Assets

Type	Time	Amount	Unit

Revenue

Type	Start date	End date	Amount	Unit

XML

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The full data:

 

Annual report 2011
ISS Global A/S

Lzop ENDT PÅ DEN
OGDINÆLE 6 ENELALFDESÅM LING

DEN 2. PRI za

2 GG
ISS Global A/S

Bredgade 30 SOM DA GENT
DK - 1260 Copenhagen K

Denmark

CVR 21 40 83 95

Phone:+45 38 17 00 00

1204044Eo0ogSN59656

 

Contents

1204044EogSN59657

MANAGEMENT REVIEW

Key figures and financial ratios

Operational review

Outlook

Financial review

Strategy — The ISS Way

Corporate Responsibility

Corporate governance and risk management

FINANCIAL STATEMENTS
Consolidated financial statements
Parent company financial statements
Management statement
Independent auditor's report

16
17
23
28
34

43
115
137
138

 

Key figures and financial ratios I Management review 3

Key figures and financial ratios

2011 2010 2009 2008 2007

 

 

 

 

 

 

DKK million (unless otherwise stated) i
|

KEY FIGURES |
Income statement ' ' '
Revenue : 77,681 74,101 69,024 68,848 63,935
Operating profit before other items 72 ! 4,804" 4,738 4,275 4,432 4,200
EBITDA i 4,317 4,341 3,448 3,968 3,885
Adjusted EBITDA 29 ' 5,639 i 5,570 5,124 5,287 5,035
Operating profit 29 i 3,482 3,509 2,599 3,113 3,050
Financial income i 155: 182 279 215 373
Financial expenses | (2,41 9); (1,997) (1,900) (2,153) (1,662)
Profit before goodw ill impairment/amortisation and impairment i ;

of brands and customer contracts i 480 | 1,045 502 727 949
Net profit/(loss) for the year i (90): 467 (594) (42) 540
Cash flow i '
Cash flow from operating activities i 3,071 3,932 3,471 3,675 3,021
Acquisition of intangible assets and property, plant i .

and equipment not related to acquisitions, net ; (989) (864) (882) (705) (699)
Financial position . .
Total assets k 47,071 46,071 44,126 42,532 42,872
Goodw ill : 22,674 23,096 22,262 21,742 21,689
Additions to property, plant and equipment not related to acquisitions, gross ; 937. 861 953 963 937
Carrying amount of net debt ; . 24277 24,989 25,130 23,963 23,159
Total equity (attrioutable to owners of ISS Global A/S) i "… 323" 464 (632) (48) 1,083
Employees :
Number of employees at 31 December ; .  534,400 522,600 485,700 472,700 438,000
Full-time employees, % i 73' 73 71 69 68
FINANCIAL RATIOS ! :
Growth, % i ' ;
Organic growth ' 6.2; 3,5 0.6 5,9 6.0
Acquisitions ' o 0 3 7 10
Divestments I (2). (2) (1) (2) (1)
Currency adjustments ? | 11; 5 (3) (3) (0)
Total revenue grow th Å 5 7 0 8 15
Other financial ratlos, % i k
Operating margin ? i 6.2: 6.4 6.2 6.4 6.6
Equity ratio i 0.7. 1.0 (1.4) (0.1) 2.5
Interest coverage ? ; 25. 3.1 3.2 2.7 3.9
Cash conversion ? i 94: 99 97 103 101

 

1 Excluding Other income and expenses, net, Goodwill impairment and Amortisation and impairment of brands and customer contracts.

2) With effect from 31 December 2011 the Group changed the classification of interest on defined benefit plans (interest on obligation and expected retum on plan assets) and interest on
other long-term employee benefits from Staff costs to Financial expenses to reflect more appropriately the nature of these items and the way they affect the business. In 2011, the
change in reclassification increased Operating profit before other items with DKK 36 million but had zero impact on Net profit/(loss) for the year. Comparative figures were reclassified for
consistency.

3) The Group uses Operating profit before olher items for the calculations instead of Operating profit. Consequently, the Group excludes from the calculations 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, acquisition and integration costs, disposals of property and restructurings. Some of these items are recurring and some are non-
recurring in nature,

4) Excluding Goodwill impairment and Amortisation and impairment of brands and customer contracts.

5) Calculated as total revenue growth less organic growth and less net acquisition/divestment growth. Currency adjustments thereby include the effect stemming from exclusion of
currency effects from the calculation of organic growth and net acquisition/divestment growth.

1204044EogSN59658

 

 

 

Definitions

Acquisitions, %

Adjusted EBITDA
Carrying amount of net debt

Cash conversion, %

Divestments, %

EBITDA

Equity ratio, %
Interest coverage
Operating margin, %

Organic growth 1), %

Total revenue growth, %

1204044EogSN59659

 

Mm

nm

Definitions | Management review 4

Revenue from acquired businesses ) x 100

 

Revenue prior year at current year's exchange rates
1) Revenue from acquired isbasedon vs atthe date,

Operating profit before other items + Depreciation and amortisation

Non-current loans and borrowings + Current loans and borrowings - Receivables from
companies within the ISS Group - Securities - Cash and cash equivalents - Positive fair
value of interest rate swaps

(Operating profit before other items + Changes in working capital) x 100

 

Operating profit before other items

Revenue from divested businesses )) x 100

 

Revenue prior year at current year's exchange rates

1) Revenue from divested businesses Is based on estimates or actual| revenue Where available at the divestment date,
Operating profit + Depreciation and amortisation

Total equity attributable to owners of 155 Global A/S x 100

 

Total assets

Operating profit before other items + Depreciations and amortisation

 

Financial income and financial expenses, net

Operating profit before other items x 100

 

Total revenue

Comparable revenue) current year - comparable revenue) prior year) x 100
p y prior y

 

Comparable revenue!) prior year

1) Comparable revenue impiles the excluslon of changes In revenue attributable to businesses acquired or divested and the effect of changes in
forelgn exchange rates, In order to present comparable revenue and thereby organic growth excluding any effect from changes in forelgn
currency exchange rates, comparable revenue in the prior year is calculated at the subsequent year's foreign currency exchange rates. Acquisi-
tons of businesses are treated as having been integrated into ISS upon acqulsition and ISS's calculatlon øf organic growth Includes changes in
revenue of these acquired businesses compared with revenue expectatlons at the date of acqulsltion. Organic growth is not a measure of

financial performance under Danish GAAP or IFRS and the organic growth figures have not been audited.

(Revenue current year - revenue prior year) x 100

 

Revenue prior year

 

 

Operational review | Management review 5

Operational review

In 2011, ISS demonstrated strong results
driven by successful execution of The ISS
Way strategy, generating strong organic
growth through a customer-focused com-
mercial strategy and our unique ability to
win and deliver on large global integrated
facility services (IFS) contracts.

ISS Global A/S is a wholly owned subsidiary of ISS
AIS, an international provider of facility services.
ISS Global A/S (referred to as "ISS" or "the Group")
owns - directly or indirectly — the ISS Global
Group's operating companies.

HIGHLIGHTS OF THE YEAR

In 2011, ISS continued the growth momentum ex-
perienced late in 2010, generating enhanced organ-
ic growth and operating profit.

Group revenue amounted to DKK 77.7 billion in
2011, an increase of 5% compared with 2010, driv-
en by organic growth of 6.2% and a positive effect
from exchange rate movements of 1% which was
offset by negative net effect from acquisitions and
divestments of 2%.

The organic growth of 6.2% in 2011, which is the
highest organic growth rate in more than 10 years,
was a continuation of the positive organic growth
trend seen in 2010, fuelled by the start-up of sever-
al large integrated facility services (IFS) contracts in
2011. North America, Latin America and Asia all
delivered double-digit organic growth rates.

Operating profit before other items increased by 1%
to DKK 4,804 million in 2011 compared with 2010
reflecting the highest level in ISS history. The oper-
ating margin (operating profit before other items as

1204044EogSN59660

PERFORMANCE HIGHLIGHTS

ORGANIC GROWTH -— was 6.2% or DKK 4.6 billion in
2011, the highest in more than 10 years

OPERATING MARGIN — was 6.2% in 2011 resulting
in the highest operating profit before other items in the history of ISS

CASH CONVERSION — continued high cash
conversion of 94% in 2011

NUMBER OF EMPLOYEES -— surpassed
530,000, creating almost 12,000 new jobs in 2011

a percentage of revenue) was 6.2% in 2011 com-
pared with 6.4% in 2010. The operating margin in
2011 was supported by strong margins in Switzer-
land, the United Kingdom, Turkey, and the Asia
region in particular. However, this was offset by the
negative impact resulting from challenging econom-
ic conditions in the Mediterranean region, opera-
tional challenges in the Netherlands and the start-
up of large national and international IFS contracts.
In order to adapt to the challenging economic con-
ditions in mainly the Mediterranean region we re-
sponded with a strict operational focus including
exiting some contracts which were challenged by
the macroeconomic conditions in the region.

Operating profit decreased by 1% to DKK 3,482
million from DKK 3,509 million in 2010.

Net profit/(loss) decreased from a net profit of DKK
467 million in 2010 to a loss of DKK 90 million in
2011, and was negatively impacted by higher finan-
cial expenses, net, including DKK 117 million relat-
ed to amendment and extension of debt and IPO
financing, an increase in royalties and an increase
in income taxes. These negative effects were partly
offset by growth in revenue and higher operating
profit before other items.

The cash conversion for 2011 was 94%, as a result
of a strong cash flow performance in especially the
Western Europe region, despite the negative effect
from the strong organic growth. In addition, cash
conversion was affected by a slight increase in
debtor days compared with 31 December 2010.

Emerging markets, comprising Asia, Eastern Eu-
rope, Latin America, Israel, South Africa and Turkey
where we have more than half of our employees,
delivered organic growth of 13% and represent
19% of total revenue and 37% of total organic
growth for the Group. In addition to boosting organ-
ic growth, the emerging markets delivered an oper-
ating margin of 6.9% in 2011, well above most ma-
ture markets and an improvement of 0.1 percentage
point over 2010.

We continued to promote a strong and uniform
commercial culture by focusing on meeting cus-
tomer needs and thereby delivering a larger share
of our customers' facility services requests, includ-
ing demand from multinational corporations for in-
tegrated facility service (IFS) solutions. Our focus
has been on further developing and refining the
value propositions for customers within selected
customer segments, such as Business Services &
IT, Public Administration and Healthcare, while at
the same time aligning values, leadership principles
and business processes. With more than 530,000
employees this is not an easy task and we have a
long journey ahead of us implementing best prac-
tices and standardised business processes globally.

The ISS Way strategy is based on our four strategic
cornerstones; customer focus, people manage-
ment, the IFS strategy and a multi-local approach.
Combined with our corporate values and leadership
principles, these cornerstones provide the founda-
tion on which we pursue our vision to "Lead facility
services globally — by leading facility services local-
ly”.

ISS has, over the past decade, built global capabili-
ties in the delivery of a well defined set of services
which are equally well suited as a single-service
delivery or as part of an integrated offering. We are
focused on leveraging this unique platform by the
global implementation of best practices and stand-
ard processes. We promote a strong and uniform
commercial culture and crafting market leading
value propositions by customer segment. We are

1204044EogSN59661

Operational review | Management review 6

uniquely positioned to grasp the huge opportunities
in our local markets and in addition we are putting
our global footprint to work by meeting increased
demand from multinational corporations for the de-
livery of integrated facility services (IFS) across
borders.

We continue to make progress in the implementa-
tion of The ISS Way strategy. With customer needs
in focus we deploy best practices globally in order
to align our organisation behind the consistent de-
livery of excellence. Efforis are being made to align
our human resources and commercial cultures.
Within human resources we continue to embed our
leadership principles and values as well as deploy-
ing group-wide employee engagement initiatives,
performance, and talent management systems, and
succession planning. In the commercial arena, we
are driving excellence in the customer segment,
service and business system dimensions to en-
hance our ability to deliver on our value proposi-
tions. Excellence programmes in customer seg-
ments such as the remote site and hospital sectors
have been completed and are being implemented.
We are also adding to our library of best practice
from a service perspective — for example, having
initiated a Catering Excellence programme.

Our strategic focus on delivering portfolio based
services has led to sustained organic growth in the
portfolio business. Historically, the portfolio busi-
ness' share of total revenue has been 75% — 80%
and during the period 2009 to 2011 our portfolio
business increased the share of total revenue with-
in this range.

Across ISS regions, we saw strong demand for our
integrated facility services (IFS) offering in 2011.
Multi-service and IFS, where we deliver two or
more services to the same customer comprised
39% of total Group revenue in 2011 compared with
35% in 2010. Multi-service and IFS revenues allow
ISS to exploit synergies in the provision of services
and create stronger customer relationships.

In 2011, ISS continued the strong focus on the
Global Corporate Clients organisation leading to the
win of an IFS contract with Deutsche Bank covering
Italy and Iberia. In addition, key focus has in 2011
been on ensuring a successful start-up of several
international IFS contract wins such as the con-
tracts with a large technology company in North

 

America and Latin America, Citi for EMEA, United
Kingdom Foreign & Commonwealth Office for APAC
as well as an IFS contract with Statoil in Norway.
The implementation of these contracts are in ag-
gregate progressing well and operating margins
and debtor days are improving gradually towards
the anticipated run rate levels. The start-up of the
large IFS contract in North America has implied an
investment in building an IFS infrastructure and
consequential margin dilution in the region in 2011.
We already see evidence of the interest for IFS
solutions in North America and we expect to contin-
ue to move towards a more complex integrated
facility services organisation.

Ås a result of our outsourcing capabilities which
have been built up over the years, the International
Association of Outsourcing Professionals (IAOP)
announced that ISS in 2011 was ranked no. 2 on
IAOP's list of the world's leading outsourcing pro-
viders — The Global Out-sourcing 100. ISS thereby
stepped up four places from 2010 which underlines
that ISS is considered a professional and reliable
outsourcing partner of choice not only within the
facility services industry but measured against all
outsourcing companies across industries.

The strategic rationale and fit of business units con-
tinue to be reviewed on an ongoing basis in the
light of The ISS Way strategy, which has led to the
identification and evaluation of certain activities that
were either non-core to The ISS Way strategy or
lacked critical mass. Following this evaluation, ISS
has completed the divestments of the industrial
services business in Belgium, the damage control
business in Germany, and the coffee vending busi-
ness in Denmark and Norway. The industrial ser-
vices business in Belgium and the damage control
business in Germany were classified as held for
sale at 31 December 2010.

In August 2010, it was decided to pursue an IPO of
ISS A/S, but in March 2011, the project was can-
celled due to the underlying level of volatility and
uncertainty in the financial markets and the existing
shareholders' and the Group's desire for a success-
ful IPO with an orderly aftermarket. Costs of DKK 9
million related to the exit processes have been ex-
pensed in 2011.

Following the cancellation of the IPO, ISS decided
to take two actions, primarily to extend the maturity

1204044EogSN59662

Operational review | Management review 7

of its financing and thereby address any near term
refinancing requirement. Firstly on 24 June 2011,
ISS extended certain tranches under its Senior Fa-
cilities Agreement from maturities in 2012 and 2013
to end 2014 and 2015, and implemented other
amendments intended to enhance the operational
flexibility of the ISS Group considering the fact that
the Group has almost doubled in size in terms of
revenue, EBITDA and assets since the original
agreement was put in place in 2005. Remaining
financing fees of DKK 79 million recognised as part
of the debt were expensed. Secondly, effective 1
July 2011 the maturity of the securitisation pro-
gramme was extended by a year to September
2013.

On 17 October 2011, G4S plc ("G4S”) announced
the proposed acquisition of ISS A/S from FS Invest
I S.årr.l. ("FS Invest”), which is indirectly owned by
funds advised by EQT Partners and by GS Capital
Partners. The transaction valued ISS at around
£5.2 billion equal to an enterprise value of approxi-
mately DKK 44 billion. The acquisition was subject
to approval by G4S's shareholders. On 1 Novem-
ber, G4S and FS Invest announced that they had
agreed to terminate the Share Purchase Agreement
because it had become evident that G4S's share-
holders would not support the acquisition, due to
the size and perceived complexity of the deal
against the current economic backdrop.

By the end of 2011, ISS had more than 530,000
employees worldwide. Since year-end 2010, the
Group's headcount has increased by almost 12,000
employees as a result of organic growth and in
spite of 12 divestments being made during the peri-
od.

Revenue growth ” 2011

Operational review | Management review 8

Revenue growth, %

 

 

 

 

Organic Aca. Div. Currency Total growth
Western Europe 4 - (3) 0 1
Nordic 4 - (2) 3 5
Asia 12 4 (0) (3) 13
Pacific 3 - - 7 10
Latin America 21 - - (2) 19
North America 35 - - (7) 28
Eastern Europe 2 - - 0 2
Other Countries 58 - - (8) 50
Total 6.2 0 (2) 1 5
Emerging Markets 13 1 (0) (3) 11

 

1” See page 4 for definitions.

REGIONAL DEVELOPMENT

The "ISS world” consists of seven regions: Western
Europe, Nordic, Asia, Pacific, Latin America, North
America and Eastern Europe. The principle for the
regional grouping generally follows the geographical
split, but the Nordic region is presented separately
from the Western Europe region. In addition, in order
to highlight the performance of emerging markets,
ISS discloses certain information for emerging mar-
kets.

The description of regions below comprises countries
generating significant revenue. In addition, ISS oper-
ates in a number of countries which due to the size of
their revenue are not included in the presentation.
Those countries are: Bahrain, Bosnia and Herze-
govina, Bulgaria, Colombia, Costa Rica, Ecuador,
Egypt, Latvia, Lithuania, Nigeria, Pakistan, Panama,
Peru, Puerto Rico, South Africa, Ukraine, United Arab
Emirates and Venezuela.

Western Europe

The Western Europe region comprises the United
Kingdom, France, Spain, Switzerland, the Nether-
lands, Belgium & Luxembourg, Germany, Turkey,
Israel, Austria, Greece, Portugal, Ireland and Italy.

The markets included in the Western Europe region
are generally characterised as developed markets but
with differences in terms of IFS market maturity from
country to country. Market conditions have

1204044EogSN59663

generally been stable during 2011 but the market
conditions in some Mediterranean countries such as
Greece and Spain remain difficult as a result of the
economic instability in the region. In 2011 we have
therefore focused on utilising the well established
service platforms and delivery models in Western
Europe. This includes continued implementation and
further refinement of country-specific sales strategies
and developing tailor-made value propositions to se-
lected customer segments on the basis of specific
customer needs. In addition, the focus in certain
countries, mainly France and the Netherlands, has
been on resolving certain structural and operational
challenges.

Revenue in the Western Europe region increased by
1% to DKK 39,321 million (2010: DKK 39,101 million)
in 2011. Organic growth was positive by 4% which
was partly offset by 3% negative growth from divest-
ments. Operating profit before other items in Western
Europe decreased by 1% to DKK 2,268 million (2010:
DKK 2,302 million) resulting in an operating margin of
5.8%, 0.1 percentage point lower than in 2010.

The development and performance across the region
is diverse with strong performances in countries such
as Switzerland, the United Kingdom and Turkey while
Spain, the Netherlands, Greece and France are fac-
ing challenging markets albeit France is making some
progress in terms of the operational turnaround.
France showed a steady development with a flat rev-
enue development, including positive organic growth

OPERATING RESULTS

Operational review I Management review 9

Operating profit

 

 

 

 

Revenue before other items Operating margin
DKK m illion DKK million

2011 2010 Change 2011 2010 Change 2011 2010
Western Europe 39,321 39,101 1% 2,268 2,302 (1)% 5,8 % 5,9 %
Nordic 18,085 17,301 5% 1,268 1,237 3% 7.0 % 7.2 %
Asia 6,090 5,401 13 % 486 409 19 % 8.0 % 7.6 %
Pacific 5,525 5,018 10% 358 339 6% 6.5 % 6,8 %
Latin America 3,648 3,070 19% 215 178 21% 5.9 % 5,8 %
North America 3,369 2,625 28 % 116 132 (12)% 3.4 % 5,0 %
Eastern Europe 1,641 1,602 2% 107 113 (5)% 6.5 % 7,1%
Other Countries 30 20 50 % (1) 2 (150)% (3.5)% 8.7 %
Corporate / eliminations (28) (37) (13) 26 (150)% (0.0)% 0.0 %
Total 77,681 74,101 5% 4,804 4,738 1% 6.2 % 6.4%
Emerging Markets 15,014 13,574 11% 1,035 927 12% 6.9 % 6.8 %

 

1204044EogSN59664

in certain focused customer segments as well as a
slight increase in operating margin. The macroeco-
nomic conditions in Spain impact the catering busi-
ness in particular while the Netherlands is experienc-
ing a very competitive market combined with opera-
tional challenges, mainly in parts of the cleaning
business. All countries in Western Europe except for
Ireland, Portugal, France and the Netherlands deliv-
ered positive organic growth rates and double-digit
organic growth rates were seen in Italy, Turkey and
Germany. Generally, the Western Europe region is
beginning to harvest the benefits of commercial strat-
egies and the customer-segmented sales strategy,
which continue to be rolled out across the region.
Major contract wins in 2011 included ATOS, BAE,
Carlsberg and the re-tender of the hospital contract
with Fulham Road Collaborative in the United King-
dom, Novartis in Switzerland, retention of the IFS
hospital contract with Delta Lloyd in the Netherlands,
a new facility services contract with the public postal!
services company, CORREOS in Spain, an IFS con-
tract with Exxon in France and a large catering con-
tract with University Hospital of Antwerp.

The decrease in operating margin was the result of
the challenging economic conditions in the Mediter-
ranean countries and the operational challenges in
the Netherlands partly offset by strong performances
in Switzerland, the United Kingdom and Turkey.

Nordic

The Nordic region, comprising Norway, Sweden, Fin-
land, Denmark, Greenland and Iceland, is among the
most developed of our regions. ISS is the leader with-
in the facility services market throughout the region.

The markets of the Nordic region are mature and

developed markets and ISS holds a relatively high
market share. The strategic focus is unchanged and
continued to be on leveraging this strong position
mainly through implementation of best practises and
utilising the footprint to develop customer segment
specific solutions and concepts and at the same time
utilising the size of the business by centralising cer-
tain functions and processes. In 2010, the three cus-
tomer sectors Retail, Hotels and Hospitals were iden-
tified as focus segments and during 2011 the regional
Business Development function has been the driving
force behind developing and implementing these
segmented solutions. In 2011, progress has also
been made in terms of aligning and centralising pro-
cesses and organisations throughout the region, in-
cluding procurement processes and service standard-
isation initiatives.

Revenue in the Nordic region increased by 5% to
DKK 18,085 million in 2011 (2010: DKK 17,301 mil-
lion). Organic growth amounted to 4% and currency
adjustments mainly stemming from an appreciation of
SEK and NOK against DKK increased revenue for
the region by approximately 2%. The negative growth
from divestments reduced revenue by 2%. Operating
profit before other items was DKK 1,268 million
(2010: DKK 1,237 million), reflecting an operating
margin of 7.0% which was 0.2 percentage point lower
than in 2010.

The organic growth of 4% was mainly driven by good
development in Finland and to some extent by Nor-
way partly offset by negative organic growth in Den-
mark. The development in Finland was achieved
through a successful execution of the sales strategy
targeting specific customer segments, mainly Retail &
Wholesale. The positive performance in the region

1204044EogSN59665

was achieved despite lower level non-recurring ser-
vices such as snow removal in the first part of 2011
compared with the same period in 2010. Contract
wins in the region included the provision of cleaning
and property services to Suomen Låhikauppa Oy, a
large retail chain in Finland, the successful start-up of
the IFS contract with Statoil in Norway and a strategic
cleaning contract with a large hotel chain in Sweden.

The operating margin of the Nordic region was 7.0%
in 2011 and thereby reflects the second highest mar-
gin of all ISS regions. The decrease in operating mar-
gin from 7.2% to 7.0% was the result of margin de-
creases, mainly in Denmark and Finland, resulting
from the loss on re-tender of a few large IFS contracis
in Denmark combined with the start-up of new con-
tracts in both Denmark and Finland where the margin
is improving gradually towards the anticipated run
rate. In addition, the margin was negatively impacted
by the lower level of non-recurring services (snow
removal, manpower etc.) in most countries of the re-
gion. The operating margin in 2011 was positively
impacted by one off income related to sale of certain
assets.

Asia

The Asia region comprises Hong Kong, Singapore,
Indonesia, India, Thailand, China, Taiwan, the Philip-
pines, Malaysia, Japan and Brunei.

The Asia region includes large and developed mar-
kets such as Hong Kong and Singapore and emerg-
ing markets such as India and Indonesia. The ambi-
tion for the Asia region is to remain one of the growth
engines for the ISS Group and to continue the sales
strategy intended to push IFS penetration within se-
lected customer segments as quickly as local mar-
kets mature. During 2011, progress has been made
in respect of alignment and standardisation of pro-
cesses through sharing of best practises which con-
tributed to a strong margin development. Going for-
ward, alignment and standardisation will continue to
be a focus area combined with the development of an
even more clear definition of the most attractive cus-
tomer segments in each country. Sourcing and train-
ing of employees will continue to be a focus area in
the coming years as good employee retention and
sourcing of employees with the right skills is im-
portant in order to continue the strong organic growth
and to deliver services at the required quality.

The Asia region delivered a strong performance in

Operational review | Management review 10

2011. Revenue was DKK 6,090 million (2010: DKK
5,401 million), an increase of 13%, driven by organic
growth of 12% and acquisition growth, net of 4%.
Operating profit before other items increased by 19%
to DKK 486 million reflecting an operating margin of
8.0%, whereby Asia again delivered the highest mar-
gin of any ISS region and achieved a 0.4 percentage
point margin increase compared with 2010.

Double-digit organic growth rates were seen in sev-
eral countries, positively impacted by the successful
implementation of a sales strategy targeting e.g. the
Transportation & Infrastructure segment and the En-
ergy & Resources segment. India was the largest
contributor to organic growth in the region with an
organic growth rate of 31%, positively impacted by
the development within security services where the
company, SDB Cisco Ltd., acquired in August 2010,
enabled ISS India to win a number of contracts in-
cluding a contract for delivering security services to
23 airports in the country. China also showed positive
developments and delivered organic growth of 31%,
supported by contract wins within the Transportation
& Infrastructure segment, e.g. a contract with Shen-
zen metro station and a significant scope increase on
the contract with Shanghai Pudong airport. During
the last part of 2011, ISS Singapore won a significant
multi-service contract with the Ministry of Defence in
Singapore comprising mainly cleaning and mainte-
nance of several camps.

The positive margin development was driven by dou-
ble-digit growth rates, a continued focus on contract
efficiencies and a good ability to pass on wage in-
creases to customers. Positive developments were
primarily seen in China, Singapore and India partly
offset by Hong Kong, Taiwan and Thailand which was
negatively impacted by the flooding in the Bangkok
area.

Pacific

The Pacific region comprises Australia and New Zea-
land, ISS Australia delivers more than 90% of the
revenue in this region.

In 2011, ISS Australia continued the strategic focus
on further developing and refining the IFS value
proposition within the remote site resource sector, the
Healthcare and the Transportation & Infrastructure
segments (mainly airports). In addition, a stroønger
focus on customer loyalty has led to enhanced cus-
tomer retention illustrated by a significant number of

1204044EogSN59666

re-tender wins. The operational focus will be on the
roll-out of best practice projects within cleaning and
security combined with a focus on realising procure-
ment savings and synergies.

