Assets
| Type | Time | Amount | Unit |
|---|
Revenue
| Type | Start date | End date | Amount | Unit |
|---|
XML
See the xml submitted here:
No XML document available for this report.
Separator
The full data:
Erhvervsstyrelsen
01 maj. 2014
Annual report
2013
ISS Global A/S
Buddingevej 197
DK - 2860 Søborg
Denmark
CVR 21 40 83 95
Phone:+45 38 17 00 00
1405014EogSN73900
Contents
1405014EogSN73901
Our performance
Key figures and financial ratios
Definitions
Highlights of the year
Outlook
Regional review
Financial review
Our business
Strategy — The ISS Way
KPIs — Measuring our performance
Business development
Corporate responsibility
Our employees
Risk management
Governance
Corporate governance
Remuneration report
Internal controls relating to financial reporting
Financial statements
Consolidated financial statements
Parent company financial statements
Management statement
Independent auditors' report
20
24
26
30
34
38
42
46
49
52
121
142
143
Key figures and financial ratios | Our performance 3
Key figures and financial
ratios
DKK million (unless otherwise stated) 2013 2012 2011 2010 2009
KEY FIGURES
Income statement
Revenue 78,506 79,492 77,681 74,101 69,024
Operating profit before other items ” 4,757 4,820 4,804 4,738 4,275
EBITDA 4,173 4,193 4,317 4,341 3,448
Adjusted EBITDA ? 5,519 5,652 5,639 5,570 5,124
Operating profit ? 3,411 3,361 3,482 3,509 2,599
Financial income 325 270 155 182 279
Financial expenses ” (2,076) (2,393) (2,414) (1,997) (1,900)
Profit before goodwill impairment/amortisation and
impairment of brands and customer contracts 918 471 484 1,045 502
Net profit/(loss) for the period ” (141) (5) (86) 467 (594)
Cash flow
Cash flow from operating activities 3,043 3,243 3,071 3,932 3,471
Acquisition of intangible assets and property, plant
and equipment, net (756) (736) (989) (864) (882)
Financial position
Total assets 45,916 46,832 47,026 46,071 44,126
Goodwill 18,813 21,217 22,674 23,096 22,262
Additions to property, plant and equipment 750 786 937 861 953
Net debt 18,091 20,297 24,277 24,989 25,130
Total equity (attributable to owners of ISS Global A/S) 4) 2,171 3,646 380 464 (632)
Employees
Number of employees at 31 December 533,400 534,100 534,400 522,600 485,700
Full-time employees, % 74 73 73 73 71
FINANCIAL RATIOS
Growth, %
Organic growth I 4.3 17 6.3 3.5 0.6
Acaquisitions 0 0 0 0 3
Divestments (2) (2) (2) (2) (1)
Currency adjustments & (3) 2 1 5 (3)
Total revenue growth (1) 2 5 7 0
Other financial ratios, %
Operating margin ” 6.1 6.1 6.2 6.4 6.2
Equity ratio 4.7 7.8 0.8 1.0 (1.4)
Interest coverage ? 3,2 2.7 2.5 31 3.2
Cash conversion ? 100 102 94 99 97
1) Excluding Other income and expenses, net, Goodwill impairment and Amortisation and impairment of brands and customer contracts.
2) The Group uses Operating profit before other 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.
3) Excluding Goodwill impairment and Amortisation and impairment of brands and customer contracts.
3) Effective 1 January 2013, the Group implemented 1AS 19 (2011) "Employee Benefits" with no material impact on the Group's consolidated financial statements, cf.
note 1.1, Basis of preparation, of the consolidated financial statements. Comparative figures for 2012 and 2011 have been restated accordingly.
5) Previously, the effect of acquisitions and divestments was adjusted in the actual consolidated revenue for the current year. This was changed in 2013 so that the effect
of acquisitions and divestments is now adjusted in the aclual prior year's consolidated revenue, to have a more logical calculation methodology. The change has been
implemented retroactively for the financial years 2008 — 2013. There was no significant impact on the reported organic growth figures as a result of the change.
8) 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.
