5%
6.4%
7.5%
4.7%

Applied expected
long-term rate

” Growth

3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
4.0%

Margin ?

6.7%
8.0%
6.8%
7.5%
6.6%
6.7%
6.1%
7.1%
7.6%
6.8%
6.6%
6.4%
4.6%
6.6%
9.0%
6.5%

Applied

- discount rate
Discount Discount
rate, rate,
net of tax pre tax
8.8% 12.0%
9.1% 11.4%
9.4% 12.1%
10.2% 13.3%
9.6% 12.0%
9.8% 12.3%
8.9% 12.2%
9.8% 13.0%
11.4% 15.4%
8.1% 9.7%
9.5% 12.1%
8.8% 12.7%
9.4% 11.7%
9.8% 12.9%
11.4% 12.6%
11.5% 15.5%
10.0% 18.8%
13.6% 18.0%

Applied

discount rate
Discount Discount
rate, rate,
net of tax pre tax
9.3% 12.9%
9.1% 11.5%
8.8% 11.3%
10.1% 13.2%
9.7% 12.0%
9.7% 12.2%
9.2% 12.2%
8.9% 12.4%
8.3% 10.0%
8.9% 11.3%
10.2% 13.7%
9.4% 11.8%
9.2% 12.2%
10.6% 11.7%
10.2% 19.7%
14.2% 18.6%

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. IMPAIRMENT TESTS (CONTINUED)

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
fong-term Allowed fong-term Allowed . Allowed
2009 rate decrease rate decrease Applied rate increase
France 3.0% 0.0% 6.2% 0.0% 8.8% 0.0%
Finland 3.0% 1.7% 7.9% 1.8% 9.1% 1.8%
United Kingdom 3.0% >3.0% 6.8% >3.0% 9.4% >3.0%
Norway 3.0% >3.0% 7.4% 2.8% 10.2% >3.0%
Netherlands 3.0% 2.2% 6.5% 1.7% 9.6% 1.6%
Denmark 3.0% 1.8% 7.2% 1.6% 9.8% 1.8%
Belgium 3.0% 1.3% 6.7% 1.2% 8.9% 1.0%
Spain 3.0% 0.4% 6.4% 0.4% 9.8% 0.3%
Australia 3.0% 1.5% 6.6% 1.1% 11.4% 1.5%
Switzerland 3.0% >3.0% 7.6% >3.0% 8.1% >3.0%
Sweden 3.0% >3.0% 6.8% >3.0% 9.5% >3.0%
USA 3.0% 0.7% 6.0% 0.7% 8.8% 0.8%
Austria 3.0% 0.4% 6.4% 0.4% 9.4% 0.3%
Germany 3.0% 0.0% 4.4% 0.0% 9.8% 0.0%
Ireland 3.0% 0.9% 6.5% 0.7% 11.4% 0.6%
New Zealand 3.0% 0.8% 6.4% 0.6% 11.5% 0.6%
italy 3.0% 0.6% 7.5% 0.6% 10.0% 0.5%
Philippines 3.0% 0.1% 4.7% 0.0% 13.6% 0.1%

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%
Ireland 3.0% 0.7% 6.6% 0.6% 10.6% 0.4%
Italy 3.0% 0.2% 9.0% 0.2% 10.2% 0.1%
Mexico 4.0% 0.5% 6.5% 0.3% 14.2% 0.4%

” Based on Operating profit before other iterns.

CONSOL:DATID F'NANCIAL STATEMENTS | ANNUAL REPORT 2399 + 87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. PROPERTY, PLANT AND. EQUIPMENT

DKK million

Cost at 1 January

Foreign exchange adjustments
Adjustment relating to prior years
Additions ”

Additions from acquired companies, net
Disposals

Transfers 3

Cost at 31 December

Depreciation at 1 January

Foreign exchange adjustments

Adjustment relating to prior years
Depreciation

Write-downs

Depreciation from acquired companies, net
Disposals

Transfers

Depreciation at 31 December
Carrying amount at 31 December

Hereof assets held under finance leases

Land and
buildings

285
6
25
68
(6)
(11)
(206)

161
(47)
(2)
(25)
(14)
(92)
119
(56)

105

2009

Plant and
equipment

3,339
183
1,332
886
(70)
(258)
(319)