Revenue in the Pacific region increased by 10% to
DKK 5,525 million (2010: DKK 5,018 million) driven
by organic growth of 3% and positive currency ad-
justments of 7%. Operating profit before other items
increased by 6% to DKK 358 million (2010: DKK 339
million) equal to an operating margin of 6.5%, which
was 0.3 percentage lower compared with 2010.

Organic growth was driven in particular by the strong
retention of existing customers combined with the
effect of large contract wins during the last part of
2010. In Australia, significant re-tender wins included
a cleaning contract with public schools in New South
Wales and a number of contracts within the remote
site mining sector, During the last part of 2011, Aus-
tralia won an additional IFS contract within the remote
site mining sector. The operating margin in New Zea-
land was negatively impacted by the earthquake in
Christchurch in 2011 and the effects from initiatives
aimed at increasing the Margin within the cleaning
business have not been realised yet.

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

ISS has built a unique position in Latin America with a
strong geographical presence and a developed ser-
vice offering which means that no other competitor is
able to self-deliver a comparable number of services
in the countries in which ISS is present. Focus is on
exploiting our first mover advantage and selectively
expanding the geographical platform as markets ma-
ture. In 2011, the systematic and customer-focused
sales approach was the driver behind impressive
organic growth which was achieved on top of the
region's all time high organic growth of 29% in 2010.
Looking ahead the main focus is on pursuing and
further developing the successful sales strategy while
increasing margins through increased contract effi-
ciency and efficient management of wage increases.

Revenue was DKK 3,648 million (2010: DKK 3,070
million), an increase of 19%, driven by organic growth
of 21%. Operating profit before other items increased
by 21% to DKK 215 million reflecting an operating
margin of 5.9%, 0.1 percentage point higher than in

Operational review | Management review 11

2010.

All countries of the region delivered significant dou-
ble-digit organic growth rates driven by a continued
high level of new sales. In 2011, a subcontractor
model was started in seven countries in Latin Ameri-
ca in which ISS has no presence in order to address
the demand from regional and global customers. ISS
began to supply services under the contract with a
large technology company in 11 countries in Latin
America in February 2011 in a full service delivery
model with møre than 800 dedicated employees.
Brazil was the largest absolute contributor to the or-
ganic growth of the region with an organic growth
rate of 14%, positively impacted by a strong perfor-
mance across most customer segments but particu-
larly by the Industry & Manufacturing and Healthcare
segments through the contract wins of e.g. GM, Ga-
roto, Johnson & Johnson and Hospital Sao Paulo. In
Uruguay we won a large multi-service contract with
Montes del Plata paperplant which is a joint venture
between Store Enso and Arauco. The increase in the
margin for the region was a result of strong perfor-
mance in all countries which was partly offset by Bra-
zil which was impacted by start-up costs on a number
of new large contracts combined with costs related to
exiting three larger contracts.

North America
The North America region comprises the USA and
Canada.

ISS has established good geographical coverage in
several parts of the USA experiencing economic
growth and continues to focus on enhancing its geo-
graphical footprint in selected targeted metropolitan
areas. In 2011, the IFS contract with a large technol-
ogy company started and investments were made in
building up the necessary IFS delivery capabilities to
capitalise further on market opportunities within IFS
solutions. Furthermore, the region continued the de-
velopment of more customer-focused and segmented
value propositions, targeting specific customer seg-
ments such as Healthcare, Transportation & Infra-
structure and Retail & Wholesale which led to con-
tract wins Ccovering parts of a large retail chain and
cleaning contracts with San Antonio and Portland
airports,

Revenue in the North American region increased by
28% to DKK 3,369 million (2010: DKK 2,625 million)
in 2011. Organic growth was 35% while currency

adjustments reduced revenue by 7%. Operating profit
before other items in North America amounted to
DKK 116 million (2010: DKK 132 million) in 2011 re-
sulting in an operating margin of 3.4% compared with
5.0% in 2010.

The strong organic growth was driven by the start-up
of the contract with the large technology company
mentioned above, The start-up of this contract was
also the driver behind the margin decrease from
5.0% to 3.4% as the margin in the early phase of the
contract has still not reached its full potential. The
margin in the existing business was slightly above the
level realised in 2010. In order to gain the necessary
IFS delivery capabilities to support and deliver on
major contracts in North America, costs have been
incurred in relation to the build-up of the IFS platform,
which has already resulted in two IFS contract wins.
Due to the investment nature of the costs related to
building the platform, these are classified as Other
income and expenses, net.

Eastern Europe

The Eastern Europe region comprises the Czech
Republic, Slovakia, Poland, Slovenia, Hungary, Ro-
mania, Estonia, Russia and Croatia.

ISS has established a wide geographical reach and a
unique service platform in Eastern Europe with the
capabilities to self-deliver a full range of services. The
strategic goal of ISS Eastern Europe is to provide
integrated service solutions to multi-national blue chip
companies. In recent years focus has been on
strengthening the management teams and leadership
capabilities throughout the region combined with de-
veloping and implementing a more focused sales
approach targeting mainly the segments Healthcare,
Business Services & IT and Industry & Manufactur-
ing. During 2011, alignment of processes and imple-
mentation of best practices within sales, contract and
risk management, single-service excellence, HR min-
imum standards and procurement continued to be a
priority.

Revenue in Eastern Europe increased to DKK 1,641
million (2010: DKK 1,602 million) in 2011, driven by
organic growth of 2%. Operating profit before other
items decreased slightly to DKK 107 million (2010:
DKK 113 million) reflecting an operating margin of
6.5%, 0.6 percentage point lower than in 2010, main-
ly as a result of start-up costs on new large IFS con-
tracts.

1204044EogsSN59667

 

Operational review I Management review 12

The development and performance varies across the
region, mainly as a result of different market condi-
tions from country to country. The sales strategy fo-
cused on delivering services to blue chip companies
is progressing according to plan, as illustrated by a
strong portfolio development in the last part of 2011
with material IFS contract wins mainly in the Czech
Republic illustrated by the win of the contracts with
the Czech National Bank and Tesco. Russia delivered
organic growth of 60%, mainly as a result of revenue
growth from blue chip customers within the customer
segments Business Services & IT and Industry &
Manufacturing, primarily as a result of the start-up of
contracts with Citi, Philip Morris and a large technolo-
gy company. This positive development was offset by
mainly Romania and Slovakia which delivered nega-
tive organic growth due to difficult market conditions
and despite a positive development in the contract
portfolio during the last part of 2011 which has yet to
fully feed through to organic growth.

BUSINESS DEVELOPMENTS IN 2011

During 2011, we continued to make progress in de-
veloping our business. Focused on customer needs,
ISS continued to deploy best practices globally in
order to align the organisation behind the consistent
delivery of excellence, ISS continued to drive excel-
lence in the customer segment, service and business
system dimensions to enhance our ability to deliver
on our value propositions. Excellence programmes in
customer segments such as the remote sites and
hospitals sectors have been completed and are being
implemented and new best practises from a service
perspective such as a Catering Excellence pro-
gramme have been initiated.

ISS measures and monitors the overall business de-
velopment based on the following three measures:

+ Revenue by customer segment
.… Revenue by service delivery type
+ Revenue by service type

The development within these three categories is
described in the following.

Revenue by customer segment

Revenue is classified into ten customer segments
identified by ISS based on the section classification
level of the International Standard Industrial Classifi-
cation.

Our service offerings are increasingly tailored to spe-
cific customer segments in order to address these
customers' explicit needs in order to provide added
value to our customers. ISS focuses on promoting a
strong and uniform commercial culture through de-
ployment of a commercial strategy methodology and
to leverage its platform towards selected customer
segments.

The Business Services & IT, Public Administration
and Healthcare segments are among our most im-
portant and largest customer segments, and we focus
on developing service solutions for these segments.
Simultaneously, we focus on service delivery to the
public sector, which includes both the Public Admin-
istration segment as well as part of the revenue from
Healthcare, Transportation & Infrastructure and Ener-
gy & Resources.

In line with expectations, the revenue split by cus-
tomer segment in 2011 is quite stable compared with
2010. Many of the recent major contract wins such as
the contract with a large technology company and Citi
have increased revenue within Business Services &
IT which remained the largest customer segment in
2011 representing 28% compared with 26% in 2010.
The share of revenue from Public Administration de-
creased from 16% in 2010 to 14% in 2011, adversely
affected by reduced public spending in many coun-
tries while revenue from Industry & Manufacturing
increased from 14% in 2010 to 15% in 2011, positive-
ly impacted by large contract wins such as BMW in
Germany combined with an increase in the manufac-
turing industry in some countries of the Western Eu-
rope region. The revenue share from Healthcare re-
mained unchanged at 11%.

Revenue by service delivery type

Fundamentally, ISS's delivery model includes three
different ways of delivering services to customers.
Service solutions are offered either as single-
services, multi-services or integrated facility services
(IFS). We continue to focus on strengthening the sin-
gle-service excellence concepts, while at the same
time enhancing our integrated facility services capa-
bilities.

In 2011, single-services, including key accounts, mul-
ti-services and integrated facility services (IFS) gen-
erated 61%, 18% and 21% of our revenue, respec-
tively, compared with 65%, 16% and 19% in 2010.
The development illustrates that the share of revenue

1204044EogSN59668

Operational review I Management review 13

origin from delivering two or More services or inte-
grated service solutions increased by 4 percentage
points in 2011 with a similar reduction in the share of
revenue stemming from delivery of single-services.
This is a continuation of the trend in recent years and
fully in line with the strategic aim of becoming the
leading global provider of integrated facility services
(IFS). The relative share of revenue origin from deliv-
ering two or more services or integrated service solu-
tions is increasing in all regions with the largest in-
creases seen in North America, Asia and Western
Europe (primarily in Germany, Turkey, Israel and Ita-
ly) driven by large international contracts such as the
contract with a large technolagy company but also by
large local multi-service and IFS contracts, e.g. the
contract with BMW in Germany.

Revenue by service type

Cleaning services Cleaning services has been at
the heart of ISS in many years and we have devel-
oped a wide range of services within cleaning — from
providing basic general cleaning to highly specialised
niche cleaning services. The ISS cleaning services
offering encompasses a range of services within daily
office and facility cleaning, industrial cleaning, clean-
ing in transport systems, dust control, washroom ser-
vices and specialised cleaning, such as cleaning of
nuclear plants, hospitals or food production facilities.

In 2011, cleaning services remained ISS's largest
business area with revenue of DKK 39.5 billion, rep-
resenting 51% of total Group revenue and slightly
lower than in 2010, In line with the strategy to broad-
en the service platform, cleaning services' relative
share of total Group revenue has consistently de-
clined in recent years, while the revenue share from
support services, catering services and security ser-
vices in particular has consistently increased. In
2011, the cleaning services share of revenue was
only slightly lower than in 2010 as a result of the
change in focus from building the service platform
through acquisitions in services other than cleaning
to utilising the existing service platform to grow or-
ganically.

Properiy services The ISS property services offering
encompasses building maintenance, technical
maintenance, landscaping, pest control and damage
control.

In 2011, revenue from property services amounted to
DKK 15.0 billion, representing 19% of total Group

1204044EogSN59669

revenue, a slight decrease compared with 20% in
2010. Property services revenue was adversely af-
fected in 2011 by a number of divestments completed
in 2010, most significantly the waste management
business in France, the non-core building mainte-
nance business in Spain and the non-core property
services business in Norway as well as by divest-
ments completed during 2011 such as the damage
control business in Germany and the industrial ser-
vices business in Belgium. These divestments all
involved non-portfolio-based services and thereby
underline the strategic focus on portfolio-based on-
site services. Adjusted for the effect from divestments,
revenue within property services increased by almost
DKK 2 billion.

Catering services The ISS catering services offering
includes in-house restaurants, hospital canteens,
catering services to remote sites, corporate catering
and office catering services including coffee solu-
tlons.

In 2011, revenue from catering services increased by
0.7 billion to DKK 7.7 billion equal to 10% of total
Group revenue, which was unchanged from last year.
In 2011, catering services continued to be positively
impacted by cross selling to existing customers com-
bined with a gradual recovery in revenue from non-
portfolio-based catering services, such as event ca-
tering which was offset by lower public spend, espe-
cially in the public sectors of certain Mediterranean
countries.

Support services The ISS support services offering
encompasses the operation of receptions, internal
mail handling, scanning and other office logistics, call
centres, manpower supply and outplacement ser-
vices.

In 2011, support services accounted for approximate-
ly 8% of total Group revenue, unchanged from 2010.
In absolute figures, revenue in support services in-
creased from DKK 5.6 billion in 2010 to.DKK 6.2 bil-
lion in 2011. In 2011, support services were positively
impacted by greater demand for outplacement ser-
vices and cross-selling of services mainly to cleaning
customers, which was offset by lower demand for
manpower supply services.

Security services The ISS security services offering
includes manned guarding, access control and patrol-
ling of customer facilities and the installation of alarm

Operational review |] Management review 14

and access systems.

Revenue increased by DKK 0.5 billion to DKK 5.8
billion, equivalent to 7% of total Group revenue in
2011, unchanged compared with 2010. The increase
in revenue from security services was mainly due to
the full year effect of the acquisition of the Indian
company SDB Cisco Ltd. in August 2010 which add-
ed approximately DKK 400 million in annual revenue.

Facility management The ISS facility management
offering includes on-site management of facility ser-
vices, change management, space management and
consulting. In 2011, revenue from facility manage-
ment services increased by DKK 0.3 billion to DKK
3.5 billion, equivalent to 5% of total Group revenue,
the same relative share as in 2010. The increase was
mainly driven by the start-up of remote site mining
contracts in Australia and new FM contractis in Latin
America.

ACQUISITIONS AND DIVESTMENTS

The transition from a company building on predomi-
nantly acquisitions to a company driven by organic
growth taking advantage of our global platform has
come a long way and we made no acquisitions in
2011. We expect to continue the disciplined acquisi-
tion policy going forward and expect that any acquisi-
tion activities will primarily take place in emerging
markets, either by expanding our presence in existing
markets through bolt-on acquisitions or by establish-
ing a service platform in new markets. Future acquisi-
tions might also include selective competence-
enhancing acquisitions in developed markets.

We review the strategic rationale and fit of business
units on an on-going basis and in the light of our strat-
egy and customer needs, which has led to the identifi-
cation and evaluation of certain activities that were
either non-core to The ISS Way strategy or lacked
critical mass. Some of these activities were divested
in 2009 and 2010, and an additional 12 divestments
were completed in 2011. The divestments completed
in 2011 comprised the divestment of the industrial ser-
vices business in Belgium, the damage control busi-
ness in Germany and the coffee vending business in
Denmark and Norway as well as five minor business-
es in Western Europe and the Nordic region.

We expect to continue evaluating our activities in the
light of our plan to accelerate The ISS Way strategy

focusing on our core businesses and to deleverage
debt.

The divestments completed in 2011, resulted in a
positive effect of DKK 69 million on other income and
expenses, net and an impairment loss on goodwill of
DKK 83 million. In addition, classification of certain
non-core activities in Western Europe as held for sale
during 2011 has resulted in a non-cash impairment
loss on goodwill of DKK 79 million.

FINANCING

On 22 June 2011, ISS announced that it had suc-
cessfully received lender consent to extend certain
tranches under its Senior Facilities Agreement and to
implement other amendments intended to increase
the operational flexibility. Extensions were accepted
by 96.5% of the lenders in the tranches for which ISS
had requested extension, meaning that approximate-
ly DKK 17,9 billion of ISS's Senior Facilities was ex-
tended from 2012 and 2013 to either December 2014
or April 2015.

Consequently, 96% of the Term Facility B and Acqui-
sition Facility B was extended from 2013 to April
2015, and 98% of the Revolving Credit Facility and
Letter of Credit Facility was extended from 2012 to
December 2014. An interest margin increase of 150
bps applies across these extended tranches. As part
of the amendments lenders approved the capacity to
increase its revolving credit facility by an additional
DKK 1.5 billion and implemented other amendments
intended to increase the operational flexibility. The
refinancing was executed effective 24 June 2011 as a
non-cash transaction. Remaining financing fees of
DKK 79 million recognised as part of the amended
and extended debt were expensed.

Effective 1 July 2011, the securitisation programme
was extended by one year to September 2013, the
size of the credit facility was reduced from DKK 3,725
million (EUR 500 million) to DKK 2,977 million (EUR
400 million) and the pricing of the programme was
improved by the interest margin being reduced by 25
bps.

Following these extensions, ISS has no significant
short-term financing maturities.

1204044Eo0ogSN59670

Operational review | Management review 15

MANAGEMENT CHANGES

On 4 November 2011, ISS announced that Henrik
Andersen, who has held several positions within ISS,
most recently the position as CEO of ISS in the Unit-
ed Kingdom, replaced Jakob Stausholm as Group
CFO with effect from 1 December 2011.

SUBSEQUENT EVENTS

Other than as set out above and apart from the
events described in this Annual Report, the Group is
not aware of events subsequent to 31 December
2011, which are expected to have a material impact
on the Group's financial position.

Qutlook

The outlook set out below should be read in con-
junction with "Forward-looking statements” (see
opposite) and the description of risk management
on pages 40-42.

In 2012, ISS will maintain its focus on the key oper-
ational objectives; (i) cash conversion, (ii) operating
margin and (iii) organic growth.

The outlook for 2012 is based on expectations of
challenging macroeconomic outlook and difficult
market conditions in Europe — in particular certain
Mediterranean countries. We expect a continued
strong growth in emerging markets.

ISS experienced a strong positive trend in organic
growth in 2011 following the start-up of several
large integrated facility services (1FS) contracts
leading to organic growth of 6.2% for the Group. A
sound development in the contract portfolio in late
2011 is expected to ensure a continuation of the
organic growth rate which in 2012 is expected to be
in the 4—6% range.

In 2011, ISS achieved an increase in operating
profit before other items compared with 2010. How-
ever, the operating margin was slightly below the
level realised in 2010. In 2012, the operating mar-
gin is expected to be around the level realised in
2011.

ISS will continue to prioritise cash flow and we will
focus on managing the absolute level of debt sup-
ported by a continued low level of acquisition
spending and continued robust cash conversion,
which in 2012 is expected to be around 90%.

1204044EogSN59671

Outlook ] Management review 16

FORWARD-LOOKING STATEMENT

This Annual Report contains forward-looking statements, includ-
ing, but not limited to, the guidance and expectations contained in
the "Outlook” section on this page. 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”, "in-
tend” 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 for-
ward-looking statements and fram the past performance of ISS.
Although ISS believes that the estimates and projections reflected
in the forward-looking statements are reasonable, they may prave
materially incorrect, and actual results may materially differ, e.g.
as the result of risks related to the facility service industry in gen-
eral or ISS in particular including those described in this report and
other information made available by ISS.

Ås 8 result, you should not rely on these forward-looking state-
ments, ISS undertakes no obligation to update or revise any for-
ward-looking statemenis, whether as a result of new information,
future events or otherwise, except to the extent required by law.

 

Financial review

ISS accelerated its growth momentum in
2011, recording the highest organic
growth rate in more than a decade despite
uncertainty and volatility in the macroeco-
nomic environment in most of its markets
of operation.

INCOME STATEMENT

Revenue amounted to DKK 77,681 million repre-
senting year-on-year revenue growth of 5%. Reve-
nue growth was driven by organic growth of 6.2%
with all seven regions delivering positive organic
growth rates, including double-digit organic growth
rates in North America, Latin America and Asia.
Revenue was also positively impacted by exchange
rate movemenits of 1%, mainly stemming from an
appreciation of CHF, AUD, NOK and SEK against
DKK. Revenue growth was impacted by 2% nega-
tive growth from acqguisitions and divestments, net.

Staff costs increased by DKK 1,930 million, or 4%,
from DKK 47,888 million in 2010 to DKK 49,818
million in 2011. The change was due primarily to an
increase in the overall number of employees result-
ing from organic growth which was partly offset by
the effect from completed divestments. Staff costs as
a percentage of revenue decreased slightly from
64.6% in 2010 to 64.1% in 2011.

Consumables increased by DKK 392 million, or
6%, from DKK 6,359 million in 2010 to DKK 6,751
million in 2011. Consumables which comprise items
such as chemicals, food costs and uniforms
amounted to 8.7% of revenue in 2011, a slight in-
crease compared with 8.6% in 2010.

Other operating expenses increased by DKK
1,189 million, or 8%, from DKK 14,284 million in
2010 to DKK 15,473 million in 2011, equal to 19.9%
of revenue, up from 19.3% in 2010. The increase
was the result of higher costs related to subcontrac-
tors which rose from 8.0% of revenue in 2010 to

1204044EogSN59672

Financial review | Management review 17

8.9% in 2011, mainly as a result of the increase in
the number of global contracts. Albeit our business
is based upon our self-delivery model we do rely on
the use of subcontractors in certain countries with
no ISS operation.

Operating profit before other items amounted to
DKK 4,804 million in 2011, an increase of 1% from
DKK 4,738 million in 2010, driven by the increase in
revenue resulting from the strong organic growth.
The operating margin was 6.2%, a slight decrease
compared with 6.4% in 2010. The operating margin
in 2011 was supported by strong margin increases
in Switzerland, the United Kingdom, Turkey, and
the Asia region, in particular. However, this was
more than offset by the negative impact resulting
from challenging economic conditions in the Medi-
terranean region, operational challenges in the
Netherlands and the start-up of large national and
international IFS contracts.

Other income and expenses, net was a net ex-
pense of DKK 96 million in 2011 compared with a
net expense of DKK 83 million in 2010. The net
expense of DKK 96 million consisted mainly of DKK
52 million related to a strategic build-up of IFS ca-
pabilities in North America, DKK 47 million related
to a revised estimate for social security contribu-
tions in prior years, DKK 37 million related to re-
structuring projects in Brazil, Finland, Norway, the
Netherlands and at head office. The expenses were
partly offset by a net gain of DKK 69 million related
to divestments, primarily of the coffee vending
business in Norway and Denmark, the non-core
industry service activities in Finland and the indus-
trial services business in Belgium.

In 2010, other income and expenses, net amounted
to a net expense of DKK 83 million which mainly
consisted of expenses of DKK 113 million related to
prior year adjustments in Norway, which was partly
offset by a net gain of DKK 46 million related to
divestments, mainly stemming from a gain from the
divestment of the washroom activities in Denmark,
Norway and Sweden and partly offset by divest-
ment losses, mainly stemming from the waste

management activities and the security activities in
France.

Financial income and expenses, net increased
by DKK 449 million, or 25%, to a net expense of
DKK 2,264 million in 2011 from DKK 1,815 million
in 2010, The main reasons for the increase were an
increase in net interest expenses of DKK 255 mil-
lion, mainly following the margin increase as a re-
sult of the amendment and extension of senior
debt, an increase in the effect from foreign ex-
change losses, net of DKK 164 million combined
with an increase in amortisation of financing fees of
DKK 96 million which were partly offset by a de-
crease of DKK 93 million related to a net change in
the fair value of cash flow hedges transferred from
equity.

In 2011, financial income and expenses, net mainly
comprised DKK 1,769 million of net interest ex-
penses, DKK 135 million in net losses on foreign
exchange and DKK 199 million in non-cash amorti-
sation of financing fees, including DKK 79 million in
additional non-cash amortisation of financing fees
related to the amendment and extension of certain
tranches under the Senior Facilities Agreement as
all remaining financing fees recognised as part of
the amended and extended debt were expensed. In
addition, financial income and expenses, net in-
cluded financing fees of DKK 38 million related to
the IPO financing package which was not executed
due to cancellation of the IPO. Financial income
and expenses, net also included an expected return
on plan assets and interest expenses on defined
benefit pension plans equal to a net expense of
DKK 29 million.

Income taxes increased from DKK 659 million in
2010 to DKK 738 million in 2011. The effective tax
rate in 2011 was 60.6% compared with 38.6% in
2010, calculated as the consolidated tax expense
of DKK 738 million divided by Profit before tax and
goodwill impairment / amortisation and impairment
of brands and customer contracts of DKK 1,218
million. The increase in the effective tax rate com-
pared with 2010 was mainly due to non-deductible
refinancing costs in 2011 and a valuation allowance
on deferred tax assets in France, The rules on limi-
tation on the deductibility of financial expenses,
including refinancing costs, in Denmark impacted
the tax expense in 2011 adversely by approximate-
ly DKK 169 million. The effective tax rate amounted

1204044EogSN59673

Financial review | Management review 18

to 46.8% when adjusted for the impact of the limita-
tion on deductibility of financial expenses. In addi-
tion, the tax expense was adversely impacted by
Contribution economique territoriale (CET) in
France as well as non-deductible costs. With
amended tax legislation in France limiting the use
of tax losses carry forward, a valuation allowance
on deferred tax assets in France of DKK 100 million
has been expensed in 2011. The effective tax rate
amounted to 52.4% when adjusted for the effect of
the valuation allowance on the deferred tax assets
in France.

Goodwill impairment amounted to DKK 322 mil-
lion of which DKK 160 million derived from impair-
ment tests at 30 June 2011 and DKK 162 million
derived from the divestment of businesses. Impair-
ment losses derived from impairment tests of DKK
160 million related to ISS's business in Spain and
were caused by an increase in the discount rate
applied following the amendment and extension of
the Senior Facilities Agreement combined with the
macroeconomic impact on the catering business.
Impairment losses derived from the divestment of
businesses of DKK 162 million mainly related to the
re-measurement of net assets of non-core activities
in Western Europe, which were classified as held
for sale at 30 September 2011, resulting in an im-
pairment loss of DKK 79 million. Furthermore, a re-
measurement of net assets of the divested damage
control business, VATRO in Germany, which was
classified as held for sale at 31 December 2010
and subseqguently divested in July, resulted in a
loss of DKK 61 million. The remaining loss of DKK
22 million related to three minor divestments in
Norway.

In 2010, goodwill impairment amounted to DKK 259
million, of which DKK 250 million derived from im-
pairment tests and DKK 9 million derived from the
divestment of businesses. Impairment losses de-
rived from impairment tests of DKK 250 million re-
lated to ISS Greece and was mainly the result of an
increase in the discount rate applied following an
increase in the interest rate as well as challenging
market conditions. Impairment losses of DKK 9
million derived from the divestment of businesses
related to the divestment of the non-strategic call
centre activities in Denmark and the property ser-
vices activities in |reland.

A detailed specification is included in note 11 to the

consolidated financial statements.

Amortisation and impairment of brands and
customer contracts amounted to DKK 365 million
in 2011, down from DKK 435 million in 2010. The
decrease of DKK 70 million compared with 2010
was mainly a result of a general decrease in the
amortisation of customer contracts due to the use
of the declining balance method.

Tax effect of goodwill impairment and amortisation
and impairment of brands and customer contracts,
which is presented separately in the income state-
ment to show the effective tax percentage before
impairment and amortisation of intangibles, was
DKK 117 million in 2011 compared with DKK 116
million in 2010, The stable development was due to
the decrease in amortisation and impairment of
brands and customer contracts which was parily
offset by the effect from a reduction in corporate tax
rates in a number of countries in 2011.

Net profit/(loss) decreased from a net profit of
DKK 467 million in 2010 to a loss of DKK 90 million
in 2011, and was negatively impacted by higher
financial expenses, net, including DKK 117 million
related to amendment and extension of debt and
IPO financing, an increase in royalties and an in-
crease in income taxes. These negative effects
were partly offset by growth in revenue and higher
operating profit before other items. A loss of DKK
97 million was attributable to the owners of ISS,
whereas a profit of DKK 7 million was attributable to
non-controlling interests.