1405014EogSN73902
Definitions | Our performance 4
Definitions
Acquisitions, %
Adjusted EBITDA
Net debt (carrying amount of
net debt)
Cash conversion, %
Divestments, %
EBITDA
Equity ratio, %
Interest coverage
Operating margin, %
Organic growth 1, %
Total revenue growth, %
FORWARD-LOOKING STATEMENTS
Revenue from acquired businesses ”) x 100
Revenue prior year
1) Revenue from acquired is basedon ts ions 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 derivative financial instruments
(Operating profit before other items last twelve months +
Changes in working capital last twelve months) x 100
Operating profit before other items last twelve months
Revenue from divested businesses ) x 100
Revenue prior year
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 ISS 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
(Revenue current year - comparabie revenue” prior year) x 100
Comparable revenue! prior year
1) Comparable revenue implies the exclusion of changes in revenue attributable to businesses acquired or divested and the effect of changes in
foreign exchange rates. In order to present comparable revenue and thereby organic growth excluding any effect from changes in foreign
n datthe sut
currency exch rates, revenue in the prioryear is syear's foreign currency exchange rates, Acquisi-
tions of businesses are treated as having been integrated into ISS upon acquisition, and ISS's calculation of organic growth includes changes in
revenue of these acquired compared with ri atthe date of: Organic growth is not a measure of
financlal 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
Tius Annual Report contains forward-looking statements, including, but not limited
to, the guidance and expectations contained in the ”Outlook” section on page 9.
Statements herein, other than statements of historical fact, regarding future events
ør prospects, are forward-looking statements. The words "may", "will”, ”should”,
predict”, "intend” or variations
of these words, as well as other statements regarding matters that are not historical
mø Fr
”expect”, ”anticipate”, ”belteve”, ”estimate”,
In the forward-looking statements and from the past performance of 15S. Although
ISS belteves that the estimates and projections reflected in the forward-looking
statements are reasonable, they may prove materially incørrect, and actuafl results
may materially differ, e.g as the result of risks related to the facility service industry
in genera! or ISS in particular indluding thøse described in this report and other
information made avallable by ISS.
fact or regarding future events or prospects, constitute forward-Iooking 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
1405014EogSN73903
As 8 result, you should not rely on these forward-looking statements. ISS undertakes
no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise, except to the extent reguired by law
Highlights of the year] Our performance 5
Highlights of
the year
In 2013, we followed up on the large REVENUE AND ORGANIC GROWTH
multinational contract wins of 2012 by ; i
winning IFS contracts with H.JJ. Heinz in om ;
Profitable organic growth remained a
key priority and by successfully divesting
certain non-core activities, we achieved > a0e — 2010 2011
a more focused business platform in IE Aevenue, DKK billen
line with our strategy. The divestment I Organ grevsth, %
proceeds were used to repay a significant
part of our debt.
Europe and Nordea Bank in the Nordic 75 DA i. 6
region. We were ranked best outsourcing % i N ;
provider in the world by the International es NV df
Association of Outsourcing Professionals. j i NR / ;
j
2012 2013
OPERATING PROFIT AND OPERATING MARGI
DKK bilton Bø
ISS Global A/S is an indirectly wholly owned sub- >0 7
sidiary of ISS A/S, an international provider of facili- Eee ES
ty services. ISS Global A/S owns — directly or indi-
rectly — the ISS Global Group's operating compa-
4.0
nies (together referred to as "ISS" or "the Group”).
nm
Operating results and performance
SES Ey ne BRS
2009 2010 2011 2012 2013
EEN
Group revenue decreased 1.2% to DKK 78.5 billion HR Operating profit before other items, DKK bil on
in 2013. Organic growth amounted to 4.3% which » … Operating margin, %5
was more than offset by a negative effect from ex-
change rate movements of 3% and the negative
impact from the successful divestment of non-core hindsdeskrdedenekde
activities of 2%.
In 2013, we remained focused on generating profit- 100
able organic growth and ensuring a customer base
with satisfactory payment conditions in a still-
challenging macroeconomic environment. Organic
growth increased to 4.3% and the start-up of the 70
Barclays and Novartis contracts combined with 60
continuing strong growth in emerging markets were 50
the main drivers of increased organic growth. zoo 2om 202 2013
1405014EogSN73904
REVENUE AND GROWTH»
Highlights of the year! Our performance 6
Revenue Growth components, %
DKK million 2013 2012 Growth Organic Acq. Div. Currency Total
Western Europe 39,704 39,414 1% 5 0 (3) (1) 1
Nordic 16,853 17,736 (5)% 1 - (3) (3) (5)
Åsla 8,019 7,367 9% 15 0 - (6) 9
Pacific 5,105 6,007 (15)% (1) - (4) (10) (15)
Latin America 3,708 3,820 (3)% 7 - - (10) (3)
North America 3,459 3,539 (21% 2 (1) (3) (2)
Eastern Europe 1,657 1,605 3% 5 - - (2) 3
Other countries 38 36 4 % 18 - - (14) 4
Corporate / eliminations (37) (32) (20)% -
Group 78,506 79,492 (1)% 4.3 0 (2) (3) (1)
Emerging markels 17,732 16,833 5 % 11 0 - (6) 5
1) See page 4 for definitions.