5,093

(1,301)
(123)
(1,332)
(753)
(67)
28
166
188

(3,194)
1,899

177

Total

3,624
189
1,357
954
(76)
(269)
(525)

5,254

(1,348)
(125)
(1,357)
(767)
(159)
30
169
307

(3,250)
2,004

177

Land and
buildings

266
(8)

65
8
(38)
(8)

285

(63)

(18)
(1)
31

(47)

238

2008

Plant and
equipment

3,141
(183)

899
163
(674)
(7)

3,339
(1,121)

127
(766)
(99)

558

0
(1,301)

2,038

182

Total

3,407
(191)

964
171
(712)

(15)

3,624

(1,184)
129

(784)

(100)
589
2
(1,348)
2,276

182

Land and buildings with a carrying amount of DKK 0 million (DKK 5 million in 2008) have been provided as collateral for mortgage debt of
DKK 0 million (DKK 0 million in 2008). 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 32, Contingent liabilities.

1 In 2009, additrons included assets held under finance leases of DKK 114 miilion (2008: DKK 155 million).

3 in 2009, DKK 218 million, net was transferred to Assets held for sale. In 2008, DKK 13 million, net was transferred to Intangible assets.

17. INVESTMENTS IN ASSOCIATES
DKK million

Cost at 1 January

Foreign exchange adjustments
Disposals

Transfer to Assets held for sale

Cost at 31 December

Revaluation at 1 January
Foreign exchange adjustments
Net result for the year
Dividends received

Disposals

Transfer to Assets held for sale

Revaluation at 31 December

Carrying amount at 31 December

88 - ANNUAL REPORT 2008 | CONMSOLIDATED FINANCIAL STATEMENTS

u

2009

21

(0)
(6)

16

(5)
(0)

21

2008
24

(3)
(0)

21

(0)

(4)
(0)

3

24

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. INVESTMENTS IN ASSOCIATES (CONTINUED)

The Group's share

DKK million Operating Net Owner- Net
2009 Country Revenue profit result Assets Liabilities ship % Equity result
NSB Trafikservice AS Norway 70 2 1 35 30 45 2 1
ISS Industriservice AB Sweden 238 4 1 105 74 48 15 1
Other associates - 121 12 9 19 14 - 4 2

429 18 11 159 118 21 4

Goodwill at 31 December 2009 - ”

Carrying amount at 31 December 2009 21 4

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 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

18. DEFERRED TAX

DKK million 2009 2008
Deferred tax liabilities/(assets), net at 1 January 2,026 2,188
Foreign exchange adjustments 89 (117)
Additions from acquired companies, net 17 71
Tax on other comprehensive income (4) (37)
Transfer to Assets held for sale 52 -
Tax on profit before impairment/amortisation of intangibles ” 23 203
Tax effect of impairment/amortisation of intangibles ” (361) (282)
Deferred tax liabilities/(assets), net at 31 December 1,842 2,026

Recognised in the statement of financial position as follows:

Deferred tax liabilities 2,356 2,498
Deferred tax assets (514) (472)
Deferred tax liabilities/(assets), net ' 1,842 2,026

"In this context intangibles comprise the value of goodwill, brands and customer contracts.

continues

COHSOLIGATED Fin AMCIAL STATEMENTS | ANNUAL REPORT 2609 - 89

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18. DEFERRED TAX (CONTINUED)

Deferred tax specification

2009 20038

Deferred tax Deferred tax  Deferred tax Deferred tax
DKK million assets liabilities assets liabilities
Tax losses carried forward 422 - 443 -
Goodwill 59 301 47 265
Brands - 443 - 433
Customer contracts - 1,608 - 1,860
Property, plant and equipment 122 179 86 118
Other provisions 114 - 153 -
Issued bonds - 5 - 56
Tax losses in foreign subsidiaries under Danish joint taxation - 23 - 23
Set-off within legal tax units and jurisdictions (203) (203) (257) (257)
Deferred tax 514 2,356 472 2,498

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:

2009 2008

Recog- Unrecog- Recog- Unrecog-
DKK million Total nised nised Total nised nised
Germany 297 57 240 254 58 196
Denmark 113 111 2 196 195 1
France 61 61 - 8 - 8
Brazil 51 4 47 39 2 37
Belgium 30 19 11 22 17 5
israel 15 3 12 10 3 7
Austria 9 - 9 2 - 2
USA 8 8 - 22 19 3
Argentina 4 2 2 3 - 3
Hong Kong 3 1 2 2 1 1
Greece 2 1 1 1 - 1
New Zealand 1 1 - 3 - 3
Italy 1 - 2 - 2
Total 327 269

The unrecognised tax losses can be carried forward indefinitely in the individual countries except for the USA (20 years) and Argentina,
Greece and Italy (5 years). 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 foreseeabie future taking into
account any restrictions in utilisation in the local tax legislation.

90 - ANNUAL REPORT 2009 | CONSOLIDATED FINANCIAL STATEN ENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. OTHER FINANCIAL ASSETS

DKK million 2009 2008
Costs related to PPP (Public Private Partnerships)/PFI (Private Finance Initiative) contracts 7 34
Regulatory long-term loans 54 47
Deposits 157 102
Other 63 55
Other financial assets 281 238

Regulatory long-term loans are measured at amortised cost with any resulting adjustment being recognised in the income statement.

20. INVENTORIES

DKK million 2009 2008
Raw materials and supplies 136 102
Work in progress 0 15
Finished goods 167 147
Inventories 303 264
Inventories expensed 6,044 6,134
21. TRADE RECEIVABLES

DKK million 2009 2008
Trade receivables (gross) 10,371 10,325
Provision for doubtful debts (241) (228)
Trade receivables 10,130 10,097

The ageing of trade receivables at 31 December was:

Not past due 8,018 7,793
Past due 1 to 60 days 1,600 1,814
Past due 61 to 180 days 402 407
Past due 181 to 360 days 89 66
More than 360 days 21 17
Trade receivables 10,130 10,097

The Group's exposure to credit risk and losses related to individual customers is disclosed in note 33, Financial risk management.

continues

CONSOLIDATED FIMANZJAL STATEMENTS | ANNUAL REPORT 2009 - 91

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. TRÅDE RECEIVABLES (CONTINUED)

DKK million 2009 2008
Movements in the provision for doubtful debts during the year was:

Provision for doubtful debts at 1 January (228) (227)
Foreign exchange adjustments (6) 6
Additions from acquired businesses, net (9) (22)
Provisions for the year (93) (73)
Provisions reversed 34 51

Amounts written off as uncollectible 58 37

Transfer to Assets held for sale 3 -
Provision for doubtful debts at 31 December (241) (228)

Trade receivables are shown net of provision for doubtful debts.

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.

Securitisation

As part of the refinancing of the EUR 850 million of the EMTNs maturing in September 2010, the Group has during 2009 launched a securitisa-
tion programme in 5 major countries. Under the programme trade receivables of the participating countries are sold to a newly established
special purpose entity (SPE), which is fully consolidated in the Group's financial statements. The securitised trade receivables continue to be
recognised in the Group's statement of financial position as the majority of risks and rewards remain with the Group.

As at 31 December 2009, trade receivables of DKK 2,267 million have been provided as security for securitisation debt with a face value of
DKK 937 million.

22. CONTRACT WORK IN PROGRESS

DKK million 2009 2008
Contract expenses 399 410
Recognised profits (less recognised losses) 87 72
Contract work in progress (before advances) 486 482
Progress billings (291) (300)
Contract work in progress 195 182
Prepayments from customers 440 420

Prepayments from customers is included in note 31, Other liabilities in the line Prepayments from customers.

92 - ANNUAL REPORT 2909 | CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. TAX RECEIVABLES AND TAX PAYABLES
DKK million

Tax (receivables)/payables, net at 1 January

Foreign exchange adjustments

Additions from acquired companies, net

Adjustment relating to prior years, net

Tax on profit before impairment/amortisation of intangibles ”
Tax on other comprehensive income

Joint taxation contribution

Tax paid, net

Tax (receivables)/payables, net at 31 December

Recognised in the statement of financial position as follows:
Tax payables
Tax receivables

Tax (receivables)/payables, net

"In this context intangibles comprise the value of goodwill, brands and customer contracts.