STATEMENT OF CASH FLOWS

Cash flow from operating activities was DKK
3,071 million in 2011, down by DKK 861 million
from DKK 3,932 million in 2010. The decrease was
due primarily to an increase in outflow from pay-
ments related to royalties of DKK 532 million, an
increase in outflow from changes in working capital
of DKK 245 million and an increase in outflow from
changes in provisions, pensions and similar obliga-
tions of DKK 107 million which were partly offset by
an increase in operating profit before other items of
DKK 66 million.

The change in cash outflow from payments related
to royalties compared with 2010 of DKK 532 million
was due to changed payment terms.

1204044EogSN59674

Financial review | Management review 19

The cash outflow from changes in working capital of
DKK 308 million was due to a negative cash flow
from trade receivables as a result of the high organ-
ic growth of 6.2% and a slight increase in debtor
days partly driven by the start-up of new large con-
tracts as well as a challenging economic environ-
ment. This negative effect was partly offset by a
positive impact from trade payables mainly stem-
ming from the increase in the level of activity.

The cash outflow from changes in provisions, pen-
sions and similar obligations of DKK 235 million
was mainly related to pension payments and re-
assessment of provisions.

Payments related to other income and expenses,
net of DKK 146 million were mainly related to re-
structuring projects initiated and expensed in 2010
and build-up of IFS capabilities in North America.

Income taxes paid increased from DKK 623 million
in 2010 to DKK 709 million in 2011 as a result of
improved performance in 2010 leading to higher tax
payments in 2011.

Cash flow from investing activities in 2011 was a
net outflow of DKK 311 million with DKK 989 million
relating to investments in intangible assets and
property, plant and equipment, net (excluding ac-
quisition-related intangibles) and representing 1.3%
of revenue, DKK 89 million relating to payment of
earn-outs and deferred payments on acquisitions
completed in previous years which was partly offset
by a cash inflow of DKK 761 million from divest-
ments, most significantly in Germany, Belgium and
Norway.

Cash flow from investing activities in 2010 was a
net cash outflow of DKK 695 million, of which DKK
470 million related to acquisitions completed during
2010 and payment of earn-outs and deferred pay-
ments on acquisitions completed in previous years.
The sole acquisition completed in 2010 was the
49% ownership in SDB Cisco Ltd. in India. The
cash outflow from acquisitions was more than offset
by proceeds from divestments of DKK 591 million
that related primarily to the divestments of non-core
activities in the Nordic region and France. Invest-
ments in intangible assets and property, plant and
equipment, net, (excluding acquisition-related in-
tangibles) amounted to DKK 864 million in 2010,
representing 1.2% of revenue. Investments in fi-

 

nancial assets, net, amounted to an inflow of DKK
48 million in 2010 primarily related to sale of gov-
ernment bonds in ISS's insurance captive company
which activities ceased in the second half of 2010.

Cash flow from financing activities in 2011 was a
net cash outflow of DKK 2,297 million. This was
mainly a result of interest payments, net of DKK
1,710 million and repayment of borrowings of DKK
987 million, partly offset by proceeds from borrow-
ings of DKK 362 million. Repayment of borrowings
was mainly related to repayments on the Senior
Facilities while proceeds from borrowings were
related to drawings under the securitisation pro-
gramme and drawings on working capital facilities.

Cash flow from financing activities in in 2010 was a
net cash outflow of DKK 3,096 million. This was
mainly a result of repayment of borrowings of DKK
3,395 million and interest payments, net of DKK
1,761 million, partly offset by proceeds from bor-
rowings of DKK 1,546 million. Repayment of bor-
rowings was a result of DKK 2,606 million related
to repayment of the 2010 EMTNs and repayment
of DKK 789 million on the Acquisition and Term
Loan facilities. Proceeds from borrowings mainly
related to additional debt raised under the securiti-
sation programme of DKK 1,529 million since year-
end 2009.

Cash conversion Changes in working capital was
an outflow of DKK 308 million, which resulted in a
cash conversion of 94% in 2011 compared with
99% in 2010.

Cash conversion ratios for individual years may
vary. The cash flows from operations for the indi-
vidual periods depend on the timing of a number of
payments towards the end of the individual months
and years. For a definition of cash conversion, see
page 4.

STATEMENT OF FINANCIAL POSITION

Total assets amounted to DKK 47,071 million at 31
December 2011, of which DKK 28,175 million was
non-current assets, primarily acquisition-related
intangible assets, and DKK 18,896 million was cur-
rent assets, primarily trade receivables of DKK
11,871 million.

Intangible assets decreased by DKK 770 million
from DKK 26,024 million at 31 December 2010 to

1204044EogSN59675

Financial review I Management review 20

DKK 25,254 million at 31 December 2011. Intangi-
ble assets primarily comprise goodwill and custom-
er contracts related to a significant number of ac-
quisitions over the years.

At 31 December 2011, goodwill amounted to DKK
22,674 million, a decrease of DKK 422 million or
2% from last year. The decrease was mainly due to
goodwill impairment of DKK 322 million that related
to impairment losses of DKK 160 million derived
from impairment tests in Spain and impairment
losses of DKK 162 million derived from divest-
ments, mainly related to the re-measurement of net
assets of non-core activities in Western Europe
leading to an impairment loss of DKK 79 million and
a re-measurement of net assets of VATRO in Ger-
many leading to an impairment loss of DKK 61 mil-
lion.

Goodwill is related to acquisitions carried out under
varying circumstances and at different stages of
macroeconomic cycles. The goodwill is distributed
on most of the countries in which the Group oper-
ates. The acquired companies, to which the good-
will relates, comprise a diverse portfolio of service
types, customer segments, geographical regions,
contract sizes and management skills. The largest
amount of goodwill relates to the Group's opera-
tions in France, representing approximately 18% of
the total carrying amount of goodwill.

Customer contracts decreased by DKK 384 million
to DKK 2,187 million at 31 December 2011, mainly
due to amortisation of customer contracts of DKK
354 million.

Non-current assets other than intangible assets
amounted to DKK 2,921 million at 31 December
2011, a slight decrease from DKK 2,996 million at
31 December 2010. The slight decrease of DKK 75
million was a consequence of amended tax legisla-
tion in France limiting the use of tax losses carry
forward and leading to a valuation allowance on
deferred tax assets in France of DKK 100 million in
2011.

Trade receivables increased from DKK 10,896
million at 31 December 2010 to DKK 11,871 million
at 31 December 2011. The change was a result of
the organic growth of 6.2% and a slight increase in
debtor days from 31 December 2010 to 31 Decem-
ber 2011.

1204044EogSN59676

Other current assets, comprising inventories, con-
tract work in progress, tax receivables, other re-
ceivables, prepayments and securities amounted to
DKK 1,918 million at 31 December 2011, an in-
crease of DKK 190 million from 31 December 2010.
Other receivables comprising pass-through invoices
and various refunds and recoverable payments
increased from DKK 345 million at 31 December
2010 to DKK 447 million at 31 December 2011 while
prepayments comprising prepayments to suppliers,
sign-on fees etc. increased from DKK 538 million at
31 December 2010 to DKK 656 million at 31 De-
cember 2011.

Cash and cash equivalents increased from DKK
3,603 million at 31 December 2010 to DKK 4,028
million at 31 December 2011, of which DKK 2,498
million resided at Group level with the remainder at
country level. The cash position was positively im-
pacted by the inflow of working capital in Q4 2011.
The cash position may fluctuate significantly from
month to month due to the frequency and timing of
cash collection and outgoing payments, e.g. salary
payments.

Assets and liabilities held for sale amounted to
DKK 141 million and DKK 90 million, respectively,
and included the assets and liabilities attributable to
three non-core activities in Western Europe for
which sales processes have been initiated.

Total equity decreased from DKK 487 million at 31
December 2010 to DKK 334 million at 31 Decem-
ber 2011, of which DKK 323 million was equity at-
trioutable to the equity holders of ISS Global A/S.
The total change in equity for the year attributable
to the equity holders of ISS Global A/S was a de-
crease of DKK 141 million.

Net income and expenses recognised in equity
reduced equity by DKK 192 million. This included a
net loss of DKK 90 million for the year, actuarial
losses, net, including the effect of the asset ceiling
on defined benefit pension schemes that amounted
to DKK 62 million and negative currency adjust-
ments of DKK 105 million relating to investments in
foreign subsidiaries. Partly offsetting this was a
positive effect of DKK 86 million related to hedges
net of tax.

The equity ratio, defined as total equity attributable to
owners of ISS Global A/S relative to total assets was

Financial review | Management review 21

0.7% at 31 December 2011 compared with 1.0% at 31
December 2010.

Non-current loans and borrowings decreased
from DKK 20,780 million at 31 December 2010 to
DKK 19,890 million at 31 December 2011 primarily
due to the reclassification of parts of the Acquisition
and Term Loan facilities to current loans and bor-
rowings.

Other non-current liabilities comprise pensions
and similar obligations, deferred tax liabilities and
provisions, and amounted to DKK 2,363 million at
31 December 2011 compared with DKK 2,508 mil-
lion at 31 December 2010. The decrease was main-
ly the result of a decrease in deferred tax liabilities
and non-current provisions.

Pensions and similar obligations amounted to DKK
1,172 million at 31 December 2011, compared with
DKK 1,177 million at 31 December 2010. The ma-
jority of the Group's pension plans are defined con-
tribution plans. The Group's contributions to such
plans are accrued and expensed on an ongoing
basis. ISS has defined benefit plans in certain
countries, mainly France, Germany, the Nether-
lands, Sweden, Switzerland, Norway and the Unit-
ed Kingdom. As mentioned above, actuarial losses
of DKK 62 million, net of tax, including the net effect
of the asset ceiling, were taken directly to equity.
The losses were primarily a result of actuarial loss-
es in the United Kingdom and Sweden, driven by a
reduction of the discount rate applied and of the
value of plan assets. Despite actuarial losses of
DKK 62 million net of tax and including the net ef-
fect from the asset ceiling, the net obligation de-
creased by DKK 5 million from 31 December 2010
to 31 December 2011, mainly due to higher pension
contributions in the United Kingdom.

Provisions amounted to DKK 593 million at 31 De-
cember 2011, of which DKK 338 million had an
estimated maturity of more than one year, Compar-
ative figures at 31 December 2010 were DKK 740
million and DKK 361 million, respectively. The pro-
visions comprise acquisition-related provisions and
various obligations incurred in the course of busi-
ness, e.g. self-insurance obligations, labour-related
obligations, legal obligations, restructurings, con-
tract closures, etc.

Other current liabilities comprising current loans

1204044EogSN59677

and borrowings, trade payables, tax payables and
provisions, amounted to DKK 13,378 million at 31
December 2011 compared with DKK 11,404 million
at 31 December 2010. The increase was driven by
an increase in current loans and borrowings of DKK
1,542 million resulting from an increase in drawings
under the securitisation programme and drawings
on working capital facilities and by an increase in
trade payables of DKK 640 million resulting from
the increase in the level of activity.

Other liabilities amounted to DKK 11,016 million at
31 December 2011 compared with DKK 10,637
million at 31 December 2010. Other liabilities con-
sist mainly of accrued wages and holiday allowanc-
es, tax withholdings, VAT and other payables and
accrued expenses.

Financial review I Management review 22

The carrying amount of net debt amounted to DKK
24,277 million at 31 December 2011, down by DKK
712 million from DKK 24,989 million at 31 Decem-
ber 2010. The decrease was mainly related to the
cash inflow from operations and proceeds from
acqguisitions and divestments, net which were partly
offset by the negative effects of payment of interest
as well as investments in intangible assets and
property, plant and equipment, net (excluding ac-
quisition-related intangibles). At 31 December
2011, non-current loans and borrowings amounted
to DKK 19,890 million, current loans and borrow-
ings amounted to DKK 9,384 million while securi-
ties, cash and cash eguivalents and receivables
from companies within the ISS Group totalled DKK
4,997 million.

Strategy — The ISS Way I Management review 23

Strategy — The ISS Way

Since launching The ISS Way strategy in
2008, we have made substantial headway
in the process of implementing the strate-
gy. Now we are harvesting the rewards.

STRATEGY AND BUSINESS MODEL

It all starts with customer needs. Fundamental
needs, such as a compelling quality/price proposi-
tion, reliable and flexible service and convenience.
We cater for our customers looking for innovative
solutions such as the ability to procure a bundled set
of services from a single provider delivered consist-
ently, as well as an offering which addresses the
challenges they are faced with in terms of environ-
ment, health and safety. Finally, ISS can deliver
solutions which meet the customers specific indi-
vidual needs.

The ISS business model is based on offering a
range of facility services within cleaning services,
support services, property services, catering ser-
vices, security services and facility management
which can be delivered as either a single-service,
multi-service or integrated service solution. Our
value proposition offers customers the efficiencies
and financial certainty which emerge from our abil-
ity to share best practices across our operations in
the individual services, our ability to provide flexible
solutions through our self-delivery model and our
ability to provide an integrated solution as well as
one point of contact. Through our philosophy of
self-delivery we can also provide a flexible service
solution delivered in a consistent manner across all
customer sites. We are acutely aware of the in-
creased demands being put on customers from a
corporate responsibility perspective and design our
offerings to address these demands and help our
customers to better achieve their objectives.

1204044EogSN59678

CORPORATE VALUES

   
   
     
    
  
   
    
   

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.

In addition to meeting these fundamental needs, we
support our customers in delivering on their specific
value proposition — from health care providers to
those operating in remote sites — through a seg-
mented approach and deep insight into our cus-
tomers' markets. In the case of Hospitals, for ex-
ample, we provide a set of services that are tailored
specifically to address what is most important for a
hospital aiming at faster patient recovery. We do
not see our service only as cleaning operating thea-
tres or maintaining the premises but as contributing
to the recovery of patients and the well-being of
staff and visitors. For example, our catering solution
for a hospital reflects the very different needs of
three user groups; patients, staff and visitors. We
also provide reception and portering services and
our personnel are thereby often the first people
patients meet when arriving at the hospital. Backed
by their special training and our tailored processes,
our personnel can contribute to putting patients at
ease by ensuring that their first encounter is a
pleasant and efficient one. These segment specific
value propositions which are developed in close
cooperation with our Excellence Centres enables us
to transfer these unique skills to other contracts and
segments via global knowledge transfer.

Our strategy is defined by customer needs and to a
great extent it revolves around a few key themes —
the most important of which is alignment. To deliver
our value proposition our organisation must be
aligned behind the same vision, set of values and
leadership principles. Furthermore, alignment is
driving the implementation of a core set of policies
and processes. This alignment results in, for exam-
ple, a well-defined health and safety system and
culture being established which will help us mini-
mise corporate responsibility risk for our customers
and safeguard our employees. Similarly, by having
common processes we are able to provide a con-
sistent and uniform customer experience across all
sites using the same delivery methods, tools and
training. These are elements of service delivery that
are important to our customers, which means that
they are also important to us. With over 530,000
employees working on site at customer premises
every day, ensuring alignment is no easy task.
Nonetheless, we have made good progress in im-
plementing the strategy — awareness is high and
knowledge of the concepts of The ISS Way strategy
and their rationale are in place. We are becoming
more aligned and the evidence is clear. We have

1204044FogSN59679

Strategy — The ISS Way I Management review 24

clear and consistent strategic roadmaps by country.
We are winning ground breaking contracts with
global, regional and local clients and we are ad-
vancing in our customer segmentation approach.
And we are increasingly able to demonstrate the
advantages of implementing the basket of core
global policies, processes and best practices
launched as part of The ISS Way.

HOW WE OPERATE OUR BUSINESS

Qur corporate values, leadership principles and
strategic cornerstones, together with The ISS Way
strategy, provide the roadmap by which we operate
our business.

Corporate values

Ultimately, The ISS Way strategy is founded on the
four corporate values on which we base our strate-
gic, operational and financial plans and actions:

Honesty
Entrepreneurship
Responsibility
Quality

Leadership principles

Our set of international leadership principles define
the attitudes and behaviour ISS expects from its
leaders:

In ISS we

. put the customer first

+ have a passion for performance

. encourage innovation

. treat people with respect

. lead by example

. lead by empowerment

. develop ourselves and others

… believe teamwork is at the heart of our perfor-
mance

. are one company with shared values, one brand
and one strategy.

These principles, which are integrated in the re-
cruitment, appraisal, development and talent man-
agement processes, are applicable for all ISS lead-
ers and are supported by an ISS University pro-
gramme on the leadership principles. As the princi-
ples translate our values into actions and behav-
iours by describing successful leaders, this initiative
will further enhance our leadership capabilities.

Our strategic cornerstones

The ISS Way strategy is built on our strategic cor-
nerstones: customer focus, people management,
the IFS strategy, and our multi-local approach:

Customer focus We focus on our customers. We
serve selected customer segments locally, regional-
ly and globally with specific value propositions
through focusing on identifying customer needs and
wants. We build sustainable partnerships with cus-
tomers who value our approach to service.

People management People management is our
core competence. We excel in people management
in order to deliver excellence in our service offer-
ings to our chosen customer segments. We miti-
gate risks and volatility transferred from our cus-
tomers by applying leadership skills, Human Re-
source and HSE policies, employee training and
skills in complying with local labour legislation. We
achieve these benefits by sharing knowledge and
best practices within the Group.

IFS strategy IFS is our strategic aim. We advance
our service offering towards IFS by building the ISS
House of services and developing our facility man-
agement capabilities. We self-deliver multiple site-
based services within the ISS House and we inte-
grate our service deliveries seamlessly in our cus-
tomers' organisations and facilities.

Multi-local approach We strike a balance be-
tween autonomy and alignment. We operate with
strong local leadership and autonomy to ensure
timely responses to operational demands and to
benefit from knowledge of local market conditions.
We implement our fundamental Group policies and
strategic direction to enable us to exploit best prac-
tices and leverage our geographical footprint. We are
disciplined and use tight financial control.

OUR SERVICE OFFERING

The ISS service offering is designed to meet cus-
tomer needs. Our fundamental offering is illustrated
by the five pillars of the ISS House: cleaning ser-
vices, support services, property services, catering
services and security services. The ”roof, facility
management, represents the sixth service and our
capabilities within the integration of service deliver-
ies. The ISS House is built on a strong foundation
of service excellence, which means that our cus-

1204044EogSN59680

Strategy — The ISS Way I Management review 25

tomers enjoy the benefits of partnering with a ser-
vice expert — a company that truly understands
customer needs and provides the services required
to meet them.

Facility
managemerit

0
Cleaning Support Property Catering Security
services services services services services

ELLY ESTTT  CIT9 SSD ENSSSTDS

 

Our service concepts are developed to address
specific customer needs. This entails defining ver-
sions of the ISS House built on ISS's fundamental
competencies and presenting an integrated solution
of services customised for a given segment.

ISS focuses primarily on delivering site-based ser-
vices based on portfolio contracts, where ISS em-
ployees become an integrated part of the custom-
ers' daily operations. ISS also offers selected route-
based services, such as pest control.

The delivery model

ISS distinguishes between services offered and the
way in which these services are delivered. The
three delivery models are: single-services, Multi-
services and integrated facility services (IFS). Dur-
ing 2011, we continued to develop and strengthen
our single-service excellence and integrated facility
service (IFS) capabilities.

In a single-service outsourcing, the customer buys
one service solution from ISS, outsourcing of cater-
ing services, for instance.

In a multi-service outsourcing, which consists of two
or more services but not a fully integrated solution,
the customer achieves the same benefits as with
single-service outsourcing but with the additional
benefits of service integration where possible.

In an integrated facility service (IFS) solution, ISS
delivers two or møre services under one contract
with a single point of contact on-site, which allows
ISS to integrate the facility service functions taken
over by ISS at the customer's premises. The cus-
tomer receives both the full potential of single-
service outsourcing and the advantages of inte-

grating services, including cost efficiencies and a
more efficient and flexible service set-up.

THE ISS WAY STRATEGY
— IMPLEMENTATION STATUS

Our focus is to unleash the full potential of our
unique business platform. Our robust strategy pro-
cess has resulted in a clear roadmap for ISS. We
know where we are going, how we are going to get
there and when. We are well underway in imple-
menting The ISS Way strategy based on a number
of key strategic priorities, the central themes being
alignment and focus.

To this end, we are focusing on securing a cohe-
sive business platform through the divestment of
non-core activities. In 2011, we divested 12 busi-
nesses with an aggregate annual revenue of DKK 2
billion. We are developing service concepts tailored
to specific customer segments and ensuring the
delivery of a strong value proposition. We continue
to invest in employee training at all levels of the
organisation, as well as accelerating our efforts
within Health, Safety and Environment.

We have established common processes — based
on tried and true internal best practice — for all the
phases of the customer contract lifecycle. These
processes are demonstrating their worth through
enhanced customer experience and improved em-
ployee satisfaction.

We are also driving alignment in leadership and
now have a Leadership programme at our ISS Uni-
versity to supplement the existing programmes for
top management and expect this to be reflected in
every employee's lifecycle within ISS.

Our success in Corporate Clients is a tribute to the
organisation's ability to drive the implementation of
the strategy and deliver on our unique offering to
large international blue-chip companies. All-in-all,
2011 was a breakthrough year in strategy imple-
mentation.

THE ISS VALUE CHAIN

Our strategy, The ISS Way, is being implemented
by the application of our management tool, the ISS
value chain.

1204044EogSN59681

Strategy — The ISS Way I Management review 26

The links in the ISS value chain are best illustrated
by starting at the Business growth end. The shared
purpose of our existence at ISS is to create share-
holder 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 ca-
pable employees who are engaged in their jobs and
motivated by being part of a strong team. Capable
employees are employees who have been trained
to deliver clearly defined and operational service
concepts. Strong and attractive service concepts
are the result of informed decisions made regarding
the business platform, which determines the cus-
tomer segments we should serve and the services
we choose to deliver to these segments. Acquisi-
tions are a useful tool in the continued development
of ISS, and they will be used selectively to improve
ISS's competitiveness, build critical mass and en-
hance service capabilities and capacity where and
when appropriate. At the same time divestments
are made when activities do not contribute to our
core business or lack critical mass.

The ISS value chain is our primary management
tool applied across the organisation designed to
ensure a structured and robust approach to the
implementation of The ISS Way at a strategic, tacti-
cal and operational level. It forms a central part of
The ISS Way of thinking and working. Management
at all levels of the organisation have shared points
of reference deeply embedded in the organisation
that enable them to see their actions from a broader
perspective, thus creating a well-founded, valuable
and homogenous service culture at ISS.

Implementation of The ISS Way strategy and the
application of the ISS value chain are supported by
an ISS University programme for top management
that addresses our strategy and implementation
tools — all of which drive focus and alignment.

Ø X
ON
V ” ” ;
N Acquisition ”

v. Growth

 

Business
i Growh 7

THE ISS VALUE CHAIN |

i
|

i

OPERATIONAL OBJECTIVES

ISS seeks to maintain and enhance operational
efficiency by focusing on three well-established
operational objectives which are used throughout
the Group: (i) cash conversion, (ii) operating margin
and (iii) organic growth.

Cash conversion

ISS's objective is to continue to maintain a robust
rate of cash conversion primarily by operating in a
manner that optimises working capital. Through this
approach, ISS expects to continue to generate a
high level of positive cash flow from operations.

Operating margin

ISS's objective is to maintain or improve its operat-
ing margin. ISS seeks to improve operational effi-
ciencies by implementing group-wide excellence

1204044EogSN59682

Customer
X… Experience

Strategy — The ISS Way I Management review 27

 

Business
Flatform .
i . . Service
Er "g Concept
; .” Employee
i ” Engagement .
Service

Value

and best practice initiatives combined with specific
initiatives ajimed at increasing the margin in certain
countries.

Organic growth

ISS's objective is to focus on organic growth
through new sales and cross-selling of services to
both new and existing customers. ISS will aim to
continue to leverage its international market posi-
tion and service offering in order to increase its
local market positions. We work with a wide range
of initiatives, including further development of the
Corporate Clients organisation, enhancing our fo-
cus on specific customer segments and implement-
ing commercial planning processes and tools.

 

Corporate Responsibility | Management review 28

Corporate Responsibility

As a global company with more than
530,000 employees serving more than
200,000 customers in more than 50 coun-
tries, ISS influences the lives of many
people through providing employment and
training as well as providing safe and
healthy work environments for millions of
employees and customers in the facilities
we service.

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 Cor-
porate Responsibility (CR), as economic, social and
environmental issues are inevitably interconnected.
Therefore CR is an integral part of our values and
business strategy and closely linked to the ISS val-
ue chain.

AtISS we believe that having sound CR policies
embedded in the way we conduct our business is
the best way to take care of our key resource — our
employees. If our employees are safe and satis-
fied, our customers are satisfied. Furthermore, CR
is increasingly becoming an important area for our
customers as they strive to improve their perfor-
mance, make a positive impact on their society and
reduce their risks. The leading global companies
require a consistent CR performance from their
partners, which is a key factor in winning and re-
taining contracts with most customers. For many
customers CR is a key part of the value proposition
they are demanding from us. By being proactive,
we can demonstrate that we understand the issues
at hand and are already addressing it through our
CR efforts. While our customers may have different
needs, they all request a consistent service prod-
uct. Our systematic approach, such as our Group
Health, Safety and Environment Management sys-

1204044EogSN59683

 

tem supports this in the delivery of our services
and thereby help our customers to reduce their
risks and making us a preferred partner. Our Cor-
porate Responsibility performance may inspire
customer trust in our company and lead to an in-
crease in business opportunities.

Research clearly shows that employees find that
focus on Corporate Responsibility contributes to
providing a sense of purpose and a source of pride
in working for the company. As our company is
based on human capital, we need capable and en-
gaged employees who are motivated and proud of
working at ISS. We strongly believe our efforts on
Corporate Responsibility will provide our employees
with a sense of purpose. Our capable, engaged and
motivated ISS team members also contribute to a
positive customer experience.

ISS respects, supports and promotes human rights
as stated in the United Nations Declaration of Hu-
man Rights and the Core Conventions of the Inter-
national Labour Organisation.

ISS has made a strong commitment as a signatory
and supporter of the United Nations Global Com-
pact since its inception in 1999. In line with mem-
bership regulations, ISS is committed to aligning
strategy and operations with the ten Global Com-
pact principles on human rights, labour rights, envi-
ronmental protection and anti-corruption.

COMPULSORY REPORT

This CR chapter does not constitute ISS's full report on Cor-
porate Responsibility. The full CR Report as per section 99a
of the Danish Financial Statements Act is available at
www.responsibility.issworld.com/report2011 and in accord-
ance with guidelines from the UN Global Compact to the
members; the CR Report also serves as ISS's communication
on progress in implementing the ten principles of the Global
Compact.

 

OUR APPROACH TO CORPORATE
RESPONSIBILITY

AtISS, we have adopted a principles-based ap-
proach to CR that contributes to sustainable devel-
opment as defined by the international community.
This approach effectively integrates universally
accepted principles into the way we conduct our
business, forming a foundation that is embedded in
our corporate values, our Code of Conduct and our
business strategy, The ISS Way.

ISS holds a unique position in contributing to the
following focus areas:

+ facilitating the right to work;

+ non-discrimination, equal opportunities and
diversity; and

. access to education.

Our initiatives and actions

Following the establishment of the Group function
for Health, Safety and Environment (HSE) and CR,
a strategy was developed and rolled out across the
Group covering these areas. This strategy is con-
sistent with the overall Group strategy, The ISS
Way, and the HSE Vision.

OUR HSE VISION IS CALLED 100”

1: We aim to be number 1 in our industry and
recognised as an industry leader in the way we deliver
Health, Safety and Environmental performance;

0: We operate with 0 fatalities at our workplaces; and

0: We incur 0 serious incidents and occupational injuries
at our workplaces.

A Group HSE Manual setting minimum require-
ments for the countries to develop and tailor their
HSE management system to their specific activities
and risk exposure levels was launched in 2010. In
the course of 2011, countries have developed ac-
tion plans for closing any gaps with the Group HSE
Manual.

In order to have a systematic approach to our HSE
and CR reporting ISS invested in an HSE-IT system
in 2011. The system has now been implemented
and gone live in the USA, Ireland and the Latin
American countries.

ISS has developed a whistleblower policy to enable

1204044EogSN59684

Corporate Responsibility | Management review 29

all ISS employees, business partners and other
stakeholders to report suspected violations or con-
cerns relating to any matter of exceptional gravity or
sensitivity. The policy was approved by the Danish
Data Protection Agency

in 2011.

In terms of responsible procurement, ISS devel-
oped a supplier self-assessment that was sent to
our major vendors covering issues such as our
Code of Conduct, forced labour, non-discrimination,
human rights, and child labour. This is to ensure
that we also include the supply chain in our scope.

In order to stay on course and keep HSE and CR in
constant focus, a "Me and You' campaign was
launched in March, June and September 2011 cov-
ering safety, health and the environment. The safe-
ty campaign focused on working at height, slips,
trips and falls and driving safely. The health cam-
paign focused on a healthy back, chemicals and
personal protection equipment while the environ-
mental campaign focused on reducing energy, re-
ducing waste and conserving water.

To improve our overall HSE and CR performance, a
Group HSE and CR Action Plan was developed
and implemented in 2011. Based on our HSE and
CR performance, the stated targets and actions will
be reviewed and amended annually as deemed
appropriate to meet our HSE Vision. The objective
of this Group HSE and CR Action Plan are targets
and actions to:

. improve our HSE and CR culture;
. improve our HSE management systems; and
+ to monitor our HSE and CR performance.

There are actions that countries were required to
incorporate in their country action plans in 2011
such as:

. implement the ISS Safety Rules in their opera-
tions;

. develop and report on their environmental per-
formance and plans for improvement;

e translate the ISS Code of Conduct in their local
languages and to make this available to every
employee during induction;

. investigate incidents to prevent reoccurrence.

 

 

Our targets

Consistent with the ISS values, our highest priority
is to protect our colleagues from getting hurt.
Therefore, we will be steadfast in our commitment
to making our workplaces free from hazards, and
we will operate under the assumption that all inju-
ries can be prevented and that injuries in the work-
place are unacceptable. Our goal will always be
zero injuries and zero environmental incidents, and
this must be clear to everyone in the organisation.

The following Group targets were established for
2011:

1 In accordance with the HSE Vision, our first pri-
ority is to prevent fatalities at our work places.
Our Group target is 0.

2 In terms of Lost Time Incidents Frequency (LTIF),
the Group target was to reduce LTIF by 25% to
below 10, with further reductions in the coming
years.

3 In terms of Total Reportable Cases Frequency
(TRCF), the Group target was to reduce our
TRCF by at least 25% from the baseline of 23
with further reductions in the following years.

4 At least one management review by country
management of the suitability, adequacy and ef-
fectiveness of the country's HSE Management
system as per the Group HSE Manual.

5 To have a minimum of 350 of our top managers
across the Group take the e-learning modules on
anti-corruption and competition laws in 2011.

6 To carry out audits on least 20% of countries we
operate in regarding compliance with child labour
and working time regulations.

Our performance

In 2011, the Group HSE and CR Reporting Manual
was amended to increase the number of reporting
parameters and to provide guidance on reporting.
The primary purpose of gathering HSE and CR
data is to manage HSE and CR risks by monitoring
performance. The data will also be used to inform
ISS management and external stakeholders of our
performance and track progress towards the
achievement of our HSE and CR commitments.

Sadly, the 2011 reporting shows a number of fatali-
ties associated with our operations: seven people
have died at our workplaces in 2011. The number
of fatalities is not acceptable and to achieve our
HSE Vision of zero fatalities, we have improved our

1204044EogSN59685

Corporate Responsibility I Management review 30

investigation techniques to ensure that we deter-
mine the root causes of such incidents, learn from
them and prevent them from re-occurring. To pre-
vent future fatalities in our operations, the overall
safety culture as well as safety procedures
throughout the workforce will be further strength-
ened. Improvements require the full commitment
from the country management as well as the opera-
tional level management and this is a vital require-
ment of our Group HSE Manual.

HSE PERFORMANCE

Target Performance

 

Lost Time Incident Frequency
(LTF) less than 10 10

Total Recordable Case Frequency
(TRCF) 17.25 16

Management Reviews
(% of countries) 100 98

E-learning module on anti-corrup-
tion and competition laws (number
of top managers) 350 762

Audits on Corporate Responsibility
(% of countries) 20 25

 

Going forward

Going forward, our objective is to roll out the HSE-
IT system to all countries and regions to help us
improve the quality of the data. In 2012, we will also
expand on our data parameters including on the
environmental impact of waste. Our initiatives and
actions in 2011 and our plans for 2012 are steps in
our journey towards embedding CR in our busi-
ness. We have built a solid foundation and will be
building on this foundation both in terms of imple-
mentation and reporting.

Employees

ISS is one of the world's largest private employers
with more than 530,000 employees located in Eu-
rope, Asia, Pacific, Latin America and North Ameri-
ca.

PEOPLE INDICATØRS

 

2011 2010
Total Employees 534,400 522,600
Full time employees 73% 73%
Part time employees 27% 27%
Total Employees > 1 year 66% 61%

 

At the end of 2011 our employees in emerging
markets comprised more than half of our workforce.

Human Resources — Vision and strategy

The ISS Human Resources vision was updated in
2011. The new Human Resources vision is "that all
leaders at every level of the organisation lives and
breathes according to the ISS Leadership Princi-
ples — promoting teamwork and collaboration
across borders and business — ensuring that each
and every one of our more than 530,000 employees
work towards our shared vision of being the Great-
est Facility Service Company Globally”.

With the ISS Leadership Principles applied in our
HR endeavours, the vision ensures that ISS has

capable and motivated leaders capable of imple-
menting and living The ISS Way strategy.

Implementation of the updated Human Resources
strategy is supported by the "The Role and Direc-

tion of HR”, developed in 2011, which aligned the

global Human Resources to focus on five core pri-
orities:

e Leadership Development
. Performance Management
Employee Engagement

. Succession Planning

e Talent Management

At all times, the HR strategy will be aligned to the
business strategy so these priorities may change.

"The Role and Direction of HR” describes the link
between HR competencies, the Human Resources
strategy, the ISS strategic cornerstones and The
ISS Way — ultimately linking to shareholder return.
More competencies are identified than the five core
priorities and successful HR performance in ISS
depends on all local HR organisations being able to
deliver satisfactory operational services, like re-
cruitment and salary adjustment, while maintaining
momentum in the strategic priorities. Furthermore,
The Role and Direction of HR includes the "ISS
International HR Standards” launched in 2007 to
ensure a continued drive towards implementation of
these in all countries. The ISS International HR
standards comprise the framework for local initia-
tives covering the following 12 topics:

s Recruitment

1204044EogSN59686

Corporate Responsibility I Management review 31

+ Employee appraisals and reviews

. Motivation and loyalty

. Employee relations

e Training and development

e 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

ISS's performance management system plays an
important role in all of the above key initiatives. The
system is the principal tool for assessing individual
capabilities. Feedback during an annual perfor-
mance evaluation and target-setting process, in-
cluding a mid-year review, help to develop the fuli
potential of the individual managers. In addition to
facilitating the process, the performance manage-
ment system provides ISS with a basis for talent
management and succession planning.

Training and development

Leadership development is a must-win battle for
ISS and people management is a strategic corner-
stone in order to deliver excellence in service offer-
ings. The ability of our leaders, at all levels, to guide
and motivate must be based on human understand-
ing, respect and responsibility.

It is a core HR discipline to ensure that we have
appropriate training and leadership development
programmes in place, at all levels of management.
Training and leadership development is a priority as
we build human resource excellence because we
believe that an investment in our people is an in-
vestment in our customers and our business.

The ISS Way of managing and leading is described
in our nine leadership principles. These outline how
we relate to our clients, how we bring out the best
in our people and how we ensure that everyone is
treated fairly and with respect. All leadership pro-
grammes are closely linked to our Leadership Prin-
ciples and work as a daily guideline for all manag-
ers in ISS so that they can guide their employees in
how to create customer value.

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 level of management
e.g. team leaders, supervisors and contract man-
agers, in their responsibilities towards their immedi-
ate staff and customer interfaces. Most training is
conducted at ISS academies and training facilities
in national and local operations.

Additionally, in order to implement strategic initia-
tives, such as cleaning excellence and the integrat-
ed facility service (IFS) concept, ISS continues to
develop key specialists and leaders for train-the-
trainer. This is supplemented by local initiatives.

The ISS University focuses on continuously en-
hancing the competencies of ISS executives. The
"ISS Advantage' management induction programme
for executives of the Group highlights The ISS Way
strategy and our ISS value chain management tool.
As in previous years, the ISS University programme
portfolio consisted of internal and external seminars
designed in cooperation with institutions such as
IMD and Henley Management College.

Employee engagement

The success of each service delivered depends on
the people delivering it. With more than 530,000
employees worldwide, this makes employee en-
gagement one of the most important elements at
ISS. Employee engagement exists when every lev-
el of the organisation is staffed with people who
understand what is expected of them and are ca-
pable of and desire to deliver services in a way that
strengthens the customers' experience of service
value. We therefore focus on two main aspecis of
employee engagement:

« Motivation
« Capability

Our company requires many different sets of peo-
ple skills. This places great emphasis on our ability
to train and develop employees. While some em-
ployees may want to stay in their current jobs, we
need to encourage development whenever we see
the possibility. Every business unit must ensure that
employees are properly skilled through local train-
ing and development programmes. This enables us
to offer our employees flexibility in their job func-
tions, thereby strengthening our collaboration with
our customers.

In 2011, ISS piloted a Global Employee Engage-

1204044EogSN59687

Corporate Responsibility | Management review 32

ment Survey to gain insight into where we can im-
prove employee engagement in order to improve
ISS profitability and customer satisfaction. Around
150,000 employees were surveyed using the same
process and questionnaire. By December 2012, all
countries are expected to have conducted their first
Employee Engagement Survey after the global
standard process. This survey will assist in measur-
ing and thereby quantifying our success and pro-
gress in capturing the hearts and minds of our em-
ployees. The survey should be linked to carrying
out a customer satisfaction survey as this enables
ISS's leaders to combine the results from both sur-
veys.

The service industry generally has a high degree of
employee tumover, as part of the industry is often
considered suitable for short-term or secondary
employment. ISS pursues a range of strategies to
retain its employees by offering training and devel-
opment, more full-time and daytime work, multi-task
jobs, teamwork, career opportunities, leisure activi-
ties, etc.

In 2011, the share of full-time employees (working
30 hours or more a week) was 73%, unchanged
from 2010. This indicator is important, as in gen-
eral, full-time employees develop stronger ties with
ISS. The distribution of employee seniority (in
years) provides another perspective for employee
loyalty within ISS. In 2011, approximately 66% of
the Group's employees had been with ISS for more
than one year, an increase from 61% in 2010.

Equal opportunities

ISS rewards its people solely on the basis of merit.
When recruiting, developing and promoting, ISS
focuses on the individual capabilities and qualifica-
tions of a candidate and not on the person's gen-
der, age, ethnic origin, religion, political views, etc.

Thanks to our corporate culture, and aided by lan-
guage courses and adapted training materials, ISS
is an employer of choice for many immigrants and
ethnic minorities. In all regions but especially in
Western Europe, ISS is among the largest employ-
ers of ethnic minorities. For ISS, diversity is a
strength.

Employee and trade union 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. Estab-
lished in 1995, the European Works Council (EWC)
is an in-house forum for dialogue between ISS ex-
ecutives and ISS employee representatives from
across Europe.

In June 2009, the EWC and ISS signed a new four-
year EWC agreement. The EWC meeting agenda
includes information and consultation on matters
relating to the ISS Group in Europe, in particular
concerning the structure, financial situation, devel-
opment of ISS, the current situation and probable
trends of employment. Discussions have also in-
volved the introduction of new working methods
and processes, training and HSE issues, provided
that such issues may affect the interests of the em-
ployees of the ISS Group in Møre than one country
in Europe. A total of 22 representatives from 16
counties took part in the EWC annual meeting in
2011.

1204044EogSN59688

 

Corporate Responsibility I Management review 33

The global agreement between Union Network In-
ternational (UNI) and ISS was renewed in 2008.
The agreement aims at enabling all ISS employees
worldwide to exercise rights to union membership
and collective bargaining. As part of the agreement,
ISS and UNI created the Global UNI-ISS Founda-
tion in 2009 for the purpose of monitoring and im-
proving employment standards within the service
industry globally. In 2011, the foundation initiated a
project to raise standards for low-wage janitors in
Mexico City through improved labour law enforce-
ment. The project, the agreement and collaboration
between ISS and UNI has prompted UNI to name
ISS as an employer that treats its workers well and
one that sets a good example for other global em-
ployers.

 

Corporate governance and risk management | Management review 34

Corporate governance and risk
management

EQT 54% . "—— FS INVEST 5.Å R.L (LUXEMBOURG) ” GOLDMAN SACHS CAPITAL
; PARTNERS 44%

FS INVEST II S.Å R.L (LUXEMBOURG)

mme turen,
ISS A/S
|
ISS WORLD SERVICES A/S

; |
]
! "155 GLOBAL A/S … I

OPERATING SUBSIDIARIES

1) Certain members of the Board of Directors, members of the Executive Group Management Board 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), ISS's ultimate parent company. The total number of shares held by these directors and officers is below
2% of the total share capital.

CORPORATE GOVERNANCE the Danish Financial Statements Act, International

Financial Reporting Standards (IFRS), the Action

The management team of the Group formally con- . in
Plan for Corporate Social Responsibility (CSR), the

sists of the Board of Directors and the Managing

Director of ISS Global A/S. Since ISS Global A/S Danish Venture Capital and Private Equity Associa-
has no operating activities of its own, the Group tion's (DVCA) Guidelines for Responsible Owner-
relies on the management team of ISS A/S, the ship and Good Corporate Governance as well as
ultimate parent company in Denmark. As a subsid- good corporate governance practices for compa-
iary of ISS A/S, ISS Global A/S is subject to the nies of ISS's size and global reach. The DVCA
same corporate governance policies applicable in Guidelines for Responsible Ownership and Good
ISS A/S, which is described in the sections below. Corporate Governance are available at ww.dvca.dk.
The Board of Directors regularly reviews the Shareholders
Group's corporate governance in relation to the ISS A/S is a limited liability company incorporated
Group's activities, business environment and statu- and operating under Danish law. The company's
tory requirements. Good corporate governance share capital is indirectly owned by funds advised
practices at ISS are implemented in a dynamic pro- by EQT Partners (EQT) and Goldman Sachs Capi-
cess with the Board of Directors continuously as- tal Partners (GS Capital Partners). EQT and GS
sessing the need for adjustments to benefit ISS Capital Partners are together referred to as the
stakeholders and the Group itself. Principal Shareholders and hold 54% and 44% of
the share capital respectively. The remaining ap-
Corporate governance policies and procedures at proximately 2% of the share capital is held by cer-
ISS take into account the Danish Companies Act, tain members of the Board of Directors, the Execu-

1204044EogSN59689

tive Group Management Board and a number of
senior officers of the Group through director and
management participation programmes.

EQT is the leading private equity group in Northern
Europe with close to EUR 18 billion in raised capital
and multiple investment strategies. Together with a
network of industrial advisers, EQT implements its
business concept by acquiring or financing high-
quality medium-sized to large companies in North-
ern and Eastern Europe, Asia and the United
States, developing them into leading companies.
Development is achieved by applying an industrial
strategy with focus on growth. Since inception, EQT
has invested more than EUR 10.5 billion in around
100 companies and exited around 50.

EQT Partners, acting as investment advisor to the
managers of each EQT fund, has around 120 in-
vestment professionals with an extensive industrial
and financial competence. EQT Partners has offices
in Copenhagen, Frankfurt, Helsinki, Hong Kong,
Oslo, London, Munich, New York, Shanghai, Sin-
gapore, Stockholm, Warsaw and Zurich.

GS Capital Partners is managed by Goldman,
Sachs & Co. or an affiliate thereof. Goldman, Sachs
& Co. is a wholly owned subsidiary of the Goldman,
Sachs Group inc. ("Goldman Sachs”). Goldman
Sachs is a leading global investment banking, secu-
rities and investment management firm that pro-
vides a wide range of services worldwide to a sub-
stantial and diversified client base that includes
corporations, financial institutions, governments
and high net worth individuals. Founded in 1869,
the firm is headquartered in New York and main-
tains offices in London, Frankfurt, Tokyo, Hong
Kong and other major financial centres around the
world.

Management
ISS has a two-tier management structure consisting
of:

. the Board of Directors (the Board), and
. the Executive Group Management Board (the
EGM).

The Board determines the overall Group strategy
and supervises the company's activities, its man-
agement and organisation. The EGM is responsible
for ISS's day-to-day operations. The two bodies are

1204044EogSN59690

 

Corporate governance and risk management | Management review 35

separate and have no overlapping members.

Board of Directors of ISS A/S

The Board has seven members appointed by the
general meeting for a period of one year. Re-
election may take place. Board members have
been nominated jointly by the Principal Sharehold-
ers. Five members are independent, while two
members are representatives of the Principal
Shareholders.

In addition to the Board members elected by the
general meeting, there are four employee repre-
sentatives on the Board. They have been elected
on the basis of a voluntary arrangement regarding
Group representation for employees of ISS World
Services A/S as further described in the articles of
association. The employee representatives joined
the Board following the annual general meeting on
1 March 2011 for a term of four years. The employ-
ee representatives hold the same rights and obliga-
tions as other members of the Board.

The Board functions in accordance with the rules of
the Danish Companies Act, the articles of associa-
tion and its rules of procedure, which provide guide-
lines for the Board's work in general. Board resolu-
tions are generally passed by a simple majority,

and in the event of an equality of votes, the Chair-
man casts the deciding vote.

The Board convenes at least six times a year. Ex-
traordinary meetings are convened whenever spe-
cific matters require attention between scheduled
meetings. A total of 13 Board meetings were held in
2011. The Board receives a monthly financial and
operational reporting package and is briefed about
important matters between Board meetings. The
Board approves the strategy plan, the annual
budget and certain large acquisitions, divestments
and integrated facility services contracts based on
recommendations from the Transaction Committee
(see Board Committees below).

In a process led by the Principal Shareholders and
the Chairman an appraisal of the Board is carried
out annually to assess the competencies of the
Board, the effectiveness of its work and how the
Board ensures that good corporate governance is
in place.

More details on the Board members are available

 

1204044EogSN59691

on pages 55-57 in the Annual Report for ISS A/S.
Remuneration to the Board is disclosed in note 5 to
the consolidated financial statements.

Board Committees
Currently the Board has three subcommittees that
report to the Board,

The Audit Committee evaluates the external fi-
nancial reporting, and monitors and challenges the
main accounting policies and estimates as well as
the systems of internal controls and risk manage-
ment. Its duties also include supervision of the
external auditor and the internal audit function in
addition to considering the relationship with the
external auditors and reviewing the audit process.
The Board appoints the committee members and
the chairman of the committee who cannot be the
Chairman of the Board. The committee consists of
three members of the Board (currently John Allan,
Michel Combes and Steven Sher), and meetings
are also attended by the Group CFO, the Head of
Group Controlling, the Head of Group Internal Au-
dit and the Group General Counsel. John Allan is
chairman of the committee, which held four meet-
ings in 2011.

The Transaction Committee (previously the Ac-
quisition Committee) considers ISS's procedures
for acquisitions, divestments and larger integrated
facility services contracts, reviews the transaction
pipeline, approves certain large transactions in ac-
cordance with adopted procedures, and evaluates
selected effected transactions. The committee con-
sists of two members of the Board (currently Harry
Klagsbrun and Steven Sher), and meetings are also
attended by the Group CEO, the Group CFO, and,
as applicable, the Head of Group Strategy and
Corporate Development and the Head of Global
Corporate Clients. Steven Sher is chairman of the
committee, which held three meetings in 2011.

The Remuneration Committee recommends the
remuneration packages and incentive schemes for
the Group CEO, and provides input on remunera-
tion in respect of other EGM members, certain sen-
ior officers, and compensation levels and bonus
systems in general. The committee consists of
three members of the Board (currently Ole Ander-
sen, Harry Klagsbrun and Steven Sher), and the
Group CEO participates in meetings, where the
Group CEO's remuneration is not tabled for discus-

Corporate governance and risk management | Management review 36

sion. Ole Andersen is chairman of the committee.
The committee held two meetings in 2011.

The Financing Committee, which was discontinued
in 2011, considered ISS's capital structure, financ-
ing of future investments and hedging policies. The
committee held 6 meetings in 2011. The Finance
Committee has been replaced by a finance working
group that reports to the Board via the Group CFO.

The Nomination Committee was discontinued in
2011 due to the cancellation of the IPO.

Executive Group Management Board of ISS A/S
The EGM consists of Group CEO Jeff Gravenhorst
and Group CFO Henrik Andersen. The primary
tasks of the EGM are to carry out day-to-day man-
agement of the Group, develop new strategic initia-
tives, develop Group policies, monitor Group per-
formance and evaluate investments as well as ac-
quisitions, divestments and large integrated facility
services contracts.

Group Management Board of ISS A/S

The Group Management Board (the GMB) is head-
ed by the Group CEO, and includes the Group
CFO, Regional CEOs, COO-Projects, Head of
Global Corporate Clients, Head of Group Human
Resources, Head of Group Strategy and Corporate
Development and the Group General Counsel. The
primary tasks of the GMB are to develop and exe-
cute new strategic initiatives, develop and imple-
ment Group policies, monitor Group performance,
review financial matters, coordinate and evaluate
acquisitions, divestments and large integrated facili-
ty services contracts and to provide the EGM with
input for decision making.

No member of the GMB is permitted to hold direc-
torships in companies outside the ISS Group unless
specific consent is granted.

An overview of heads of Group functions of the ISS
Group head office is available on page 167 in the
Annual Report for ISS A/S.

Country Management

In each of the countries in which ISS operates,
country management teams are appointed to man-
age the business in accordance with ISS Group
policies and procedures as well as local legislation
and practice. ISS delegates substantial autonomy

and considerable power to the country manage-
ment teams including management of operations in
their relevant markets, financial reporting, local tax
and compliance with local legislation and practices.
An overview of the country managers of the ISS
Group is available on pages 168-170 in the Annual
Report for ISS A/S. The country management
teams for each relevant country are described on
the ISS website at www.issworld.com.

Remuneration

Each Board member (except representatives of the
Principal Shareholders) receives a fixed annual fee
and members of the Board committees receive an
additional fixed fee.

Remuneration to the Board is reported in note 5 to
the consolidated financial statements. The invest-
ment by certain Board members in the Directors"
Participation Programme is described below.

The members of the EGM and the GMB are remu-
nerated with a combination of fixed salary, standard
benefits in accordance with market standards and,
for most members, a performance-based bonus of
up to 60% of their fixed salary. All employment con-
tracts of the EGM and the GMB members may be
terminated with 6-24 months notice. One employ-
ment contract includes a severance payment of 2
years salary. No other members of the EGM or the
GMB are entitled to severance payments. The em-
ployment contracts contain no special termination
rights.

Directorships in companies in the ISS Group held
by members of the EGM and the GMB are not re-
munerated separately.

Detailed reporting on remuneration made to the
members of the EGM is included in note 5 to the
consolidated financial statements. The investment
by the EGM and certain senior officers of the Group
in the Management Participation Programme is
described below.

Directors? and Management Participation Pro-
gramme

The Principal Shareholders have established a
Management Participation Programme in which the
EGM and a number of senior officers of the Group
have invested. The programme is structured as a
combination of direct and indirect investments in a

1204044EogSN59692

 

Corporate governance and risk management | Management review 37

mix of shares and warrants in FS Invest. At the
introduction of the programme in 2006, warrants in
FS Invest were granted free of charge to certain
senior officers of the Group with a vesting schedule
(based on value of shares and time) of which
271,632 were outstanding as of 31 December
2011.

Certain members of the Board participate in a Di-
rectors' Participation Programme and a Co-
investment Scheme, under which they have invest-
ed in a mix of shares and warrants in FS Invest.

As of 31 December 2011, the investments under
the programmes were as follows:
PARTICIPATION PROGRAMMES

Number Investment
of measured

 

DKK million persons at cost
Board of Directors 4 15.7
Executive Group Management Board 2 6.5
Corporate Officers 26 45.3
Country Management 104 109.9

 

In December 2011, a change of the Directors' and
Management Participation Programmes was initiat-
ed and it is expected that the change of the pro-
grammes will be completed by the end of the first
quarter of 2012.

INTERNAL CONTROL AND RISK MAN-
AGEMENT SYSTEMS RELATING TO Fl-
NANCIAL REPORTING

Overall control environment

The Board and the EGM have overall responsibility
for the Group's internal control and risk manage-
ment systems for the financial reporting process
including compliance with applicable laws and other
regulations related to financial reporting.

ISS considers internal controls to be an essential
management tool. Accordingly, care is taken to
ensure that a sound framework of controls is in
place for safeguarding the business, the ISS
Group's assets and shareholder investments as
well as its financial reporting.

The Group's internal control and risk management
systems are developed to mitigate rather than elim-

inate risks identified in relation to the financial re-
porting process and thus assist in ensuring that the
consolidated financial statements provide a true
and fair view of the financial performance and fi-
nancial position of the Group without material er-
rors.

The Board has approved policies, standards and
procedures in key areas related to financial report-
ing, including the Code of Conduct, Accounting and
Reporting Policies, Treasury Policies and Proce-
dures, and Control Procedures.

The Audit Committee is responsible for monitoring
the internal controls and risk management systems
as well as challenging the EGM in its assessment of
material financial reporting risks. A material finan-
cial reporting risk is considered to be a risk that
may cause a material error in the consolidated fi-
nancial statements of the Group.

The Audit Committee has set up a Group Internal
Audit department that is responsible for providing
assurance concerning the internal control environ-
ment in accordance with an approved internal audit
plan.

The EGM has established a Group Controlling de-
partment that is responsible for controlling the fi-
nancial reporting from subsidiaries and preparing
tne consolidated financial reporting.

Internal control procedures at Group level have
been established to assess on an ongoing basis the
Group's internal control environment and to man-
age identified risks. However, as a risk of misuse of
assets, unexpected losses, etc. always exists, such
controls can provide only reasonable and not abso-
lute assurance against material misstatements,
omissions or losses.

The aim of the established control environment is
therefore 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;

e material risks are identified and minimised;

+ internal controls are in place to support the quali-
ty and efficiency of the business processes and

1204044EogSN59693

Corporate governance and risk management | Management review 38

to safeguard the Group's business and assets;
and

" ISS's business is conducted in compliance with
applicable legislation, regulation and ISS policies.

Risk assessment

Risks related to the financial reporting process are
identified and assessed annually based on a mate-
riality test including a risk assessment of the impact
of quantitative and qualitative factors. The evalua-
tion of the risks includes an assessment of the like-
lihood that an error will occur and whether such an
error may be material.