24. OTHER RECEIVABLES
DKK million

Receivables from companies within the ISS Group
Prepayments

Receivable sales price from divestments

Currency swaps

Other

Other receivables

2009

(105)
(58)

23
542

(15)
(394)

(2)

306

(308)

(2)

2009

12
525
210

324

1,071

2008

(126)
(33)
361

18
(363)

(105)

123

(228)

(105)

2008

57
468
2

3
246

776

Receivables from companies within the ISS Group are related to a joint taxation scheme with Danish Group companies. The effective interest
rate regarding receivables from companies within the ISS Group was 6.2% (2008: 6.3%).

Prepayments comprise various prepaid expenses such as rent, leasing and insurance as well as accrued interest expenses.

According to the Senior Facility Agreement the use of proceeds from divestments is subject to restrictions. Consequently, divestment proceeds
may only be used for acquisition of businesses or repayment of borrowings. It is management's intention to use the proceeds from the receiv-

able sales price of DKK 210 million for acquisition of businesses.

CONSOLIDATEID FINANCIAL STATEMENTS f ANNUAL REPORT 2009 - 93

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25. SECURITIES, CASH AND CASH EQUIVALENTS

Carrying
amount
(DKK
million)

Bonds 97
Securities 97

Cash and cash equivalents 3,364

Bonds mainly consist of listed Danish government bonds.

2009
Average
effective

interest
rate

4.0%

1.0%

Average
duration
(years)

0.9

Carrying
amount
(DKK

million)"

86

86

2,961

2008

Average
effective
interest
rate

4.0%

2.7%

Average
duration
(years)

1.8

Of the total cash position, DKK 62 million (2008: DKK 61 million) was restricted and DKK 1,080 million was reserved for partial redemption of
the remaining 2010 EMTNSs. After the reporting date the Group completed a tender offer for additional EUR 150 million of the outstanding
notes leaving EUR 200 million of notes for refinancing before maturity in September 2010.

26. ASSETS AND LIABILITIES HELD FOR SALE
DKK million

Goodwill

Other intangibles

Property, plant and equipment
Financial assets

Deferred tax assets
Inventories

Trade and other receivables

Assets held for sale

Deferred tax liabilities

Pensions and similar obligations
Other provisions

Bank loans

Trade payables and other liabilities

Liabilities related to assets held for sale

2009

15
58
218

249

614

12
14
64
11
278

379

2008

In 2009, assets and liabilities held for sale related to certain businesses which comprised non-core activities in France, Spain and Norway. In

2008, no assets or liabilities were classified as held for sale.

The assets and liabilities of these activities have been classified as held for sale and are presented separately in the statement of financial
position at the lower of the carrying amount at the date of the classification as held for sale and fair value less costs to sell. Assets are not
depreciated or amortised from the date when they are classified as held for sale.

According to management's estimates the proceeds on disposal of the activities are expected to be lower than the carrying amount of
the relevant assets and liabilities. Accordingly, a write-down of net assets on other income and expenses of DKK 159 million, a write-down
on goodwill of DKK 448 million and a write-down of customer contracts of DKK 179 million has been recognised at 31 December 2009.
Generally estimates on proceeds on disposal are associated with uncertainty and may possible be adjusted subsequently.

94 - ANNUAL REPORT 200% | CONSOLIDATED FIMANCIAL STATEMEINTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27. SHARE CAPITAL

DKK million 2009 2008
Share capital at 1 January 100 100
Share capital at 31 December 100 100

Number of shares (in thousands of shares)
Number of shares at 1 January 100,000 100,000

Number of shares at 31 December - fully paid 100,000 100,000

At 31 December 2009 a total of 100,000,001 shares with a nominal value of DKK 1 per share were issued and fully paid (2008: 100,000,001
shares). No shares carry special rights. Shares are not freely transferable.

28. BORROWINGS

DKK million ” 2009 2008:
Issued bonds 7,738 10,174
Bank loans 20,633 20,914
Finance lease obligations 115 122
Long-term debt 28,486 31,210
Issued bonds due within one year 2,577 -
Bank loans due within one year 835 315
Bank loans and overdrafts ” 1,126 782
Securitisation debt »” . 892 -
Finance lease obligations 93 69
Debt to companies within the ISS Group? 94 113
Short-term debt 5,617 1,279
Total long-term and short-term debt 34,103 32,489
Fair value 34,804 29,981

As part of the strategy to refinance the EUR 850 million of the EMTNs due 2010, the Group issued EUR 525 million of new Senior notes due
2014, and additionally a securitisation programme was launched in 5 major countries during 2009. Due to the terms of the securitisation debt
it has been classified as short-term in the statement of financial position although the securitisation facility is committed for a period of 3
years from September 2009 to September 2012.