The risk of errors is relatively higher for accounting
areas that require management judgement and/or
are transactions that are generated through com-
plex accounting processes. Accounting areas that
require management judgement are described in
note 2 to the consolidated financial statemenis,
Critical accounting estimates and judgements.

On an ongoing basis the Audit Committee discuss-
es:

. material and relevant new accounting pro-
nouncements and implementation of such;

. evaluation of the overall effectiveness of the in-
ternal controls for financial reporting; and

. accounting for material legal and tax issues and
significant accounting estimates.

Control activities

In order to sustain a sound control environment,
specific control activities are designed to obtain the
desired assurance. These measures must ensure
that all relevant aspects of a specific area are cov-
ered, and that the combination of control activities
monitors all relevant aspects of the business. The
control activities are based on the risk assessment
made by the EGM. The purpose of the control! activ-
ities is to ensure that material errors in the financial
reporting are prevented, detected and corrected.

The Group has implemented a formalised financial
reporting process that includes:

+ reporting of financial performance and financial
position — all countries must report a full income
statement, balance sheet, cash flow statement,
portfolio analysis and three-months forecasts etc.
on a monthly basis. The reporting is monitored

and controlled by Group Controlling. Any signifi-
cant variance from budgets must be explained;

» reporting of cash flow forecasts — all countries
must report bi-weekly their daily cash flow fore-
casts for a rolling three-months period. Subse-
quently, actual figures are continuously moni-
tored by Group Treasury for deviations from the
forecasted figures;

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

« budgets and financial plans — all countries must
prepare budgets and plans for the following fi-
nancial year in a pre-defined process and format.
Regional management teams review the pro-
posed budgets and plans with the countries;

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

. strategy reviews — annual meetings with country
managers at which the strategy is discussed, and
priorities and plans for the coming year are
agreed;

+ acquisitions and divestments — al! acquisition and
divestment proposals must be presented in a
predefined acquisition or divestment report for-
mat and valuation model for approval. Board or
Transaction Committee approval is required for
large or strategic acquisitions and divestments;
and

+ control self-assessments — country management
must self-assess every six months the implemen-
tation of certain key internal control activities and
develop action plans to close any implementation

gaps.

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
accounting and internal control compliance have
been established, including an Accounting Manual,
Reporting Instructions, Budgeting Manual and other
relevant guidelines. The aim is to ensure that all
employees receive the relevant information on a
timely basis to ensure efficient and reliable execu-
tion of tasks including carrying out the established
control activities.

1204044EogSN59694

Corporate governance and risk management | Management review 39

Monitoring

Each month the Group's subsidiaries report finan-
cial information on financial developments to Group
Controlling. This information is used to prepare
consolidated financial statements and reports sub-
mitted to the Board and the EGM. Financial report-
ing from the subsidiaries is controlled on a monthly
basis (see Control activities).

The country management teams are responsible for
ensuring that the control environment in each oper-
ating country is sufficient to prevent material errors
in the country's financial performance and financial
position reported for consolidation purposes. The
regional management teams provide governance of
the country operations.

Additionally, in order to independently evaluate the
adequacy of the local internal control environment
and procedures, Group Internal Audit visits the
country organisations regularly. The visits take
place according to a plan for the year approved by
the Audit Committee. The findings and conciusions
of internal audits, including recommendations on
how to improve the control environment, are pre-
sented in reports addressed to country and regional
management teams, representatives of EGM and
the external auditor.

Group Internal Audit performs follow-up audits to
ensure that the recommendations are implemented.
The key findings from internal audits are presented
to the Audit Committee, which evaluates the results
reported and uses the conclusions to assess the
general control environment and performance and
financial position when reviewing the internal audit
plan for the coming year.

External audit

The Board nominates the external auditors for elec-
tion. The nomination follows an assessment of the
competencies, objectivity and independence of the
external auditor and the effectiveness of the audit
process.

An independent business relationship with the
Group's external auditors is essential for the control
environment. As part of the safeguards to ensure
independence, the external auditors cannot perform
certain non-audit services for ISS including, but not
limited to, the preparation of accounting records
and financial statements and in recruitment for sen-

ior management positions.

The company collaborates with its external auditors
at country level and at Group level in relation to
procedures and internal controls by exchanging
internal audit reports and by generally sharing rele-
vant 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 by the Audit Committee.

The Board reviews the Annual Report at a Board
meeting attended by the external auditor. The find-
ings of the external auditor and any major issues
arising during the course of tne audit are discussed
and significant accounting principles and critical
accounting estimates and judgements are re-
viewed.

RISK MANAGEMENT

ISS continuously seeks to identify, evaluate and
mitigate risks that may have an adverse effect on
the Group's ability to achieve the strategic objec-
tives, including financial performance, financial po-
sition and growth.

Overall, operational and financial risks are man-
aged in accordance with policies adopted by the
Board. Detailed plans and business procedures for
a number of functions are also described in manu-
als and guidelines. The policies for operational and
financial risk management and ISS Group stand-
ards are documented and distributed to the operat-
ing companies. ISS's Group Controlling, Group
Internal Audit, Group Risk Management, Group
Legal and Group Treasury departments supervise
compliance with these standards.

Operational risk management

ISS is exposed to operational risks through its ac-
tions and activities at our own premises as well as
at our customers' premises. Operational risk is as-
sessed based on the activities of each operating
company, historic and current claims events, and
the markets in which the companies operate. Fur-
thermøre, operational risk is assessed on an indi-
vidual site-by-site basis at customer premises
where we provide our services. Operational risk is

1204044EogSN59695

Corporate governance and risk management | Management review 40

monitored and mitigated in accordance with ISS
Group standards for risk management, risk financ-
ing, HSE management and good operational prac-
tice.

Operational risk is managed based on insurance
and own funding, primarily through global insurance
programmes managed centrally by ISS.

ISS believes that the Group is not subject to mate-
rial operational risks except for risks common in the
ordinary course of business in the service industry.

Financial risk management

ISS is exposed to financial risks as a result of its
opera-ting activities, investing activities and financ-
ing activities. The Group's financial risks are man-
aged centrally in Group Treasury based on policies
approved by the Board. The Group's financial risk
management is described in detail in note 35 to the
consolidated financial statements.

Risk factors

The risks discussed below are those that the Board
and the Group Management Board currently view
as being the most significant to our business.

Macro-economy We believe that the growth in
demand for our services generally correlates with
economic conditions, including growth in gross do-
mestic product, in the countries in which we oper-
ate. We believe that the facility services industry is
less sensitive to macroeconomic cycles than a
number of other industries. However, economic
downturns or otherwise uncertain economic out-
looks in the markets in which we operate or on a
global scale could adversely affect the demand for
outsourcing facility services.

Periods of recession or deflation may adversely
impact prices, payment terms and demand for ser-
vices particularly if customers downsize their busi-
nesses or reduce their demand for services.

During the recent economic downturn, in certain
regions and in certain customer segments, we ex-
perienced reduced activity levels that negatively
impacted our revenue and put pressure on our op-
erating margins. Generally speaking, however, we
were able to off-set these factors by taking appro-
priate steps to adapt our cost structure. Our portfo-
lio business tends to be more resilient and was less

affected during the recent economic downturn than
our once-only business.

Risk associated with our growth strategy Our
organic growth strategy is dependent on various
factors including our ability to cross- and up-sell,
the increased trend among multinational companies
to outsource facility services and procure cross-
border contracts and our ability to subsequently
provide these services in a global, effective and
price-efficient manner. Sustaining the organic
growth of our business requires us to adapt contin-
uously to meet the needs of our existing and poten-
tial customers. In particular, our success will de-
pend on:

- the continued growth in demand for the outsourc-
ing of facility services, either as single-services,
multi-services or integrated facility services;

our ability to continue to self-deliver integrated
facility services (IFS) to local and multi-national
customers and the recognition by such custom-
ers that we are one of very few service providers
positioned to provide such services, also on a
global scale; and

our ability to establish our presence in new mar-
kets and to grow our market share in existing
markets.

We strive to meet all these requirements by adapt-
ing appropriate sales processes to reflect the needs
of our customers, evaluate our existing business
platform — in terms of the services delivered, our
capabilities and the geographies in which we oper-
ate — on an ongoing basis to ensure it reflects both
the current and future requirements of our custom-
ers.

Risks associated with our customer contracts
The profitability of our contracis generally depends
on our ability to successfully calculate prices by
taking into consideration all economic factors, use
of subcontractors, direct as well as inherent liabili-
ties, and our ability to manage our day-to-day oper-
ations under these contracts. We may not be able
to accurately predict the costs of and identify all
risks associated with our contracts or the complexi-
ty of the services delivered, which may result in
lower-than-expected margins, losses under these
contracts or even the loss of customers.

We seek to mitigate these risks by applying best

1204044EogSN59696

Corporate governance and risk management | Management review 41

operational practices when entering into contractual
agreements with our customers. This is supported
by a contract risk assessment module which is be-
ing implemented across the Group.

Qualified local managers and employees Our
continued success depends strongly on our effec-
tive decentralised organisational structure in which
country and regional managers retain substantial
autonomy regarding the management of operations
in their local markets. As a result, we depend
strongly on these local managers. Qualified local
and regional managers are also important in order
to ensure best practices being shared across the
Group, effective management continuity and the
implementation and management of our growth
strategies. Our competitive strength also depends
partly upon our ability to attract, train and retain
employees.

Competition risk The facility services market is
fragmented with relatively low barriers to entry and
there is significant competition from local, regional,
national and international companies of varying
sizes and financial abilities offering an array of ser-
vice capabilities. We also face competition from in-
house providers.

We believe that our self-delivering capabilities, our
ability to deliver reliable and flexible service con-
cepts and services across borders, group-wide
HSE standards, credible risk transfer as well as our
general process and management systems all con-
tribute towards positioning ISS very favourably in
the markets in which we operate. Furthermore, the
market for large and complex international con-
tracts generally has higher barriers to entry than the
facility services market in general.

Regulatory risks Due to the nature of our indus-
try and the global reach of our operations, we are
subject to a variety of laws and regulations govern-
ing areas such as labour, employment, immigration,
health and safety, tax (including social security and
salary taxes), corporate governance, customer pro-
tection, business practices, and the environment.
Changes in such laws and regulations may con-
strain our ability to provide services to customers or
increase the costs of providing the services.

To the extent that we are unable to pass on to our
customers the costs of compliance with stricter or

 

 

changing requirements (e.g. increases in labour
costs mandated by law or collective bargaining
agreements) and taxes, our margins may decline.
In particular, because of our large workforce, laws
and regulations relating to labour, employment (in-
cluding the transfer of employees), social security,
health and safety of employees and immigration
affect our operations and the cost of compliance
significantly affects our results and financial condi-
tion.

Financial risks The Group is exposed to a num-
ber of financial risks including currency risk, interest
rate risk, liquidity risk and credit risk, The financial
risks and management thereof are described in
note 35 to the consolidated financial statements.

1204044FogSN59697

 

Corporate governance and risk management | Management review 42

Consolidated financial statements 43

Consolidated financial statements
ISS Global A/S

1204044EogSN59698

Consolidated financial statements 44

Consolidated income statement

1 January — 31 December

 

 

 

DKK million Note 2011 2010
Revenue 341 77,681) 74,101
Staff costs 5,6 | — (49,818) — (47,888)
Consumables 20 ; (6,751) (6,359)
Other operating expenses 7 i (15,473) (14,284)
Depreciation and amortisation ” 14,16 : (835) (832)
om
Operating profit before other items ? ' 4,804. 4,738
i .
Other income and expenses, net 8 ; ” (96). (83)
Royalty ' (1,226). (1,146)
Operating profit ” 3; 3,482 3,509
Share of result from associates 17 | TT 0 10
Financial income 9' 0 151 182

Financial expenses 9 ; (2,415) (1,997)

 

Profit before tax and goodwill impairment/ : '
amortisation and impairment of brands and customer contracts | 1,218. 1,704

Income taxes 10' (738) (659)

 

Profit before goodwill impairment/

 

 

 

amortisation and impairment of brands and customer contracts El 480. 1,045
Goodwill impairment 11,14,15 | (322) (259)
Amortisation and impairment of brands and customer contracts 14 : (365). (435)
Income tax effect ” 10,18 £ 117 116
Net profit/(loss) for the year (90). 467
Attributable to: ;

Owners of ISS Global A/S (97) 447
Non-controlling interests | 7 20
Net profit/(loss) for the year FÉ. (90) 467

 

1) Excluding Goodwill impairment and Amortisation and impairment of brands and customer contracts.

2) Excluding Other income and expenses, net, Royalty, Goodwill impairment and Amortisation and impairment of brands and customer contracts.
3) Excluding tax effect of Goodwill impairment and Amortisation and impairment of brands and customer contracts.

4) Income tax effect of Goodwill impairment and Amortisation and impairment of brands and customer contracts.

1204044EogSN59699

Consolidated statement of comprehensive income

1 January — 31 December

Consolidated financial statements 45

 

 

 

 

 

 

DKK million Note 2011 2010
Net profit/(loss) for the year ; ' (90); 467
Other comprehensive income i .
Foreign exchange adjustments of subsidiaries and non-controlling interests ; (105) 613
Fair value adjustment of hedges, net 36 i (11) (120)
Fair value adjustment of hedges, net, transferred to Financial expenses 36 ; 97 190
Actuarial gains/(losses) 29 i (91). (129)
Impact from asset ceiling regarding pensions 29 | "| 8! (20)
Tax on other comprehensive income 10 ; 0: 18
i ;
Total other comprehensive income ; (102): 552
Total comprehensive income for the year ; (192) 1,019
Attributable to:
Owners of ISS Global A/S ; (200) 998
Non-controlling interests ; 8 21
Total comprehensive income for the year ; (192) 1,019

 

1204044EogSN59700

 

Consolidated financial statements 46

Consolidated statement of cash flows

1 January — 31 December

 

 

 

 

 

DKK million Note 2011 2010

Operating profit before other items | 4,804 4,738

Depreciation and amortisation 14, 16 ; 835: 832

Changes in working capital 12 i: (308). (63)

Changes in provisions, pensions and similar obligations ; (235) (128)

Other expenses paid i (146) (186)

Income taxes paid 23) (709); (623)

Payments related to royalties ! (1,170). (638)

Cash flow from operating activities ! 3,071" 3,932

Acquisition of businesses 13 | (89) (470)

Divestment of businesses 13 | 761. 591

Acquisition of intangible assets and property, plant and equipment ; (1,082) (965)
Disposal of intangible assets and property, plant and equipment i 93 101
(Acquisition)/disposal of financial assets i 6. 48 '
Cash flow from investing activities ! (311) (695)

Proceeds from borrowings ! 362 ' 1,546

Repayment of borrowings : (987) (3,395)

Interest received from companies within the ISS Group ; - 4

Interest received external ; 137 102

Interest paid within the ISS Group ; (122) (118)

Interest paid, external ; (1,725Y (1,749)

Capital increase ' 59" -

 

 

 

 

Payments (to)/from ISS Group companies, net | (13) 523
Non-controlling interests ; (8). (9)
Cash flow from financing activities ; (2,297). (3,096)
Total cash flow i 463" 141
Cash and cash equivalents at 1 January ; 3,603: 3,353
Total cash flow i 7 463: 141
Foreign exchange adjustments i (38) 109
Cash and cash equivalents at 31 December 25 i 4,028 3,603

 

 

1204044EogSN59701

Consolidated financial statements 47

Consolidated statement of financial position
At 31 December

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DKK million Note 2011 2010
|
i
Assets [
Intangible assets 14,15 , 25,254 26,024
Property, plant and equipment 16 | 2,066 2,045
Investments in associates 7 ” 7 9
Deferred tax assets 18 ; 553 657
Other financial assets 19 | 295 285
Non-current assets ; 28,175 29,020
Inventories 20 ; 334 318
Trade receivables ai 11,871 10,896
Contract work in progress 22 |; 129 125
Tax receivables 23 ' 335 383
Receivables from companies within the ISS Group ' — 938 -
Other receivables 24 ; 447 345
Prepayments ; 656 538
Securities 25 i 17: 19
Cash and cash equivalents 25 | 4,028 ; 3,603
Assets classified as held for sale 26 ; 141: 824
|
Current assets ! 18,896 . 17,051
i ;
Total assets 7 47,071 46,071
DKK million Note 2011 2010
Equity and liabilities '
Total equity attributable to owners of ISS Global A/S i " 323. 464
Non-controlling interests ! 11 23
Total equity 271 0 334 487
Loans and borrowings 28 : 19,890 20,780
Pensions and similar obligations 29 ' ” 1,172 1,177
Deferred tax liabilities 18 - 853 970
Provisions 30 i 338 361
|
Non-current liabilities ; 22,253. 23,288
Loans and borrowings 28 | 9,384 7,842
Trade payables i 3,425. 2,785
Tax payables 23 | 314 398
Other liabilities 31 ; 11,016 - 10,637
Provisions 30 få 255, 379
Liabilities classified as held for sale 26 i 90 255
Gurrent liabilities | 24,484 : 22,296
Total liabilities | 46,737 45,584
| ” .
Total equity and liabilities | 47,071 46,071

 

1204044EogSN59702

 

Consolidated statement of changes in equity

1 January — 31 December

Attributable to owners of ISS Global A/S

Consolidated financial statements 48

 

 

 

 

 

 

 

 

 

 

Non-con-
Share Share Retained Translation Hedging trolling Total
DKK million capital premium earnings reserve reserve Total interests equity
Equity at 1 January 2011 160 1,881 (1,874) 387 (90) . 464 23 487
Comprehensive income for the year i ' . . ; |
Net profit/(loss) for the year | - - (97) ED - (97) 7 (90). |
| ii
Other comprehensive income :
Foreign exchange adjustments of subsidiaries : .
and non-controlling interests ; - ' - - (106) - (106) 1 (105)
Adjustment relating to previous years me ' - 5 —… (5) - HEE -
Fair value adjustment of hedges, net - - - - (11) (11) - (11)
Fair value adjustment of hedges, net,
transferred to Financial expenses ' - - Lom - 97 97 «7 97
Actuarial gains/(losses) : - - (91) — - (91) - (91)
Impact from asset ceiling regarding pensions — - 8 - - 8 - 8.
Tax on other comprehensive income -… 7 21 - (21) 0 ”- 0
Total other comprehensive income - - (57) ' (106) — 60 (103) sq (102)
Total comprehensive income
for the year - - (154) (106) 60 (200) me 8 (192)
Transactions with owners ;
Capital increase ; - . 59 - - 59 - 59,
Impact from acquired and divested i le
companies, net ! - - - - - - (12) (12).
Dividends paid - - - - - - (8) (8)
Total transactions with owners ' +00 - 59 - - 59 …. (20) "89
Total changes in equity - - (95) (106) 60 (141) ” (12) (153)
Equity at 31 December 2011 ; 160 1,881 (1,969) 281 (30) 323 11 334 |

 

Dividends

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

1204044EogSN59703

 

 

Consolidated financial statements 49

Consolidated statement of changes in equity

1 January — 31 December

Attributable to owners of ISS Global A/S

 

 

 

 

 

 

 

 

 

 

 

Non-con-
Share Share Retained Translation Hedging trolling Total |

DKK million capital premium earnings reserve reserve Total interests equity
Equity at 1 January 2010 160 1,881 (2,306) (225) (142) (632) 21 (611)
Comprehensive income for the year
Net profit/(loss) for the year - - 447 - - 447 20 467
Other comprehensive income
Foreign exchange adjustments of subsidiaries

and non-controlling interests - - - 612 - 612 1 613
Fair value adjustment of hedges, net - - - - (120) (120) - (120)
Fair value adjustment of hedges, net,

transferred to Financial expenses - - - - 190 190 - 190
Actuarial gains/(losses) - - (129) - - (129) - (129)
Impact from asset ceiling regarding pensions - - (20) - - (20) - (20)
Tax on other comprehensive income - - 36 - (18) 18 - 18
Total other comprehensive income " - (113) 612 52 551 1 552
Total comprehensive income

for the year - - 334 612 52 998 21 1,019
Transactions with owners
Remission of debt to parent company - - 98 - - 98 - 98
Impact from acquired and divested

companies, net - - - - - - (10) (10)
Dividends paid - - - - - - (9) (9)
Total transactions with owners - - 98 - - 98 (19) 79
Total changes in equity - - 432 612 52. 1,096 2 1,098
Equity at 31 December 2010 160 1,881 (1,874) 387 (90) 464 23 487
Dividends

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

 

1204044EogSN59704

Notes to the
consolidated
financial
statements

1204044EogSN59705

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Consolidated financial statements 50

Accounting policies
Significant accounting policies
Critical accounting estimates and judgements

Income statement

Segment information

Revenue

Staff costs

Share-based payments

Fees to auditors elected at the Annual General Meeting
Other income and expenses, net

Financial income and financial expenses

Income taxes

Goodwill impairment

Statement of cash flows
Changes in working capital
Acquisition and divestment of businesses

Statement of financial position
Intangible assets

Impairment tests

Property, plant and equipment
Investments in associates

Detferred tax

Other financial assets

Inventories

Trade receivables

Contract work in progress

Tax receivables and tax payables
Other receivables

Securities, cash and cash equivalents
Assets held for sale

Share capital

Loans and borrowings

Pensions and similar obligations
Provisions

Other liabilities

Financial assets and liabilities

Other

Contingent liabilities, pledges and guarantees
Operating leases

Financial risk management

Derivatives

Related parties

Interests in joint ventures

Subsequent events

New standards and interpretations not yet implemented
Subsidiaries, associates, joint ventures and SPEs

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1204044EogSN59706

Consolidated financial statements 51

INOTE 1. Significant accounting policies

ISS Global A/S is a company domiciled in Denmark. The consolidated financial statements of ISS Global A/S as of and for the year
ended 31 December 2011 comprise ISS Global A/S and its subsidiaries (together referred to as "the Group") and the Group's interests
in jointly controlled entities and associates.

Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU and additional Danish disclosure requirements for consolidated financial statements (class D).

In addition, the consolidated financial statements have been prepared in compliance with the IFRSs issued by the IASB.

The consolidated financial statements were discussed and approved by the Executive Group Management Board and the Board of
Directors on 2 April 2012 and issued for approval at the Annual General Meeting on 2 April 2012.

Basis of preparation
The consolidated financial statements are presented in Danish kroner (DKK) (rounded to nearest DKK million), which is also ISS
Global 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 accounting policies”. However, based on new information minor
adjustments to comparative figures in primary statements and notes have been implemented.

Change in accounting policies
With effect from 1 January 2011, the Group has implemented:

+ Amendments to IFRIC 14 "Prepayments of a Minimum Funding Requirement”;

+ IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments”;

+ Revised IAS 24 "Related Party Disclosures”;

+ Amendmenits to IAS 32 "Classification of Rights Issues”;

+ Amendmenits to IFRS 1 "First-time Adoption of International Financial Reporting Standards"; and
+ Improvements to IFRSs (May 2010).

The adoption of these Standards and Interpretations did not affect recognition and measurement in the consolidated financial
statements for 2011 including earnings per share and diluted earnings per share.

Change in classification In 2011, the Group changed the classification of interest on defined benefit plans (interest on obligation and
expected return on plan assets) and interest on other long-term employee benefits from Staff costs to Financial expense to reflect
more appropriately the nature of these items and the way they affect the business. The change in classification increased Operating
profit before other items with DKK 36 million but had zero impact on Net profit/(loss) for the year. Comparative figures were
reclassified for consistency, which resulted in DKK 43 million being reclassified from Staff costs to Financial expenses, i.e. Operating
profit before other items was increased by DKK 43 million but Net profit/(loss) for the year was unchanged.

Basis of consolidation

The consolidated financial statements comprise the parent company ISS Global A/S and subsidiaries in which ISS Global 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 Global A/S owns, directly or indirectly, more than 50% of the voting rights of an entity or otherwise has a controlling interest,
e.g. by virtue of a statute or agreement.

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 risks and rewards, the Group concludes that it controls
the SPE. SPEs controlled 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 SPEs" 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.

Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling
interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control! is recognised
in the income statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the
date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset
depending on the level of influence retained.

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 indirectly more than 20% of the voting rights but less than
50%. When assessing whether ISS Global A/S has control or significant influence, potential voting rights that are exercisable at the
reporting date are taken into account.

Consolidated financial statements 52

NOTE 1. Significant accounting policies (continued)

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 in note 41, Subsidiaries, associates, joint ventures and SPEs.

The consolidated financial statements have been prepared as a consolidation of the financial statements of ISS Global A/S,
subsidiaries, SPEs and proportionally consolidated entities prepared according to the Group's accounting policies. On consolidation,
intra-group income and expenses, shareholdings, intra-group balances and dividends 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 liabilities, at the acquisition date.

The accounting items for subsidiaries are included in full in the consolidated 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. By virtue of agreement certain non-controlling shareholders are only
eligible of receiving benefits from their non-controlling interest when ISS as controlling shareholder has received their initial
investment and compound interest on such. In such instances the subsidiaries' result and equity are fully allocated to ISS until the
point in time where ISS has recognised amounts exceeding their investment including compound interest on such.

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

For acquisitions where the Group obtains control of the acquired business the acquisition method is applied. The identifiable assets,
liabilities and contingent liabilities of acquired businesses are measured at fair value at the acquisition date. Identifiable intangible
assets are recognised if separable or if they arise from contractual or other legal rights. Deferred tax related to fair value adjustments
is recognised.

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

Any excess of the fair value of the consideration transferred, the recognised amount of any non-controlling interests and the fair value
of any existing equity interest in the acquiree over the fair value of identifiable assets, liabilities and contingent liabilities acquired is
recognised as goodwill under Intangible assets. Goodwill is not amortised but tested for impairment annually. The first impairment test
is performed no later than at the end of the acquisition year. Upon acquisition, goodwill is allocated to the cash-generating units, which
subsequently form the basis for the impairment test. Goodwill and fair value adjustments in connection with the acquisition of a foreign
entity 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. When the
excess is negative, a bargain purchase gain is recognised in profit for the year at the acquisition date.

The consideration transferred comprises the fair value of the assets transferred and the liabilities and contingent liabilities incurred. If
parts of the consideration are conditional upon future events (contingent consideration) or satisfaction of agreed terms, these parts
are recognised at fair value at the acquisition date. Transaction costs that the Group incurs in connection with the business
combination are expensed as incurred.

If uncertainties exist at the acquisition date regarding identification or measurement of acquired identifiable assets, liabilities and
contingent liabilities or regarding the consideration transferred, initial recognition will take place on the basis of provisionally
determined 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 date and
comparative figures are restated accordingly. Thereafter no adjustments are made to goodwill.

Changes in estimates of contingent consideration relating to business combinations effected on or after 1 January 2010 are generally
recognised in the income statement under Other income and expenses, net. However, if new information becomes available within 12
months from the acquisition date and provides evidence of conditions relating to the contingent consideration or circumstances that
existed at the acquisition date, then the acquisition accounting is adjusted with effect on goodwill. Før business combinations effected
prior to 1 January 2010 subsequent adjustments to estimates of contingent consideration and transaction costs continue to be
recognised in goodwill.

Gains or losses on the divestment or winding-up of subsidiaries, associates or joint ventures are measured as the difference between
the consideration received adjusted for directly related divestment or winding-up costs and the carrying amount of the net assets at
the time of disposal or winding-up including any carrying amount of allocated goodwill.

Non-controlling interests At initial recognition a non-controlling interest is measured at fair value or at its proportionate interest in the
fair value of the net assets acquired. Measurement at fair value means that goodwill includes a portion attributable to the non-
controlling interest while measurement at its proportionate interest in the fair value of the net assets acquired, means that goodwill
relates only to the controlling interest acquired. The measurement principle is elected on a transaction-by-transaction basis and is
disclosed in the notes together with the description of the acquired businesses.

1204044ErogSN59707

Consolidated financial statements 53

NOTE 1. Significant accounting policies (continued) NE BE

Written put options relating to business combinations effected prior to 1 January 2010 and held by non-controlling shareholders are
accounted for in accordance with the anticipated acquisition method, i.e. as if the put option has been exercised already. Such options
are recognised as Other liabilities initially at fair value. Fair value is measured at the present value of the exercise price of the option.
At each reporting date the liability is remeasured at fair value and changes in the carrying amount, i.e. excluding the effect of unwind
of discount, which is accounted for as a financial expense, are recognised by adjusting the carrying amount of goodwill.

Written put options relating to business combinations effected after 1 January 2010 are recognised as Other liabilities initially at fair
value. At each reporting date the liability is remeasured at fair value and the change in fair value is recognised in equity.

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. Transactions 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 adjustments arising between the exchange rates at the transaction date and at the date of
payment are recognised in the income statement under Financial income or Financial expenses.

Receivables, payables and other monetary items denominated in foreign 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 financial statements is recognised in the income statement under Financial income or
Financial expenses.

On recognition in the consolidated financial statements of entities with a functional currency other than the presentation currency of
ISS Global 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 exchange 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 adjustments 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 in other comprehensive income and presented in equity under a separate
translation reserve.

Foreign exchange adjustment of intra-group balances which are considered part of the investment in the foreign entity is recognised
in the consolidated financial statements in other comprehensive income and presented in equity under a separate translation reserve.
Foreign 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 Global A/S's and which effectively hedge against
corresponding foreign exchange gains and losses on the investment in the entity are also recognised in other comprehensive income
and presented in equity under a separate translation reserve.

On recognition in the consolidated financial statements of associates with a functional currency other than the presentation currency
of ISS Global A/S, the share of profit or loss for the year is translated at average exchange rates and the share of eguity, including
goodwill, is translated at the exchange rates at the reporting date. Foreign exchange adjustments 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 in other
comprehensive income and presented in a separate translation reserve in equity.

Foreign exchange adjustments of foreign entities are recognised in other comprehensive income, and presented in the separate
translation reserve in equity. However, if the foreign entity is a non-wholly-owned subsidiary, the relevant proportionate share of the
foreign exchange adjustment is allocated to the non-controlling interests. When a foreign entity is disposed off such that control,
significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign entity is transferred
to the income statement under Financial income or Financial expenses.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign entity while retaining control, the relevant
proportion of the cumulative amount is allocated to non-controlling interests.

When the Group disposes of only part of its investment in an associate or joint venture that include a foreign entity while retaining
significant influence or joint control, the relevant proportion of the cumulative amount is transferred to the income statement under
Financial income or Financial expenses.

Repayment of intra-group balances, which constitute part of the net investment in the foreign entity, is not in itself to be considered a
partial disposal of that subsidiary.

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 instruments are included in Other receivables or Loans and borrowings,
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.

Fair value hedges Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a fair
value hedge of recognised assets and liabilities are recognised in the income statement together with changes in the value of the
hedged asset or liability 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 asset or liability.

1204044EogSN59708

Consolidated financial statements 54

NOTE 1. Significant accounting policies (continued) ”

Cash flow hedges Changes in the portion of the fair value of derivative financial instruments designated as and qualifying for
recognition as a cash flow hedge, and which effectively hedges changes in the value of the hedged item, are recognised in other
comprehensive income and presented in a separate hedging reserve in equity until the hedged transaction is realised. At this time,
gains or losses concerning such hedging transactions are transferred from other comprehensive income to the income statement and
recognised under the same line item as the hedged item.

lf the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the
designation is revoked, then hedge accounting is discontinued prospectively. The accumulated change in fair value recognised in other
comprehensive income is transferred to the income statement in the same period that the hedged item affects the income statement. If
the forecasted transaction is no longer expected to occur, then the accumulated change in fair value is transferred to the income
statement.

For other derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the
income statement under Financial income or Financial expenses.

Consolidated income statement

Presentation The consolidated income statement is presented in accordance with the "nature of expense" method. Goodwill
impairment and Amortisation and impairment 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 considered most appropriately to reflect the Group's
profitability.

Revenue from rendering services is recognised in the income statement 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; (iii) has latitude in establishing price; (iv) changes the
product or performs part of the service; (v) has discretion in supplier selection; (vi) is involved in the determination of product or service
specifications; (vii) has physical loss inventory risk; or (vii) 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 proportion 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
reliably. Contract costs 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 recognised only to the extent of contract costs incurred that are likely to
be recoverable. An expected loss on a contract is recognised immediately in the income statement.

The stage of completion of a contract is assessed by reference to the proportion that contract costs incurred for work performed to date
bear to the estimated total contract costs.

Revenue from the sale of goods in the course of the ordinary activities is recognised in the income statement provided that ali
significant risks and rewards of ownership have been transferred to the customer, and that the amount of revenue can be measured
reliably.

Revenue is measured at fair value of the consideration received less VAT and duties as well as price and quantity discounts.

Government grants mainly comprises wage subventions. Grants that compensate the Group for expenses incurred are recognised in
the income statement on a systematic basis in the same periods in which the expenses are incurred.

Staff costs comprises salaries and wages, pensions, social security costs and other employee related expenses.
Consumablies comprises material consumption related to the recognised revenue, e.g. food costs, chemicals, cloths, uniforms etc.

Other operating expenses includes expenses related to the operation 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 and impairment losses on receivables etc.

Depreciation and amortisation includes depreciation and amortisation of intangible and tangible assets excluding Goodwill
impairment and Amortisation and impairment of brands and customer contracts, which are presented in separate line items after Profit
before goodwill impairment/amortisation and impairment 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 classified as held for sale, the winding-up of operations, disposals of property, restructurings and acquisition and integration
costs. Acquisition costs comprise earn-out adjustments, direct acquisition costs related to external advisors and other acquisition
related costs such as reversal of provisions in opening balances. Integration costs comprise costs incurred as a consequence of the
integration such as termination of employees, contract termination costs mainly related to leasehold and advisory fees.

1204044EogSN59709

Consolidated financial statements 55

NOTE 1. Significant accounting policies (continued) FEE | —
Royalty comprises royalty and management fee invoiced by ISS World Services A/S (the parent of ISS Global A/S).

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.

Financial income and financial expenses 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 of discount, expected
return on plan assets and interest on obligations related to defined benefit plans as well as interest on other long-term employee
benefits. Additionally realised and unrealised gains and losses on derivative financial instruments which are not designated as
hedging arrangements and the ineffective portion of those designated as hedging arrangements are also included.

Dividends paid to non-controlling shareholders holding a put option are recognised under Financial expenses using the effective
interest method.

Income taxes for the year consists of current tax and changes in deferred tax and is recognised in profit for the year, other
comprehensive income or equity.

ISS Global A/S is jointly taxed with all Danish resident subsidiaries. The Danish income tax payable is allocated between the jointly
taxed Danish companies based on their proportion of taxable income (full absorption including reimbursement of tax deficits). The
jointly taxed companies are included in the Danish tax on account scheme. Additions, deductions and allowances are recognised
under Financial income or Financial expenses.

Goodwill impairment includes impairment losses arising from impairment tests as well as impairment of goodwill in connection with
divestments and classification of disposal groups as held for sale.

Amortisation and impairment of brands and customer contracts includes amortisation of acquired brands and acquired customer
contract portfolios and related customer relationships, impairment losses arising from impairment tests and impairment losses in
connection with divestments and classification of disposal groups as held for sale.

Income tax effect of Goodwill impairment and Amortisation and impairment of brands and customer contracts is presented in a
separate line item in connection with these two line items.

Consolidated statement of cash flows
The statement of cash flows shows the Group's cash flows from operating, 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 royalties.

Cash flow from investing activities comprises payments in connection 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 securities 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 repayment of loans, dividends, proceeds from share issues, cash
flow related to derivatives hedging net investments and dividends to non-controlling shareholders. Furthermore, interest paid and
received is included in cash flow from financing activities as this better reflects the distinction between operating and financing
activities following the acquisition of ISS World Services A/S (the parent of ISS Global A/S) by ISS A/S.

Cash flows relating to assets held under finance leases are recognised 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 translated using average exchange rates unless these deviate
significantly from the exchange rate at the transaction date.

Consolidated 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. Goodwill is not amortised.

The carrying amount of goodwill is allocated to the Group's cash-generating units at the acquisition date and tested at least annually

as part of the annual impairment test for non-current assets. Identification of cash-generating units is based on the management
structure and internal financial control, i.e. generally equal to country level,

1204044EogSN59710

 

Consolidated financial statements 56

NOTE 1. Significant accounting policies (continued)

Brands Acquisition related brands are recognised at fair value at the acquisition date. Subsequently, acquired brands with indefinite
useful lives are measured at historical cost less any accumulated impairment losses while acquired brands with finite useful lives are
measured at historical cost less accumulated amortisation and any accumulated impairment losses. Amortisation is provided on a
straight-line basis over the expected useful life of the brand, which is usually in the range 2-5 years.

A deferred tax liability is calculated at the local tax rate on the difference between the carrying amount and the tax value. The initial
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 non-current
assets.

Customer contract portfolios and related customer relationships ("Customer contracts") Acquisition related custømer contracts
are recognised at fair value at the acquisition date 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 historically 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 difference between the carrying amount and the tax value. The initial
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
non-current assets.

Software and other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and accumulated impairment losses.

The cost of software developed for internal use includes external costs to consultants and software as well as internal direct and
indirect costs related to the development. 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 based on the cost of the asset and recognised in the income statement on a straight-line basis over the estimated
useful lives of the assets. The estimated useful lives for the current and comparative years are as follows:

Estimated useful life
Software 5-10 years
Other intangible assets 5-10 years

 

 

Amortisation methods and useful lives are reassessed at each reporting date and adjusted if appropriate. When changing the
amortisation period due to a change in the useful life, the effect on the amortisation is recognised prospectively as a change in
accounting estimates.

Property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses.

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

Depreciation is based on the cost of an asset less its residual value. When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of property, plant and equipment. The residual value is determined at
the acquisition date and reassessed at each reporting date. If the residual value exceeds the carrying amount depreciation is
discontinued.

Depreciation of property, plant and equipment is recognised in the income statement on a straight-line basis over the estimated useful
lives of the assets. Assets under finance lease are depreciated over the shorter of the lease term and their useful lives unless it is
reasonably certain that the Group will obtain ownership by the end of the lease term. The estimated useful lives for current and
comparative years are as follows:

Estimated useful life

 

Buildings 5-40 years
Leasehold improvements (the lease term) 5-12 years
Plant and equipment 3-10 years

 

Land is not depreciated.

1204044EogSN59711

 

Consolidated financial statements 57

INOTE 1. Significant accounting policies (continued) ….

Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. 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 property, plant and equipment are measured as the difference between the
selling price less direct sales costs and the 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.

Investment in associates are recognised initially at cost and subsequently accounted for using the equity method. Investments in
associates are measured at the proportionate share of the entities' net asset values calculated in accordance with the Group's
accounting policies minus or plus the proportionate share of unrealised intra-group profits and losses plus the carrying amount of
goodwill. Investments in associates are tested for impairment if indications of impairment exists.

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

Receivables from associates are recognised initially at fair value and subsequently measured at amortised cost, less any impairment
losses.

Acquisition of associates are accounted for using the acquisition method, see description under Business combinations.

Other financial assets comprises mainly deposits and regulatory long-term loans. Other financial assets are initially recognised at cost
and subsequently measured at amortised cost with any resulting adjustment being recognised in the income statement.

Impairment of non-current assets Goodwill and brands with an indefinite useful! life are subject to annual impairment tests, initially
before the end of the acquisition year. Similarly, brands with definite useful life and customer contracts are tested for impairment
annually.

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. If the carrying amount exceeds the recoverable amount an impairment loss is recognised in a separate line in the
income statement. 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.

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
recoverable 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 principle and net realisable value.

Finished goods and work in progress are measured at the lower of cost plus attributable overheads and net realisable value. The cost
of raw materials and supplies includes the purchase price plus costs directly related to the purchase,

Net realisable value is the estimated selling price less costs of completion and selling costs and is determined taking into account
marketability, obsolescence and development in expected sales price.

Receivables are recognised initially at fair value. Subsequent to initial recognition receivables are measured at amortised cost using
the effective interest method, less any impairment losses. An impairment loss is recognised when objective evidence indicates that a
receivable or a portfolio of receivables is impaired. Objective evidence that receivables are impaired can include default or delinguency
by 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 receivable 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.

1204044EogSN59712

 

1204044EogSN59713

Consolidated financial statements 58

NOTE 1" Significant accounting policies (continued)

Impairment losses during the year are recognised under Other operating expenses and reflected in an allowance account against
receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is
reversed through the income statement.

Contract work in progress represents the gross unbilled amount expected to be collected from customers for contract work
performed to date. It is measured at the contract revenue of the work completed (i.e. cost plus profit recognised to date) less progress
billings and recognised losses.

The contract revenue is calculated in proportion to 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 measured 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 on a contract-by-contract basis the realisable value of work performed exceeds progress billings 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 recognised 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.

Other receivables are recognised initially at cost and subsequently at amortised cost. Other receivables comprises various
receivables, e.g. receivable divestment proceeds, outlays for customers, employee receivables and certain contract costs. Capitalised
contract costs are amortised over the term of the contract. Contract costs relate to PPP (Public Private Partnership)/PFI (Private
Finance Initiative) contracts and certain other significant contracts. Costs related to tenders for public offers for PPP/PFI contracts are
generally recognised in the income statement as incurred. However, if the Group is awarded status as preferred bidder, directly
attributable contract costs from that date, if any, are capitalised. If the Group is not awarded the contract, all costs are recognised in
the income statement.

Prepayments comprises various prepaid expenses such as prepayments to suppliers, sign-on fees, rent, leasing and insurance as
well as accrued interest expenses. Prepayments are measured at cost.

Securities that are designated as fair value through profit or loss upon initial recognition are measured at fair value. Attributable
transaction costs are recognised in the income statement as incurred. Changes in fair value are recognised in the income statement.

Equity
Share premium comprises amounts above the nominal share capital paid by shareholders when shares are issued by the Group.

Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of financial
statements of subsidiaries/joint ventures and investments in associates with another functional currency,than DKK as well as from the
translation of non-current balances which are considered part of the investment in subsidiaries/joint ventures, loans and borrowings 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 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.

Dividends are recognised as a liability at the date when they are adopted at the Annual General Meeting (declaration date). Dividends
proposed for the year are shown in a separate reserve under Equity.

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

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

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. Contributions to defined contribution plans are recognised in
the income statement under Staff costs in the periods during which services are rendered by employees. Any contributions
outstanding are recognised in the statement of financial position as Other liabilities.

 

Consolidated financial statements 59

NOTE 1. Significant accounting policies (continued)

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect
of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The
calculation is performed annually by a qualified actuary using the Projected Unit Credit Method. The present value is determined on
the basis of assumptions about the future development in variables such as salary levels, interest rates, inflation and mortality. 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 development in pension assets and liabilities and the realised amounts at the
end of the year are designated actuarial gains or losses and are recognised in other comprehensive income.

lf 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 recognised 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 Financial expenses.

Other long-term employee benefits are recognised based on an actuarial calculation. Actuarial gains and losses are recognised in the
income statement immediately under Staff costs. Interest on long-term employee benefits are recognised under Financial expenses.
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 these
warrants. 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 increase in equity.

The fair value of the warrants granted is measured using the Black-Scholes option pricing model based on the terms and conditions 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
recognised in the income statement, and a corresponding adjustment is 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
statement 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 recagnised 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 in 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 according 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 forward, 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 recognised
in the income statement.

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

When measuring provisions, the costs required to settle the obligation are discounted if this significantly impacts the measurement of
the liability. The entity's average borrowing rate is used as discount rate, The unwind of discount is recognised under Financial
expenses.

1204044EogSN59714

 

1204044EogSN59715

Consolidated financial statements 60

NOTE 1. Significant accounting policies (continued)

Restructuring costs are recognised under Provisions when a detailed, formal restructuring plan is announced to the affected parties on
or before the reporting date. On acquisition of businesses, restructuring provisions in the acquiree are only included in goodwill 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 cøsts. 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 fair value less related transaction costs paid. Subsequently, 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 Financial expenses 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 rewards incident to ownership to the lessee. Other leases are
classified as operating leases. The accounting treatment of assets held under a finance lease and the related obligation is described
under Property, plant and equipment and Financial liabilities, respectively.

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

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 transaction. Liabilities classified as held for sale are those
directly associated with the assets that will be transferred in the transaction. Assets are classified as held for sale when the carrying
amount of the assets is expected to primarily be recovered through a sale within 12 months of the reporting date in accordance with a
formal plan rather than through continuing use.

Immediately before classification as held for sale, the assets or disposal groups are remeasured in accordance with the Group's
accounting policies. Thereafter generally the assets or disposal groups are measured at the lower of their carrying amount and fair
value less costs to sell. Any impairment loss is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis,
except that no loss is allocated to inventories, financial assets, deferred tax assets or employee benefit assets, which continue to be
measured in accordance with the Group's accounting policies. Intangible assets and property, plant and equipment once classified as
held for sale are not amortised or depreciated.

Impairment losses on initial classification as held for sale, and subsequent gains and losses on remeasurement are recognised in the
income statement. Gains and losses are disclosed in the notes.

Non-current assets and disposal groups held for sale 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.

Segment information

The Group's reportable segments have been identified based on the Group's internal management reporting. Operations are generally
managed based on a geographical structure in which countries are grouped into seven regions. The regions have been identified
based on a key principle of grouping countries that share market conditions and cultures. However, countries with newly established
activities managed by the central Corporate Clients organisation are excluded from the geographical segments and combined in a
separate segment called "Other countries",

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 referred to the individual segments. Unallocated items mainly
consist of revenue, costs, assets and liabilities relating to the Group's Corporate functions as well as Financial income, Financial
expenses and Income taxes.

For IFRS 8 purposes, segment profit has been identified as Operating profit (before Goodwill impairment and Amortisation and
impairment 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
individual subsidiary from which the sales transaction originates.

1204044EogSN59716

Consolidated financial statements 61

NOTE 2. Critical accounting estimates and judgemenis

The preparation of the consolidated financial statements of the Group requires management to make judgements, accounting
estimates and assumptions concerning future events that affect the recognition and measurement of the Group's assets and liabilities,
income and expenses.

Estimation uncertainty

The estimates, judgements and assumptions are based on historical experience and various other factors which management
assesses to be reliable, but which by their nature are associated with uncertainty and unpredictability. 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 arising from operating and financing activities. As a result of these risks and uncertainties actual results may deviate from
estimates, both positively and negatively. Specific financial risks for the Group are discussed in the notes.

Estimates and assumptions are reviewed on an ongoing basis. In 2011, the development in the global economy and the volatility in the
financial markets continued to lead to high uncertainty regarding a number of key assumptions about the future, e.g. interest rates,
growth rates, volatility and credit risk. Estimates in the consolidated financial statements for 2011 have been prepared taking this into
consideration, but still ensuring that one-off effects which are not expected to exist in the long term do not affect estimation and
determination of these key factors, including discount rates and expectations of the future.

Management believes that the following are the most significant areas involving assumptions about the future, and other major
sources of estimation uncertainty at the end of the reporting period and therefore have a significant risk of resulting in material
adjustments to the carrying amounts of assets and liabilities within tne next financial year.

Impairment tests 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 generating 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.

Due to the nature of the business, estimates of expected future cash flows must be made which naturally leads to some uncertainty.
The key assumptions used to estimate expected future cash flows are discount rates and growth. Uncertainties reflecting historical
performance and possible variations in the amount or timing of the future cash flows are generally reflected in the discount rates.
Consequently, a country specific risk premium has been added to the discount rates to reflect the specific risk associated with each
cash-generating unit.

During 2011, in general increased volatility in risk free interest rates has been experienced. Furthermore discount rates were
negatively impacted by the increased interest margin following the amendment and extension of the Senior Facilities Agreement as
well as the increase in equity risk premium from 4.5% in 2010 to 5.0% in 2011.

Estimates used to measure recoverable amount and sensitivity analyses are presented in note 15, Impairment tests.

Defined benefit plans 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. When calculating the net present value of the retirement benefit obligation a number
of significant actuarial assumptions are made including discount rates, expected return on plan assets, expected increases in future
wages, salary and retirement benefits. All assumptions are assessed at the reporting date. Changes in these assumptions may
significantly affect the liabilities and pension costs under defined benefit plans. The range and weighted average of these assumptions
are disclosed in note 29, Pensions and similar obligations.

The net present value of expected future cash flows is calculated based on the discount rates used. The discount rates are based on
the market yield of high quality corporate bonds or government bonds with a maturity approximating to the terms of the defined benefit
obligations.

In certain countries, the Group participates in multi-employer pension 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.

Deferred tax assets The recognition of deferred tax assets regarding tax losses carried forward is based on management's
assessment of expected future profitability 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, and uncertainties relating to recognition are described in note 18, Deferred tax.

Receivables Impairment losses recognised are based on management's assessment of the customer's ability to make the required
payments. Following the international financial crisis in general the risk of impairment has increased. This has been taken into
consideration in the assessment of impairment losses at the reporting date and also in the management and control activities during
the year.

Impairment of receivables is described and disclosed in note 35, Financial risk management,

Contract work in progress Management assesses the stage of completion based on a method that measures reliably the work
performed. Depending on the nature of the contract, the methods include an assessment of the proportion that contract costs incurred
for work performed to date will bear to the estimated total contract costs, surveys of work performed or completion of a physical
proportion of the contract work.

 

 

Consolidated financial statements 62

NOTE 2. Critical accounting estimates and judgements (continued)

Assets held for sale mainly comprises disposal groups and is measured at the lower of the carrying amount and fair value less costs
to sell. Consequently, management makes estimates of the fair value (the final sales price) of the disposal group. Depending on the
nature of the disposal group's activity, assets and liabilities, the estimated fair value may be associated with uncertainty and possibly
adjusted subsequently. Management considers intangible assets relating to the dispøsal groups and impairment of these intangibles
both on initial classification as held for sale and subsequently. The estimation uncertainty relating to impairment of intangibles is
described above.

Assets held før sale are disclosed in note 26, Assets held for sale.

Divestments 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.

Provisions and contingencies Management assesses provisions, contingent 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 assessment on external legal assistance and established
precedents.

Provisions are disclosed in note 30, Provisions and contingent liabilities are disclosed in note 33, Contingent liabilities, pledges and
guarantees.

Acquisition of businesses When acquiring businesses the acquisition method is applied. The most significant assets acquired
generally comprise goodwill, brands, customer contracts and trade receivables.

Generally, there are uncertainties related to the identification of assets, liabilities and contingent liabilities as well as to the
measurement 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, management makes estimates of the fair value.

Goodwill is measured as the difference between the consideration transferred and the fair value of the net identifiable assets acquired.
Management makes estimates of the acquired cash-generating units, the cash-generating units that already existed in the Group and
the allocation 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 fair value of identifiable net assets is
specified in note 13, Acquisition and divestment of businesses.

Brands The fair value of the brands acquired in business combinations 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 shorter 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.

The fair value is calculated based on a discounted cash flow model based on management's estimates of expected after-tax royalty
payments (the royalty relief method) and Weighted Average Cost of Capital (WACC) including a risk premium for the assumed risk
inherent in the brand.

Customer contracts The fair value of customer contracts acquired in business combinations is based on an evaluation of the
conditions relating to the acquired customer contract portfolio and related customer relationships in terms of local market conditions,
terms and conditions of the underlying 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. Further, management
considers the Weighted Average Cost of Capital (WACC) and a risk premium for the assumed risk inherent in customer contracts.

Judgement in relation to application of accounting policies
In applying the Group's accounting policies, management makes judgements which may significantly influence the amounts
recognised in the consolidated financial statements.

Gross or net presentation of revenue In some instances ISS will serve as reseller of goods such as cleaning materials, cleaning
equipment etc. or provide staff for canteens selling food etc. In other instances services on an ISS contract will be delivered to the
customer through a subcontractor of ISS. The issue is whether revenue should be presented gross or net, i.e. based on the gross
amount billed to the customer, or based on the net amount retained (the amount billed to the customer less the amount paid to the
supplier). To determine whether revenue should be presented gross or net of costs incurred management considers whether ISS is
acting in the capacity of an agent or a principal.

Other income and expenses, net The use of Other income and expenses, net entails management judgement in the separation from
the normal ordinary operations of the Group. When using Other income and expenses, net it is crucial that these constitute items that
can not be attributed directly to the Group's ordinary operating activities. Management carefully evaluates each item to ensure the
correct distinction between the Group's ordinary operating activities and Other income and expenses, net.

1204044EogSN59717

 

Consolidated financial statements 63

NOTE 2. Critical accounting estimates and judgements (continued)

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.

Assets held for sale Non-current assets and disposal groups are classified 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 disposal groups as well as the
presentation in the statement of financial position.

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 agreement entered into on the acquisition of ownership
interests or voting rights in the entity etc.

1204044EogSN59718

Consolidated financial statements 64

NOTE 3 Segment information

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 cleaning services, support services, property services, catering services, security services and facility management services.

Operations are generally managed based on a geographical structure in which countries are grouped into seven regions. The
regions have been identified based on a key principle of grouping countries that share market conditions and cultures. However,
countries with newly established activities managed by the central Corporate Clients organisation are excluded from the
geographical segments and combined in a separate segment called "Other countries".

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.

 

 

 

 

 

 

 

2011
Other Total
Western Latin North Eastern coun- reportable
DKK million Europe Nordic Asia Pacific America America Europe tries  segments
Income statement ' . . 6 .
Revenue ” ' 39,321. 18,085 6,090 5,525 - ,3,648 3,369 1,641 30 77,709
Depreciation and amortisation ? (862) (240) (65) (52). (38) .(16) (21) 7 (794)
Operating profit before other items 3) ; 2,268 1,268, 486. 358 215 116 107 . (1) | 4,817
Other income and expenses, net : (72) 64 (4) (3) (20) (53) (0) - (88)
Royalty ! (581) (270) (109) (99) (62) - (62) (43) — (0) (1,226)
Operating profit ? ; 1,615 1,062 373 256 133 1 64 (1) 3,503
l ' ”
Goodwill impairment 5 (2009) (23) — - - - - -… … (322)

 

Amortisation and impairment

 

 

 

 

 

of brands and customer contracts ( 76) | 47) (46) (39) (12) (34) (11) - (365).
Statement of financial position | .
Total assets ; 26,275 10,818 3,862 " 3,647 2,022 1,833 1,177 6 49,640 .
Hereof assets classified as held for sale 141 - — … me - - 141
Additions to non-current assets ” 539 222 56 119 | 81 26 190 - 1,062
Total liabilities | 20,308 : 9,025 1,932 2,664 1,599 1,404 | 603 5" 37,540 -
Hereof liabilities classified as held for sale 90 - - - - - 00 - 90

|

 

Transactions between reportable segments are made on market terms.

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.

2) Excluding Goodwill impairment and Amortisation and impairment of brands and customer contracts.

3) Excluding Other income and expenses, net, Royaly, Goodwill impairment and Amortisation and impairment of brands and customer contracts.

4) Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment including acquisitions through business
combinations.