During 2009, financing fees amounting to DKK 304 million (2008: DKK 0 million) have been recognised in long-term and short-term debt
while accumulated financing fees recognised in long-term and short-term debt on 31 December 2009 amounted to DKK 504 million (2008:
DKK 307 million).

In 2009 and 2008, the Group had no debt convertible into equity.

1 The effective interest rate was 3.8% (2008: 5.9%).

” The effective interest rate was 3.4%.

» Debt to companies within the SS Group included 13 million (2008: DKK 43 million) related to a joint taxation scheme with Danish resident subsidiaries. The effective interest rate regarding debt to companies
within the ISS Group was 4.9% (2008: 6.7%).

continues

CONSOUDATED FINANCIAL STATEMENTS | ANNUAL REPORT 20939 - 95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28. BORROWINGS. (CONTINUED)
Maturity profile of long-term debt
DKK million

2009

Issued bonds
Bank loans and finance lease obligations

Long-term debt

2008

Issued bonds
Bank loans and finance lease obligations

Long-term debt

The presentation of the maturity profile of long-term debt is based on undiscounted principal cash flows.

Terms and maturity of long-term debt

Weighted average

DKK million

Issued bonds:
EMTNs due 2010
EMTNSs due 2014
Subordinated notes
Senior notes 2014
Interest rate swaps

Bank loans:
Senior facilities:
Term facility A
Term facility B
Acquisition facility A
Acquisition facility B
Second lien facility
Other bank loans

Finance lease obligations

Long-term debt

interest rate

4.75%
4.50%
8.875%
11%

Libor + 2.00%
Libor + 2.00%
Libor + 2.25%
Libor + 2.25%

Euribor + 3.75%

6.13%”

Carrying
amount

7,738
20,748

28,486

Carrying
amount

10,174
21,036

31,210

Interest
rate

Fixed
Fixed
Fixed
Fixed

Floating
Floating
Floating
Floating
Floating

" Weighted average interest rate taking the effect of interest rate hedges into account.
» The amount hedged før term facility A and aquisition facility A relates to the long-term as well as the short-term part of the debt.

96 - ANNUA

 

Face value

8,107
20,940

29,047

Face value

10,538
21,252

31,790

Interest
rate risk

Fair value
Fair value
Fair value
Fair value

Cash flow
Cash flow
Cash flow
Cash flow
Cash flow

1-2 years

757

757

1-2 years

6,332
846

7,178

Year of
maturity

2010
2014
2016
2014

2012
2013
2012
2013
2015

2-3 years

569

569

2-3 years

916

916

Face
value

822
3,378
3,907

668
13,022
532
2,125
4,465
13

115

29,047

3-4 years

15,147

15,147

3-4 years

614

614

Amount
hedged ”

1,022
7,885
599

4,018

4-5 years

4,729

4,729

4-5 years

14,405

14,405

2009

Carrying
amount

719
3,300
3,718

599
12,952
532
2,125
4,412
13

115

28,486

> 5 years

3,378
4,467

7,845

> 5 years

4,206
4,471

8,677

2008

Carrying
amount

6,149
706
3,291

28

884
12,851
1,280
1,467
4,409
23

122

31,210

continues

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28. BORROWINGS (CONTINUED)

Currency profile of long-term debt
The Group's long-term debt is denominated in the following currencies:

2009 2008
DKK 0.0% 0.0%
EUR 91.4% 91.6%
GBP 4.8% 4.1%
NOK 1.3% 1.4%
SEK 0.9% 1.2%
USD 0.0% 0.1%
Others . 1.6% 1.6%

100.0% 100.0%

Finance lease obligations
Finance lease obligations are payable as follows:

2009 2008
Minimum Minimum
lease lease
DKK million paåyments Interest Principal payments Interest Principal
Wit