1204044EogSN59719

Consolidated financial statemenis 65

NOTE 3 Segment information (continued)

DKK million

2010

 

Other Total
Western Latin North Eastern coun-  reportable
Europe Nordic Asia Pacific America America Europe  tries  segments

 

Income statement

 

 

 

 

 

 

Revenue ” 39,101 17,301 5,401 5,018 3,070 2,625 1,602 20 74,138
Depreciation and amortisation 2) (374) (250) (78) (47) (31) (15) (21) - (816)
Operating profit before other items ? 2,302 1,237 409 — 339 178 132 113 2 4,712
Other income and expenses, net (212) 136 (7) - - - 0 - (83)
Royalty (616) (268) (64) — (80) (49) (42) (26) (1) (1,146)
Operating profit ? 1,474 1,105 338 259 129 90 87 1 3,483
Goodwill impairment (255) (4) - - - - - - (259)
Amortisation and impairment

of brands and customer contracts (228) (55) (47) (42) (9) (41) (13) - (435)

 

Statement of financial position

Total assets

26,818 10,269 3,637 3,487 1,803 1,662 1,184 10 48,870

 

Hereof assets classified as held for sale 801 23 - - - - - - 824

 

Additions to non-current assets ” 592 222 247 86 64 12 53 - 1,276

 

Total liabilities

20,577 8,930 1,879 2,560 1,521 1,191 610 10 37,278

 

Hereof liabilities classified as held for sale 255 - - - - - - - 255

 

Transactions between reportable segments are made on market terms.

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.

2) Excluding Goodwill impairment and Amortisation and impairment of brands and customer contracts.
3) Excluding Other income and expenses, net, Royalty, Goodwill impairment and Amortisation and impairment of brands and customer contracts,
4) Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment including acquisitions through business

combinations.

Grouping of countries into regions

Western Europe:

Nordic:
Asia:

Pacific:
Latin America:

North America:
Eastern Europe:
Other countries:

1204044EogSN59720

Austria, Belgium & Luxembourg, France, Germany, Greece, Ireland, Israel, italy, the Netherlands, Portugal,
Spain, Switzerland, Turkey and the United Kingdom

Denmark, Finland, Greenland, Iceland, Norway and Sweden

Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, Taiwan and
Thailand

Australia and New Zealand

Argentina, Brazil, Chile, Columbia, Costa Rica, Ecuador, Mexico, Panama, Peru, Puerto Rico, Uruguay and
Venezuela

Canada and the USA

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

Bahrain, Egypt, Nigeria, Pakistan, South Africa, Ukraine and United Arab Emirates

 

Consolidated financial statements 66

NOTE 3 Segment information (continued)

Service types
The Group's revenue derives from the following service types:

 

 

DKK million 2011 2010
Cleaning services i 39,507 ' 38,400
Support services | 6,162. 5,606
Property services : 15,003 14,626
Catering services ; 7,710. 7,059
Security services ; 5,767 - 5,246
Facility management services i ' 3,532 ; 3,164
Total revenue ; 77,681 74,101

Geographical information
Revenue and non-current assets (excluding deferred tax assets) is specified below for each of the Group's significant countries LA

 

 

 

2011 2010

Non-current Non-current
DKK million Revenue assets Revenue assets
United Kingdom "7,835 1,873 : 7,384 1,788
France i 7,560 4,513, 8,084 4,553
Norway ; 5,940. 1,365 ; 5,681 1,469
Australia ; 5,033 2,436 ' 4,583 2,358
Spain ; 4,467 1,575 4,446 1,775
Sweden | 4172 1,605 3,898 1,589
Finland 1" 4,154 2,107" 3,841 2,172
Denmark (country of domicile) i 3,640 1,091 3,714 1,137
Other countries? | 34,880 11,057. 32,470 11,522

|

Total ; 77,681 27,622 74,101 28,363

 

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

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

1204044EogSN59721

Consolidated financial statements 67

INOTE 3 Segment information (continued)

Reconciliations to the income statement

 

 

DKK million 2011 2010

Revenue | '

Revenue for reportable segments : 77,709. 74,138

Elimination of internal revenue i (28) (37)
!

Revenue according to the income statement ! 77,681 74,101

Operating profit . å
3,503 . 3,483

 

 

 

 

 

 

 

 

 

Operating profit for reportable segments
Unallocated corporate costs j (1 3). 26
Unallocated other income and expenses, net : (8): -
! i
Operating profit according to the income statement : . 3,482 ; 3,509
Unallocated: : .
Share of result from associates i, 0 10
Financial income i 151 182
Financial expenses i (2,415) (1,997)
!
Profit before tax and goodwill impairment/amortisation and impairment of brands :
and customer contracts according to the income statement | 1,218 1,704
Reconciliations to the statement of financial position
DKK million 2011 2010
|
j
Total assets i
Total assets for reportable segments ; 49,640 : 48,870
Elimination of internal assets ” | (84,541); (32,311)
Unallocated assets ? | 31,972 : 29,512
Total assets according to the statement of financial position i 47,071 46,071
Additions to non-current assets ? i '
Additions to non-current assets for reportable segments ' 1,062 1,276
Unallocated additions to non-current assets ; 49 20
Total additions to non-current assets according to the statement of financial position : 1,111 1,296
Total liabilities ! … i
Total liabilities for reportable segments : 37,540 : 37,278
Elimination of internal liabilities ” (34,030) (31,653)
Unallocated liabilities ? ; 43,227 39,959
Total liabilities according to the statement of financial position i 46,737 ' 45,584

 

1) Eliminations mainly relate to intra-group balances.

2 Unallocated assets and liabilities mainly relate to the Group's holding companies as they are not included in the reportable segments. The assets and
liabilities comprise internal and external loans and borrowings, cash and cash equivalents and intra-group balances.

I Additions to non-current assets comprise additions to Intangible assets and Property, plant and equipment including acquisitions through business
combinations.

1204044EogSN59722

 

Consolidated financial statements 68

INOTE 4 Revenue

 

 

DKK million 2011 2010

Rendering of services i 73,323 69,974

Sale of goods | 2,625 2,454

Contract work in progress ;. 1,733 1,673
i .

Revenue i 77,681 74,101

 

Both revenue from rendering of services and contract work in progress have been determined based on the stage of completion
method. The amount of revenue recognised from contract work in progress mainly relates to the Group's landscaping and damage
control activities. The work performed is based on specifically negotiated contracts with customers.

NOTES. Staff costs

 

 

 

DKK million 2011 2010
Wages and salaries ; 39,417 37,789
Defined benefit plans ; 159. 137
Defined contribution plans | 1,839 1,791
Social security costs ; 6,179" 5,484
Other employee benefits | 2,224" 2,687
| :
Staff costs i 49,818 : 47,888
Average number of employees ; . 533,451 506,580

 

The Group received government grants in the form of wage subventions, which have been recøgnised in the income statement as a
reduction of staff costs. The grants compensate the Group for staff costs primarily related to social security as well as hiring certain
categories of employees such as trainees, disabled persons, long-term unemployed and employees in certain age groups.

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

The management team of the Group formally consists of the Board of Directors and the Managing Director of ISS Global A/S. As ISS
Global A/S has no significant operating activities of its own, the Group relies on the management team of ISS World Services A/S, the
parent of ISS Global A/S. Consequently, key management personnel of the Group comprises the management team of ISS World
Services A/S, i.e. the Board of Directors, the Executive Group Management Board and Corporate Senior Officers of ISS World
Services A/S.

Remuneration to key management personnel is paid by ISS A/S and is presented below. The Board of Directors and the Managing
Director of ISS Global A/S are not remunerated separately for their directorships in ISS Global A/S and are therefore not shown in the
table on the next page.

1204044EogSN59723

 

Consolidated financial statements 69

NOTE 5 Staff costs (continued)

 

 

 

 

 

 

 

2011 2010

Executive Corporate Executive Corporate

Board of Group Mana- Senior Board of Group Mana- Senior

Directors of gement Board Officers of Directors of gement Board Offticers of

ISS World of ISS World ISS World ISS World of ISS World ISS World

DKK thousand Services A/S Services A/S Services A/S Services A/S Services A/S Services A/S
Salaries and other remuneration 17 8,999 . 13,893 48,723 2,173 15,003 43,504
Bonus 2,850 17,086 - 5,450 15,065
Severance payments ” ; - 15,607, 7,476 - 16,204 3,152
Share-based payments ?” [oe |. 233 618: - 233 809
Total remuneration ' 3,999 "… 32,583 73,903 2,173 36,890 62,530

2011 2010

Jakob Jørgen

Jeff Henrik Stausho!fm Jeff Jakob Lindegaard

DKK thousand Gravenhorst Andersen (former CFO)  Gravenhorst Stausholm (former CEO)
Salaries and other remuneration ? 1. 7,858 . 533  "… 5,502 7,263 5,662 2,078
Bonus : 2,850 | …… … 2,750 2,700 -
Severance payments ” . - - 15,607 . - - 16,204
Share-based payments 2) . -— 233 - -" 233 - -

| . :

Total! remuneration ' ' 10,941 533 21,109 : 10,246 8,362 18,282

 

The Board of Directors of ISS World Services A/S received remuneration for duties performed in ISS Global 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 6, Share-based payments. However, certain members have invested in a mix of shares and warrants as
part of the Directors Participation Programme (DPP) described in note 37, Related parties.

The members of the Executive Group Management Board of ISS World Services A/S and Corporate Senior Officers of ISS World
Services A/S received remuneration for duties performed in ISS Global A/S and other companies within the ISS Group. The
remuneration consists of a combination of a fixed salary, standard benefits in accordance with market standards and, for most of
these, a performance-based bonus of up to 60% of their fixed salary. The Executive Group Management Board and certain Corporate
Senior Officers participate in the Management Participation Programme (MPP) including the warrant programme described in note 6,
Share-based payments.

Corporate Senior Officers comprises members of the Group Management Board of ISS World Services A/S, other than members of
the Executive Group Management Board of ISS World Services A/S. Members of the Group Management Board have authority and
responsibility for planning, implementing and controlling the Group's activities and are together with the Board of Directors of ISS
World Services A/S considered as the Group's key management personnel.

The employment contracts for the Executive Group Management Board of ISS World Services A/S and Corporate Senior Officers of
ISS World Services A/S may be terminated at 6-24 months' notice. One employment contract includes a severance payment of two
years salary. No other members are entitled to severance payments. The employment contracts contain no special termination rights.

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

1) Severance payments of DKK 23 million (2010: DKK 19 million) related to senior management changes at Corporate and DKK 16 million (2010: 16
million) were included in Other income and expenses, net in ISS World Services A/S and DKK 7 million (2010: 3 million) were included in Other income
and expenses, net in the consolidated financial statements of ISS Global A/S.

2) Included in Other income and expenses, net in ISS World Services A/S.

3) Henrik Andersen replaced Jakob Stausholm as Group CFO with effect from 1 December 2011. Consequently, salaries and other remuneration for
2011 reflect their respective remuneration when holding the position as Group CFO.,

1204044EogSN59724

Consolidated financial statements 70

'NOTE 6 Share-based payments

Management Participation Programme (MPP)

Funds advised by EQT Partners and Goldman Sachs Capital Partners (the "Principal Shareholders”) have established a Management
Participation Programme (MPP), in which the Executive Group Management Board ” and a number of senior officers ? of the Group
have invested. The programme is structured as a combination of direct and indirect investments in a mix of shares and warrants of FS
Invest S.å r.l ("FS Invest"), ISS Global A/S's ultimate parent company as described in note 37, Related parties. 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
Board 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 37, Related
parties. The warrants granted to the Executive Group Management Board 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 (MPP)

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 estimated 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 is expensed in the
income statement over the vesting period from July 2006 to June 2014. In 2011, DKK 1 million was recognised under Other income
and expenses, net in ISS World Services A/S in respect of warrants granted (2010: DKK 2 million).

The warrants are subject to exercise restrictions depending on the share price at the time of exercise. At a share price of 6,114 or

more at the time of exercise, 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 2011 and movements during 2010 and 2011 were:

Executive Group
Management Board ” Corporate Officers & Total

 

Series A
Number of warrants SeriesA Series B Total Series A Series B Total Series A Series B and B

 

Outstanding at 1 January 2010 57,888 57,888 29,852  241,664 271,516 29,852  299,552  329,404
Warrants settled during 2010 - - - (7,577) (44,195) (51,772) (7,577) (44,195) (51,772)

'

 

Outstanding at 31 December 2010 ': - 57,888 57,888 22,275 197,469 219,744 22,275. 255,357  277,632
Warrants settled during 2011 ! - - - —… - 700, 7 - -

 

1

Outstanding at 31 December 2011 | - 57,888 57,888 22,275 197,469  219,744 22,275  255,357  277,632

 

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

1) The Executive Group Management Board comprise the Executive Group Management Board of ISS World Services A/S.

2) Senior officers of the Group comprises Corporate Senior Officers of ISS World Services A/S (members of the Group Management Board of ISS World
Services A/S other than members of the Executive Group Management Board) and other Corporate Officers of ISS World Services A/S as well as
certain members of Country Management of certain countries.

3) Corporate Officers of the Group comprises Corporate Senior Officers of ISS World Services A/S (members of the Group Management Board of ISS
World Services A/S other than members of the Executive Group Management Board) and other Corporate Officers of ISS World Services A/S.

1204044EogSN59725 |.

Consolidated financial statements 71

NOTE 7. Fees to auditors elected at the Annual General Medting

 

 

DKK million 2011 2010

KPMG i

Audit fees ' 37 38

Other assurance services i 10 3

Tax and VAT advisory services i 10 10

Other services ; 3 3
|

Total KPMG ; 60; 54

 

Audit fees comprised audit of the consolidated and local financial statements.

Other assurance services in 2011 comprised mainly work related to the exit process as well as half-year review. The costs related to
the exit process were included in Other expenses.

Tax and VAT advisory services comprised general tax and VAT consultancy and assistance.

Other services comprised among other things work related to acquisitions and divestments such as financial and tax due diligence.

INOTE 8. Other income and expenses, net

 

 

 

 

 

DKK million 2011 2010
| :
Gain on divestments i 93 254
Gain on sale of investment in associates ; 6. -
Other 10. 10. 1
Other income i 109 255
v
Costs related to exit process ; (9) -
Build-up of IFS capabilities in North America ! (52) -
Revised estimate for social security contributions prior years (47) -
Restructuring projects | (37) (0)
Redundancy and severance payments relating to senior management changes . - (7) -
Loss on divestments | (24) (208)
Accounting irregularities in Norway in prior years i -—. (113)
Acquisition and integration costs ; . (7) (6)
Other ' (22) (11)
Other expenses ' ' (205) (338)
Other income and expenses, net ; (96) (83)

 

Gain on divestments in 2011 mainly related to the completion of the divestment of the coffee vending business in Norway and
Denmark and the sale of the non-core industry service activities in Finland. In 2010, the gain mainly related to completion of the
divestment of the non-strategic washroom activities in Denmark, Norway and Sweden.

Gain on sale of investment in associates in 2011 related to the associate ISS Industriservice AB, which was classified as held for
sale at 31 December 2010, and subsequently sold in the first quarter of 2011.

Costs related to exit process comprised costs for external advisors.

Build-up of IFS capabilities in North America in 2011 amounted to DKK 52 million and comprised costs incurred in relation to the
strategic build-up of the IFS platform to support and deliver on major contracts in the USA.

1204044EogSN59726

 

Consolidated financial statements 72

NOTE'8" Oiher income and expenses (continued)

Revised estimate for social security contributions prior years amounted to DKK 47 million and related to the period 2006 to 2010.
The amount recognised is subject to uncertainty, but reflects management's best estimate based on currently available information.

Restructuring projects in 2011 amounted to DKK 37 million and related to a number of projects in Brazil, Finland, Norway, the
Netherlands and at Corporate covering consaolidation of office locations and other efficiency improvements as well as changes in the
organisational setup. Generally, restructuring projects include primarily redundancy payments, termination of leaseholds and
relocation costs.

Redundancy and severance payments relating to senior management changes were related to changes in the Group
Management Board, see note 5, Staff costs for further details.

Loss on divestments in 2011 primarily related to completion of the sale of the industrial services business in Belgium, which was
classified as held for sale at 31 December 2010. In 2010, the loss primarily related to completion of the sale of the waste
management and security activities in France and the non-core building maintenance activities in Spain.

Accounting irregularities in Norway in prior years related to one of ISS Norway's subsidiaries and took place in the period from

2005-2010. The impact from accounting irregularities carried out in prior years amounted to DKK 113 million stemming from a
combination of overstatement of revenue and understatement of costs.

NOTE 9 Financial income and financial expenses

 

 

 

 

 

 

DKK million 2011 2010
Interest income on cash and cash equivalents etc. i 125: 93
Interest income from companies within the ISS Group i 4. -
Amortisation of gain from settlement of interest rate swaps i 1 15
Foreign exchange gains Éo. 25: 74
Financial income ' 155 182
i: .
Hereof financial income on financial assets measured at amortised cost i 125: 93
Interest expenses on loans and borrowings etc. ; |. (1,720) (1,491)
Amortisation of financing fees | (199). (103)
Interest expenses to companies within the ISS Group i (178) (116)
Net interest on defined benefit obligations ' (29) (35)
Net change in fair value of cash flow hedges transferred from equity I (97) (190)
Fair value adjustment of currency swaps, net i . (36) (4)
Foreign exchange losses ; (160) (45)
Loss related to partial redemption of EMTNs EN om (13)
Financial expenses | (2,419). (1,997)
Hereof financial expenses on financial liabilities measured at amortised cost ; (2,090) (1,702)

 

Amortisation of financing fees Effective 24 June 2011, ISS extended certain tranches under its Senior Facilities Agreement and
implemented other amendments intended to increase the operational flexibility. Please refer to note 28, Loans and borrowings for
further details. As a result of these changes, unamortised financing fees in the amount of DKK 79 million relating to the previous
tranches were expensed.

Loss related to the partial redemption of EMTNs In January 2010, a partial redemption of the EMTNs due 2010 was carried out
through the completion of a tender offer for DKK 1,116 million (EUR 150 million). The redemption resulted in a loss of DKK 13 million
primarily due to the purchase price being above nominal value.

1204044EogSN59727

 

 

Consolidated financial statements 73

NOTE 10. Income taxes

 

 

 

 

 

DKK million 2011 2010
i
Current tax regarding Profit before impairment/amortisation of intangibles ” | 586 : 698
Deferred tax regarding Profit before impairment/amortisation of intangibles ” j 144, (25)
Tax on Profit before impairment/amortisation of intangibles ” 730 673
Adjustments relating to prior years, net . "8: (14)
Income taxes : 738. 659
Tax effect of impairment/amortisation of intangibles ” ! 4117) (116)
Total tax recognised in the income statement i" 621 : 543

 

Income tax recognised in other comprehensive income

 

 

 

 

 

 

 

 

2011 2010
Before Net of Before Net of
DKK million tax Tax tax tax Tax tax
Foreign exchange adjustment of subsidiaries i . HE
and non-controlling interests (46) ”- (46). 613 - 613
Fair value adjustment of hedges, net f (11) 3 (8): (120) 30 (90)
Fair value adjustment of hedges, net, ÆRE 0 '
transferred to Financial expenses 97 (24) 73 190 (48) 142
Actuarial gains/(losses) i (91) 212. (70) (129) 36 (93)
Impact from asset ceiling regarding pensions ; 8 me 8: (20) - (20)
Total recognised in other comprehensive income ; (43) . 6. ' (43). 534 18 552
Computation of effective tax rate
2011 2010
Statutory income tax rate in Denmark ; 25.0 % 25.0 %
Foreign tax rate differential, net ; 1.5 % (1.9)%
Total 10 26,5% —— 23,1%
Non-tax deductible expenses less non-taxable income . 0.8 % 1.3 %
Adjustments relating to prior years, net id 0.7% (0.8)%
Change in valuation of net tax assets 2) .…—. 9.3 % 3.7 %
Effect of changes in tax rates ; (0.5)% (0.1)%
Other taxes? i 10.0 % 6.9 %
Limitation to interest deduction in Denmark ” i 7 13,8% 4,5 %
Effective tax rate (excluding effect from impairment/amortisation of intangibles) D ; 60.6 %: 38.6 %

 

1 Intangibles comprise the value of goodwill, brands and customer contracts.

2 Change in valuation of net tax assets in 2011 is mainly impacted by the valuation allowance of tax assets in France of DKK 100 million corresponding to

7.4 percentage points.

I Other taxes mainly comprise withholding tax and the French Cortisation sur La Valeur Ajoutee des Entreprises (CVAE).
1) At 31 December 2011 the level is impacted by refinancing costs related to the amendment and extension of the Group's Senior Facilities Agreement.

1204044EogSN59728

Consolidated financial statements 74

NOTE 11" Goodwill impairment

 

 

DKK million 2011 2010

Impairment losses derived from impairment tests ; 160 250

Impairment losses derived from divestment of businesses i 162 9
N .

Goodwill impairment io 322" 259

 

Impairment losses derived from impairment tests of DKK 160 million in 2011 related to ISS Spain and was mainly attributable to
the difficult macroeconomic conditions combined with an increase in the discount rate applied following the amendment and extension
of the Senior Facilities Agreement. For further description see note 15, Impairment tests. In 2010, impairment losses amounted to
DKK 250 million and related to ISS Greece,

Impairment losses derived from divestment of businesses of DKK 162 million in 2011 primarily related to the remeasurement of
net assets of non-core activities in Western Europe, which were classified as held for sale at 31 December 2011, resulting in a loss of
DKK 79 million. The remaining loss related to the remeasurement of the subsequently divested damage control business, VATRO in
Germany, resulting in a loss of DKK 61 million and three divested activities in Norway; Elektro Kristiansand, Elektro Oslo and
Ventilasjon, resulting in a loss of DKK 22 million, In 2010, impairment losses of DKK 9 million related to the divestment of property
services in Ireland of DKK 5 million and the divestment of the non-strategic contact centre activities in Denmark of DKK 4 million.

NOTE 12. Changes in working capital

 

 

DKK million 2011 2010
Changes in inventories | (43) (7)
Changes in receivables i (1,391) (476)
Changes in payables ” kb 1,126 420
Changes in working capital | (308) (63)

 

1204044rogSN59729

 

Consolidated financial statements 75

NOTE 13. Acaquisition and divestment of businesses

Acaquisition of businesses
The Group uses acquisitions as a tool in the continued development of the business platform. Acquisitions are used selectively to
improve competitiveness, build critical mass and increase service capabilities and capacity where and when appropriate.

When acquiring businesses the Group seeks to generate value by restructuring and refining the acquired business by applying The
ISS Way strategy. The main impact from acquisitions derives from synergies, the value of human resources and the creation of
platforms for growth. Consequently, goodwill recognised on acauisition is attributable mainly to; i) assembled workforce, ii) technical
expertise and technological know how, iii) training expertise, training and recruitment programmes and iv) platform for growth.

Acquisitions occurring on or after 1 January 2010 are accounted for in accordance with IFRS 3 (revised 2008), whereas acquisitions
occurring before 1 January 2010 are accounted for in accordance with the previous IFRS 3. Consequently, for the latter adjustments
to contingent consideration and transaction costs continue to be recognised in goodwill as described in note 1, Significant accounting
policies.

The Group made no acquisitions during 2011 (one during 2010). Acquisitions had the following effect on the carrying amount of the
Group's assets and liabilities at the reporting date:

 

 

 

 

 

 

2011 2010
Adjustments SDB  Adjustments
to prior years" Total Cisco to prior years' Total
DKK million acquisitions acquisitions Ltd. acquisitions acquisitions
Customer contracts i ' —— - 48 - 48
Other non-current assets | — - 24 (3) 21
Trade receivables i om - 70 (19) 51
Other current assets ; ' (29) (29) 83 (8) 75
Provisions i . - — - 2 2
Pensions, deferred tax liabilities and 0 ' '
non-controlling interests ; 0 0. (14) 9 (5)
Non-current loans and borrowings ; - - (1) - (1)
Other current liabilities i . . 44 44. (112) 7 (105)
I ;
Total identifiable net assets i 15 15) 98 (12) 86
Goodwill | 5 005 118 112 230
Acquisition costs, net of tax | - ' i - (1) (1)
Consideration transferred ; 20 20: 216 99 315
t ' .
Cash and cash equivalents in acquired businesses j . - KH - (49) - (49)
Cash consideration transferred ' 20 20 167 99 266
Contingent and deferred consideration | 69 . 69 (8) 206 198
Acquisition costs paid, net of tax : …— -. 5 1 6
Total payments regarding acquisition of businesses i 89 88. 164 306 470

 

Adjustments to prior years' acquisitions In 2011, the addition to goodwill was mainly due to a revised estimate relating to earn-outs
for the acquisition of Loghis Logistica in Brazil of DKK 18 million and WHF in Australia of DKK 15 million as well as a number of minor
adjustments related to various acquisitions. This was offset by a reduction in goodwill due to revised estimate relating to earn-outs for
the acquisition of Inbuilt Engineering in Singapore of DKK 17 million and a revised opening balance estimate for SDB Cisco in India of
DKK 16 million.

In 2010, adjustments to prior years' acquisitions comprised various minor adjustments to the identifiable net assets of a number of
acquisitions. The goodwill addition was mainly related to a revised estimate of the purchase obligation for the remaining 10% of ISS
Turkey, DKK 148 million, as well as the final settlement of the purchase obligation related to ISS Estonia with the acquisition of the
remaining 49%, DKK 30 million. The amounts recognised in goodwill reflect the excess over the originally estimated purchase
obligations already recognised in the statement of financial position in prior years. On the other hand, the total addition to goodwill was
reduced by a revised estimate for contingent consideration (earn-out) related to Inbuilt Engineering in Singapore, DKK 49 million, as
well as a number of minor adjustments related to various acquisitions.

1204044EogSN59730

Consolidated financial statements 76

Divestment of businesses

The Group made 12 divestments during 2011 (9 during 2010). The total sales price amounted to DKK 942 million (DKK 412 million in
2010). The total annual revenue of the divested businesses (approximate figures extracted from unaudited financial information) is
estimated at DKK 1,997 million (DKK 1,548 million in 2010) based on expectations at the time of divestment.

The divestments had the following impact on the carrying amount of the Group's assets and liabilities at the reporting date:

 

 

 

 

 

 

 

 

DKK million 2011 2010
Goodwill ' 365; 15
Customer contracts | 32: 53
Other non-current assets | 117: 275
Trade receivables | 398 ' 218
Other current assets ' 130" 89
Provisions i (2y (78)
Pensions, deferred tax liabilities and non-controlling interests i |. (32). (16)
Non-current loans and borrowings ! - (3)
Current loans and borrowings : (13) (2)
Other current liabilities | (226) (262)
Total identifiable net assets 769 289
Gain/(loss) on divestment of businesses, net i ” 69 69
Divestment costs, net of tax | 104 54
Consideration received | 942: 412
Cash and cash equivalents in divested businesses | (88) (3)
f
Cash consideration received ; 854: 409
Contingent and deferred consideration i 2" 217
Divestment costs paid, net of tax ; (95) (35)
Net proceeds regarding divestment of businesses ; 761 ' 591
The 12 divestments completed by the Group before 31 December 2011 are listed below:
Annual
Excluded from revenue ”

the income Percentage (DKK Number of
Company/activity Country Service type statement interest million) employees ”
ISS Batiservices France Property January 100%: 6 T
mo.hotel Germany Facility Management March Activities! 28 30
Elektro Kristiansand Norway Property May — Activities | 51. 52:
Elektro Oslo Norway Property June Activities! 33 37
Ventilasjon Norway Property June Activities! 64 22
ISS Industrial Services Belgium Property June 100%; 269: 418
VATRO Germany Property July 86%: 1,133 720
ISS Industrial Services Finland Property October 100%: 95 109
Event Catering Singapore Catering November Activities. 42 . 85
Domestic Care Netherlands Cleaning December 50%; 73). ..260
ISS Property Development Sweden Property January 2012 Activities! 20 23
House of Coffee Denmark/Norway Catering January 2012 100% | . 185 93
Total i 1,997 1,856:

 

1 Approximate figures based on information available at the time of divestment extracted from unaudited financial information.

1204044FogSN59731

Consolidated financial statements 77

'NOTE 13. 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 2011 2010

 

Pro forma revenue

 

 

 

 

 

 

Revenue recognised in the income statement : 77,681 74,101

Acquisitions i . - 219
; ' :

Revenue adjusted for acguisitions … 77,681 : 74,320

Divestments i (1,113) (758)
DT

Pro forma revenue . 76,568 : 73,562

DKK million 2011 2010

Pro forma operating profit before other items i . .

Operating profit before other items recognised in the income statement ; 4,804 4,738

Acquisitions i - 21

Operating profit before other items adjusted for acquisitions i 4,804 . 4,759

Divestments 1. (66). (59)
| '

Pro forma operating profit before other items |. 4,738 4,700

 

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 available. 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 før or prediction of any annualised calculation.

Acquisitions and divestments subsequent to 31 December 2011

Divestments made by the Group in the period from 1 January to 29 February 2012 are listed below. No acquisitions were completed in

 

 

the period.
Excluded from Annual
theincome — Percentage revenue ” — Number of
Company/activity Country Service type statement interest (DKK million) employees ”
ISS Proko Infra Oy Finland Facility management March 64% 9 14
Total 9 14

 

In accordance with usual Group procedures, divestment balances are prepared during the first months following the divestment.
Consequently, the final divestment balances are not available for divestments completed from 1 January to 29 February 2012.

1 Approximate figures based on information available at the time of divestment extracted from unaudited financial information.

1204044EogSN59732

Consolidated financial statements 78

NOTE 14. Intangible assets

 

 

 

 

 

Software
and other
Customer — intangible
DKK million Goodwill Brands contracts assets Total
Cost at 1 January 2011 . 24,165 11 . 4,945 928 30,049
Foreign exchange adjustments BE (73) 0 (16) (7) . (96)
Additions 00) BB .00e - 169 174
Disposals through divestment of businesses . (71) - (15) - (86)
Disposals NEN (22) (8) i —… (41) (71)
Reclassification from Property, plant and equipment i so. - 0 22 22
Reclassification to Assets classified as held for sale o (104) | (17) (5) (126),
; HE . i . HEER i
Cost at 31 December 2011 j " 23,900 3 4,897 1,066 .- 29,866
Amortisation and impairment losses at 1 January 2011 ; (1,069) . (6) (2,374) (576) i (4,025);
Foreign exchange adjustments i 3 (0) …—— (4) 2 1
Amortisation HE - (5) (354) (127) (486)
Impairment losses ” i (322) - — - — (322)
Disposals through divestment of businesses ' 61 me 7 - 68.
Disposals 5 22 8 - : 29 59.
Reclassification from Property, plant and equipment ; -, - . - (4) : (4)
Reclassification to Assets classified as held for sale ; . 79 - 15 "3 ' 97"
i
Amortisation and impairment losses at 31 December 2011 ; (1,226) (3)  " (2,710) (673) (4,612)
Carrying amount at 31 December 2011 ; 22,674 . 0 2,187 393 25,254

 

1) For a breakdown of impairment losses related to goodwill see note 11, Goodwill impairment.

1204044EogSN59733

Consolidated financial statements 79

NOTE 14 Intangible assets (continued)

 

 

 

 

 

Software
and other
Customer — intangible
DKK million Goodwill Brands  contracts assets Total
Cost at 1 January 2010 23,079 11 4,619 756 28,465
Foreign exchange adjustments 1,220 0 326 31 1,577
Additions 230 - - 131 361
Acquisitions through business combinations - - 48 - 48
Disposals through divestment of businesses - - (0) (6) (6)
Disposals (9) - - (19) (28)
Reclassification from Property, plant and equipment - - - 47 47
Reclassification to Assets classified as held for sale (355) - (48) (12) (415)
Cost at 31 December 2010 24,165 11 4,945 928 30,049
Amortisation and impairment losses at 1 January 2010 (817) (4) (1,831) (455) (3,107)
Foreign exchange adjustments (2) (1) (139) (18) (160)
Amortisation - (1) (428) (113) (542)
Impairment losses ” (259) - - - (259)
Disposals through divestment of businesses - - 0 2 2
Disposals 9 - - 14 23
Reclassification from Property, plant and equipment - - - (14) (14)
Reclassification to Assets classified as held for sale - - 24 8 32
Amortisation and impairment losses at 31 December 2010 (1,069) (6) (2,374) (576) (4,025)
Carrying amount at 31 December 2010 23,096 5 2,571 352 26,024

 

1) For a breakdown of impairment losses related to goodwill see note 11, Goodwill impairment.

1204044EogSN59734

 

 

Consolidated financial statements 80

NOTE 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 relate to several hundred acquisitions carried out under varying circumstances and at different stages of
macro-economic cycles. The intangibles are distributed between most of the countries in which the Group operates. The acquired
companies, to which the intangibles relate, 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 (CGUs) to which the carrying
amount of intangibles can be allocated and monitored with any reasonable certainty. This level of alløcation 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 organisationaliy 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
assumptions as described below. The key assumptions are revenue growth and discount rates.

Value-in-use cash flow projections are based on financial budgets approved by management covering the following financial year. The
assumptions applied in the short to medium term are based on management's expectations regarding the operational development
and growth. The terminal growth rates do not exceed the expected long-term average growth rate including inflation for the business in
which the CGUs operate.

The country specific discount rates, which are calculated net of tax, are generally based on 10 year government bonds of the individual
countries, and a target ratio of 60/40 between the market value of debt and enterprise value is used in the calculation. As a company
based in Europe, the Group assumes the long-term market equity risk premium to be 5.0%. Uncertainties reflecting historical
performance and possible variations in the amount or timing of the future cash flows are generally reflected in the discount rates.
Consequently, a country specific risk premium is added to the discount rates to reflect the specific risk associated with each CGU.

During 2011, the methodology for determining discount rates in the PIIGS countries 2 was changed following the continued increased
volatility and uncertainty related to interest rates on government bonds in these countries. Consequently, the country specific discount
rates for the PIIGS countries are determined based on a 20 year German government bond with the addition of a 10 year Credit
Default Swap weighted with the exposure to the public sector in the individual countries.

In 2011, discount rates were negatively impacted by the increased interest margins following the amendment and extension of the
Senior Facilities Agreement as explained in note 28, Loans and borrowings. Additionally, based on recent market development the
equity risk premium was increased from 4.5% in 2010 to 5.0% in 2011.

Impairment test results 2011

At 30 June 2011, the impairment test for ISS Spain resulted in recognition of an impairment loss of DKK 160 million mainly due to
difficult macroeconomic conditions combined with an increase in the discount rate applied following the amendment and extension of
the Senior Facilities Agreement. As per 31 December 2011, the assumptions in the business plan were evaluated and updated again
as part of the annual impairment testing. No additional impairment losses were identified.

1) Intangibles cover the value of goodwill, brands and customer contracts.
2) PIIGS countries include Portugal, Ireland, Italy, Greece and Spain.

1204044EogSN59735 |

Consolidated financial statements 81

NOTE 15 Impairment tests (continued)

Carrying amounts and key assumptions

The carrying amount of intangibles and the key assumptions 1 used in the impairment testing as per 31 December 2011 are
presented below for each CGU representing more than 5% of the carrying amount of intangibles or where impairment losses have
been incurred during the year.

 

 

 

 

 

 

 

Carrying amount Applied key assumptions

Customer Total in- Long-term Discount rate, Discount rate,

DKK million Goodwill Brands — contracts — tangibles? growth net of tax pre tax
i ' . '
France ? | 4,062 -—, 127 4,189 2,5% — 9.0% 14.6%
Australia bp. 2,005 . — 244. 2,249 | 73,0% —. 10.5% — — … 14,1%
Finland ; . 1,871 ' - 119 ” 1,990 00. 20% " " 8.7%. 11.1%
Netherlands ; 1,658 - 28 1,686 2.0% 9.2% 11.6%
United Kingdom i 1,472 — 179 "7 1,651. 2.5% ' 8.5% 10.7%:
Spain 0 1,220 — 212 1,432 2.5% 10.4% 141%
USA 7 1,012 - 247 1,259 . 3.0% 8.4% 11.6%:
Switzerland i 1,142. - . 31 1,173 2.0% 6.9% 8.4%'
Normway : 1,050 - 110 1,160 — 2.0% 9.6% 12.9%
Other countries : 7,182 |. 0 890 8,072 - ' - i
Total carrying amount at ;
31 December 2011 ; 22,674 . 0. 2,187. 24,861 :
Carrying amount Applied key assumptions

Customer Total in- Long-term Discount rate, Discount rate,
DKK million Goodwill Brands contracts — tangibles 2) growth net of tax pre tax
France ? 4,073 - 147 4,220 3.0% 8.5% 13.5%
Australia 1,940 - 273 2,213 3.0% 10.7% 14.4%
Finland 1,893 - 137 2,030 3.0% 8.8% 11.1%
Netherlands 1,766 - 35 1,801 3.0% 9.3% 11.6%
Spain 1,383 - 249 1,632 3.0% 11.0% 14.8%
United Kingdom 1,432 - 196 1,628 3.0% 9.0% 11.4%
Greece ” 2 - 52 54 3.0% 11.1% 13.6%
Other countries 10,607 5 1,482 12,094 - - -
Total carrying amount at

31 December 2010 23,096 5 2,571 25,672

 

1) The key assumptions applied in the impairment tests are used for accounting purposes and should not be considered a forward-looking statement
within the meaning of the US Private Securities Litigation Act of 1995 and similar laws in other couniries regarding expectations to the future
development.

2) Intangibles cover the value of goodwill, brands and customer contracts.

3) The growth is expected to be in the range 1.1% to 5.0% over the next seven years. In 2010, growth was expected to be in the range 1,2% to 3.5% over
the next five years.

4) The applied long-term discount rate, net of tax of 11.1% was calculated based on a ten year average yield on a 10 year Greek government bond while
the short to medium term discount rate applied was 17.8% and was calculated based on the current interest yield on a 10 year Greek government
bond.

1204044EogSN59736

Consolidated financial statements 82

NOTE 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 eguals its carrying amount.

 

 

 

 

 

 

 

2011
Growth Discount rate, net of tax
Applied
expected Allowed Allowed
long-term rate decrease Applied rate increase
i SEN i
France | . . 2.5% 0.4% | 9.0% 0.3%'
Australia , 3.0% >3.0% : 10.5% |. >3.0%:
Finland : .2.0% " >2.0% 8.7% . >3,0%:
Netherlands ! 2.0% 1.4% ' 9.2% 0.9%'
United Kingdom i 2.5% >2.5% 8.5% >3.0%'
Spain ; "2.5% . 0.9% 104% 0.6%
USA | 3.0% >3.0% 8.4% 2.5%
Switzerland ' | 2.0% >2.0% 6.9% . >3.0%.
Norway ; 2.0% .>2.0% ' 9.6% >3.0%
2010
Growth Discount rate, net of tax
Applied
expected Allowed Allowed
long-term rate decrease Applied rate increase
France 3.0% 0.4% 8.5% 0.3%
Australia 3.0% 2.2% 10.7% 2.3%
Finland 3.0% >3.0% 8.8% >3.0%
Netherlands 3.0% >3.0% 9.3% >3.0%
Spain 3.0% 0.1% 11.0% 0.1%
United Kingdom 3.0% >3.0% 9.0% >3.0%
Greece 3.0% 0.1% 11.1% 0.1%

 

 

Consolidated financial statements 83

NOTE 16 Property, plant and equipment

 

 

 

 

 

 

 

2011 2010
Landand Plant and Land and Plant and

DKK million buildings equipment Total buildings equipment Total
Cost at 1 January | 181" 6,457 6,638 161 6,134 6,295
Foreign exchange adjustments | (3) (25) . (28) 7 342 349
Additions : 5 932 937 9 852 861
Acquisitions through business combinations ; om, - - 8 14 22
Disposals through divestment of businesses HEN - (96) …—— (96) - (24) (24)
Disposals : (16) (593) (609) (4) (607) (611)
Reclassifications between categories …… (3) 3 7 - - -
Reclassification to Intangible assets ; ' - (22) (22). - (47) (47)
Reclassification to Assets classified as held for sale : (12) (103) (115) 0 (207) (207)
Cost at 31 December fl 152 . 6,553 6,705 - 181 6,457 6,638
Depreciation and impairment losses at 1 January : ' (60) (4,533) (4,593) (56) (4,247) (4,303)
Foreign exchange adjustments ! 1 3. 4 (2) (240) (242)
Depreciation ; (4) (710) ; (714) (4) (722) (726)
Acquisitions through business combinations : - - os - (3) (3)
Disposals through divestment of businesses | - 72 72. 0 21 21
Disposals i 7 500 507; 2 511 513
Reclassification to Intangible assets ; - 4 4: - 14 14
Reclassification to Assets classified as held forsale - 4 77 81. - 133 133
Depreciation and impairment at 31 December 7, (52) (4,587) (4,639). (60) (4,533) (4,593)
Carrying amount at 31 December i KE |. 100 — 1,966, 2,066 : 121 1,924 2,045
Hereof carrying amount at 31 December ; .

of assets held under finance leases j - 157 157 - 194 194

 

Security
A minor part of the Group's Land and buildings and Plant and equipment in certain countries has been provided as security for the
borrowings under the Senior Facilities Agreement, see note 33, Contingent liabilities, pledges and guarantees.

Leased plant and equipment

The Group leases cleaning and office equipment under a number of finance lease agreements. Some leases provide the Group with
the option to purchase the equipment at a beneficial price at the end of the lease term. The leased equipment secures lease
obligations.

In 2011, additions included assets held under finance leases of DKK 97 million (2010: DKK 101 million).

1204044EogSN59738

NOTE 17 Investment in associates:

Consolidated financial statements 84

 

 

 

 

 

 

 

 

 

 

 

 

 

DKK million 2011 2010
| i
Cost at 1 January i 3 : 12
Foreign exchange adjustments ; 0 1
Disposals . (3): (0)
Reclassification to Assets classified as held for sale ! "| (10)
ip . z
Cost at 31 December . 0 3
Revaluation at 1 January ; 6" 9
Foreign exchange adjustments | (0) 1
Net result for the year 0: 10
Dividends received i (2): 0
Additions ! -: 1
Disposals ' 3 (2)
Reclassification to Assets classified as held for sale ; (13)
Revaluation at 31 December ' 7 6
Carrying amount at 31 December 7 9
The Group's share
Operating Net Liabi- Owner- Net
DKK million Country  Revenue profit result Assets lities ship % Equity result
NSB Trafikservice AS Norway |. 94 2 2 34. 28 - -45 3. 4
Other associates - 119 (3) — (4) 33 28 7 4 (1)
Carrying amount at
31 December 2011 213 47) (2) 67 56 - 7, 0
The Group's share
Operating Net Liabi- Owner- Net
DKK million Country  Revenue profit result Assets lities ship % Equity result
NSB Trafikservice AS Norway 85 5 3 38 30 45 4 2
ISS Industriservice AB ” Sweden 286 19 12 - - 48 - 6
Other associates - 130 11 8 25 18 - 5 2
Carrying amount at
31 December 2010 501 35 23 63 48 - 9 10

 

1 ISS Industriservice AB was reclassified to Assets held for sale at 31 December 2010 and sold in the first quarter of 2011.

1204044EogSN59739

 

Consolidated financial statements 85

INOTE 18 Deferred tax

 

 

 

 

 

 

 

 

DKK million 2011 2010
Deferred tax liabilities/(assets), net at 1 January ; 313 484
Foreign exchange adjustments : (20) 19
Assumed in business combinations i : - 7
Tax on other comprehensive income ; (21) (36)
Reclassification to Assets classified as held for sale i 1: (20)
Tax on Profit before impairment/amortisation of intangibles ” | 144" (25)
Tax effect of impairment/amortisation of intangibles ” | (117) (116)
Deferred tax liabilities/(assets), net at 31 December i i "300 ! 313
; ni
Recognised in the statement of financial position as follows: | . i
Deferred tax liabilities ; 853: 970
Deferred tax assets i (553), (657)
Deferred tax liabilities/(assets), net ; 300 313
1) Intangibles comprise the value of goodwill, brands and customer contracts.
Deferred tax specification
2011 2010

Deferred tax  Deferred tax Deferred tax  Deferred tax
DKK million assets liabilities assets liabilities
Tax losses carried forward ' 484 -. 425 ”
Goodwill ; 22 441 29 413
Brands i . - - - 1
Customer contracts i 7 533. - 607
Property, plant and equipment : 149 187: 212 194
Provisions : 211 - 211 -
Issued bonds : . - ” 5. - (25)
Set-off within legal tax units and jurisdictions i (313). (313); (220) (220)

i

Deferred tax i 553 ' 853 657 970

 

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. Management's
assessment is based on relevant information available at the reporting date, including internal budgets and estimates, taking into
account any restrictions in utilisation in the local tax legislation.

Deferred tax on temporary differences relating to investments in subsidiaries, joint ventures and associates amounts to DKK 0 million
(2010: DKK 0 million).

1204044EogSN59740

Consolidated financial statements 86

NOTE 18 Deferred tax (continued)

Unrecognised deferred tax assets
The Group had unrecognised deferred tax assets regarding tax losses carried forward in the following countries:

 

 

 

2011 2010

Recog- Unrecog- Recog- Unrecog-
DKK million Total nised nised Total nised nised
Germany ; 363. - 363 332 5 327
Denmark i 2 20 2 2 - 2
France ; 258 127 131 222 191 31
Brazil i . 51, 19 32 57 21 36
Belgium i 24 18 16: 14 - 14
Israel 10 16 20 14 20 12 8
USA ; 57 " 538 4 30 29 1
Argentina 5 2. -—… 2 6 4 2
Hong Kong i 4 2 2 4 2 2
Greece ; 5 4 1. 6 5 1
United Kingdom ' 1 1 i 10 7 3
Total : 567 427

 

The unrecognised tax losses can be carried forward indefinitely in the individual countries except for the USA (20 years) and
Argentina and Greece (5 years). Deferred tax assets have not been recognised in respect of the above unrecognised tax losses
because it is not probable that future taxable profit will be available against which the Group can utilise these benefits thereon.

The increase in 2011 in unrecognised deferred tax assets mainly related to the valuation allowance of tax assets of DKK 100 million
in France due to new tax legislation.

NOTE 19 Other financial assets

 

 

DKK million 2011 2010
-

Deposits ; 138 147

Regulatory long-term loans ; 72 64

Other i 85" 74
; ”

Other financial assets : 295 285

 

Deposits comprise deposits related to rent, security and juridical deposits mainly relating to legal and tax cases.

NOTE 20 Inventories

 

 

DKK million 2011 2010
|

Raw materials, consumables and supplies i 165 136

Work in progress | 0 0

Finished goods | 169. 182

Inventories En 334 318

 

Inventories expensed as consumables i 6,751 6,359

 

1204044EogSN59741

Consolidated financial statements 87

INOTE 21. Trade receivables

 

 

DKK million 2011 2010
Trade receivables, gross i 12,104 11,137
Impairment losses | - (233) (241)
Trade receivables NEN 11,871 10,896

 

The Group's exposure to credit risk and impairment losses related to trade receivables is disclosed in note 35, Financial risk
management.

Securitisation

As part of the refinancing of the EMTNs that matured in September 2010, the Group has during 2009 and 2010 launched a
securitisation programme in 10 major countries. Under the securitisation programme securitised trade receivables of the participating
countries are provided as security for the securitisation debt (bank loans). The securitised trade receivables continue to be recognised
in the Group's statement of financial position as the credit risk and rewards remain with the Group.

As at 31 December 2011, trade receivables of DKK 4,961 million (2010: DKK 4,863 million) recognised in the statement of financial
position were provided as security for securitisation debt with a face value of DKK 2,638 million (2010; DKK 2,466 million).

INOTE 22 Contract work in progress

 

 

 

DKK million 2011 2010
i ;

Contract costs i 294 i 588

Recognised profits (less recognised losses) , 67 89
E 7

Contract work in progress, gross : 361 677

Progress billings : (238). (575)
bo i

Contract work in progress, net . 123: 102

 

Contract work in progress, net, comprise the following assets and liabilities: ! :
Contract work in progress (assets) i 129 125

 

 

Contract work in progress (liabilities) ; 6 23
I

Contract work in progress, net i 123. 102

Advances from customers i 6. 4

 

Retentions i 1 3

 

Contract work in progress (liabilities) are recognised as part of Other liabilities, see note 31, Other liabilities.

Advances from customers are included in Other liabilities in the line Prepayments from customers, see note 31, Other Liabilities.

1204044EogSN59742

Consolidated financial statements 88

INOTE 23 Tax-receivables and tax payables

 

 

 

 

 

 

 

DKK million 2011 2010
I
Tax (receivables)/payables, net at 1 January ! 15 (5)
Foreign exchange adjustments | — 49 (43)
Acquired through business combinations | ' (15) 9
Disposals through divestment of businesses ; (8) -
Adjustment relating to prior years, net ; 8 (14)
Tax on profit before impairment/amortisation of intangibles n i 586 698
Tax on other comprehensive income ' 21 18
Joint taxation contribution i 82" (25)
Tax paid i (709). (623)
Tax (receivables)/payables, net at 31 December ; ' (21) 15
Recognised in the statement of financial position as follows: i ;
Tax payables ' 314. 398
Tax receivables : (335). (383)
Tax (receivables)/payables, net ; ' (21) 15
" Intangibles comprise the value of goodwill, brands and customer contracts.
'NOTE 24. Other recéivables
DKK million 2011 2010
Outlays for customers ' ; . ' 126" 57
Receivables related to employees i 37 14
Receivables related to disposal of property, plant and equipment and divestment proceeds ; … 35 3
Receivable VAT i 24; 20
Receivable social insurance costs ' 18 19
Receivable from companies within the ISS Group ; |. 147 11
Receivable training subvention ; 40" 32
Other ; 183 189
Other receivables | 447" 345

 

Receivables related to employees comprise employee-related receivables such as loans to employees and receivable workers
compensation.

Receivable from companies within the ISS Group mainly related to a joint taxation scheme with Danish resident companies within
the ISS Group. The effective interest rate regarding receivables from companies within the ISS Group was 4.6% (2010: 5.1%).

Other comprise various receivables such as costs related to PPP/PFI contracts, bid deposits, receivable rebates, other refunds and
recoverable amounts, loans to customers etc.

1204044EogSN59743

 

Consolidated financial statements 89

INOTE 25 Securities, cash and cash equivalents

 

 

 

 

2011 2010

Average Average

effective effective

Carrying interest Carrying interest

DKK million amount rate amount rate
Investment funds 0" 17 (2.9)% 19 14.1%
Securities 10 47 (2.9)% 19 14.1%
Cash and cash equivalents bo ” 4,028. 1.4%: 3,603 1.3%

I

 

Investment funds comprise investments in various listed securities related to an employee scheme in the USA. The funds are
managed by ISS but restricted from general use.

Cash and cash equivalents included DKK 1,313 million (2010: DKK 936 million) held by the Group's consolidated SPEs handling the
Group's securitisation programme whereof DKK 392 million (2010: DKK 161 million) was not considered readily available for general
use by the parent company or other subsidiaries. In addition DKK 32 million (2010: DKK 30 million) of the total cash position at 31
December 2011 was placed on blocked or restricted bank accounts due to legal circumstances.

INOTE 26 Assets held for sale

 

 

 

 

DKK million 2011 2010
7 -
Goodwill i 24 355
Other intangibles ; 4. 28
Property, plant and equipment pe 34. 74
Other financial assets | 0" 23
Deferred tax assets j 2. -
Inventories i 5 8
Trade and other receivables i 72 336
Assets classified as held for sale i 141 824
Deferred tax liabilities 52 20
Provisions i 3 4
Loans and borrowings ; — 0
Trade payables and other liabilities i 86 231
Liabilities classified as held for sale | 80: 255

 

At 31 December 2011, sales processes had been initiated for three non-core activities in Western Europe, which were classified as
held for sale. The assets and liabilities of these activities were reclassified and 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. A loss of
DKK 79 million was recognised in Goodwill impairment in connection with the reclassifications.

All businesses classified as held før sale at 31 December 2010 have been divested during 2011. The divestments comprised the non-
core industrial service activities in Belgium, the non-core damage control activities, VATRO, in Germany and the investment in the
associate ISS Industriservice AB in Sweden.

Upon initial classification as held for sale in 2010 no impairment losses were recognised. Subsequently, remeasurement of VATRO in
June 2011 resulted in recognition of an impairment loss of DKK 61 million, which was recognised in Goodwill impairment. Upon
completion of the divestments additional! losses of DKK 19 million (Industrial Services, Belgium) and DKK 2 million (VATRO,
Germany) were recognised in Other income and expenses, net. The divestment of the associate in Sweden resulted in a gain of DKK
6 million, which was also recognised in Other income and expenses, net.

1204044EogSN59744

Consolidated financial statements 90

NOTE 27 Share capital

 

2011 2010
Nominal Number of Nominal Number of
value shares (in value — shares (in

(DKK million) thousands) (DKK million) thousands)

 

Share capital at 1 January ; 160 160. 160 160

 

Share capital at 31 December | 160 160 ' 160 160

 

At 31 December 2011, a total of 160,000 shares with a nominal value of DKK 1,000 per share were issued and fully paid (2010:
160,000 shares). No shares carry special rights. Shares are freely transferable.

INOTE 28 Loans and borrowings

This note provides information about the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For
more information about the Group's exposure to interest rate, foreign currency and liquidity risk, see note 35, Financial risk
management.

 

 

DKK million 2011 2010
Issued bonds 107 4,622 4,593
Bank loans ! 17,865: 18,330
Securitisation ; 2,604, 2,401
Finance lease liabilities ; 146 182
Derivatives : 76. 130
Debt to companies within the ISS Group i 3,961, 2,986

 

Total loans and borrowings ; 29,274: 28,622

Loans and borrowings are recognised in the statement of financial position as follows:

 

Non-current liabilities . 19,890 20,780
Current liabilities ; — 9,384; 7,842
Total loans and borrowings ; 29,274 28,622

 

The fair value of loans and borrowings is disclosed in note 32, Financial assets and liabilities.

In 2011, financing fees amounting to DKK 158 million (2010: DKK 39 million) have been recognised in løans and borrowings while
accumulated financing fees recognised in løans and borrowings on 31 December 2011 amounted to DKK 271 million (2010: DKK 312
million).

1204044EogSN59745

 

 

Consolidated financial statements 91

[NOTE 28 Loans and borrowings (continued) |

Terms and maturity of loans and borrowings

 

 

2011 2010
Average
Nominal effective
interest interest Interest Year of Face Amount Carrying Carrying
DKK million rate rate rate maturity value hedged amount amount
Issued bonds: i
EMTNSs (2014) 4.50% 4.72% Fixed 2014 821 - ! 821 823
Senior Notes (2014) 11.00% 11.37% Fixed 2014 3,903 - j 3,797 3,765
Interest rate swaps - - - - 4 I 4" 5
Bank loans: |
Senior Facilities: 1,
Term Facility A Libor