All regions, apart from the Pacific region, delivered
positive organic growth rates. Western Europe, our
largest region, delivered strong organic growth of
5% and Asia once again reported a double-digit
performance. Partly offsetting the growth were the
challenging market conditions, particularly in certain
European countries, and generally weak demand
for non-portfolio services.
Operating profit before other items was down by 2%
to DKK 4,757 million in 2013, negatively influenced
by both divestments and currency effects. The im-
pact from the divestment of the pest control activi-
ties in 12 countries reduced the operating profit be-
fore other items by approximately DKK 115 million
and the operating margin by 0.1 percentage point
compared with 2012. The effect of exchange rate
movements reduced operating profit before other
items by DKK 126 million compared with 2012. The
operating margin was 6.1% for 2013 compared with
6.1% in 2012. Adjusted for the impact of the divest-
ed pest control activities the operating margin for
2013 was slightly improved compared with 2012.
The operating margin was in line with expectations,
supported by improved margins in the Nordic region
and Latin America. However, this was offset by the
strategic divestments of non-core activities as well
as the start-up of multinational IFS contracts and the
impact of operational challenges in certain countries
in Europe and the Americas. A number of initiatives
are in progress to address these challenges includ-
ing a review of the customer base and implementa-
tion of structural changes. Corporate costs in-
creased from DKK 404 million to DKK 534 million,
as a result of a redistribution of procurement sav-
ings to countries and the strengthening of Corporate
functions to support the execution of our strategy.
1405014EogSN73905
The net profit/(loss) for the year was a loss of DKK
141 million compared with a loss of DKK 5 mil-
lion in 2012, positively impacted by a decrease in
other income and expenses, net, and lower finan-
cial expenses, net, which were more than offset by
higher non-cash expenses related to goodwill im-
pairment.
We define emerging markets as comprising Asia,
Easter Europe, Latin America, Israel, South Africa
and Turkey. These markets, which account for
more than half of our employees, delivered organic
growth of 11% and 23% of Group revenue. In addi-
tion to significantly increasing the Group's organic
growth, emerging markets delivered an operating
margin of 6.3% in 2013 (2012: 5.8%). We aim to
capitalise on the attractive market characteristics in
emerging markets and continue to grow our foot-
print in these countries in a balanced and controlled
manner.
Cash conversion for 2013 was 100% as a result of
strong cash flow performance across the Group.
Ensuring a strong cash performance continues to
be a key priority, and the result reflects our efforts
to ensure payment for work performed and to exit
customer contracts with unsatisfactory payment
conditions. These efforts led to a decrease in debt-
or days of more than one day compared with 2012.
At ihe end of 2013, ISS had møre than 533,000
employees worldwide. The Group's headcount re-
mained approximately at the same level as at year-
end 2012, as the impact from organic growth was
offset by 14 divestments made during the year.
OPERATING RESULTS
Highlights of the year i Our performance 7
Operating profit
before other items
Operating margin ”
DKK million 2013 2012 Change 2013 2012 Change
Western Europe 2,388 2,407 (1)% 6.0 % 6.1 % (0.1)%
Nordic 1,246 1,190 5% 7.4 % 6.7 % 0.7 %
Åsia 608 564 8 % 7.6 % 7.7 % (0 1)%
Pacific 253 311 (19)% 50% 52% (0.2)%
Latin America 145 91 59 % 3.9 % 2.4 % 15%
North America 101 151 (33)% 2.9 % 4.3 % (1.4)%
Eastern Europe 109 102 7 % 6.6 % 6.4 % 0.2 %
Other countries (1) (1) - (3.2)% (3.0)% (0.2)%
Corporate / elimmations (92) 5 1,940 % (0.1)% 0.0 % (0.1)%
Group 4,757 4,820 (1)% 6.1 % 6.1 % (0.0) %
Emerging markets 1,115 978 14 % 6.3 % 5.8 % 05%
1) See page 4 for definitions.
Strategy update
In May 2013, the International Association of Out-
sourcing Professionals (IAOP) announced that ISS
is ranked number one on IAOP's list of the world's
leading outsourcing providers — "The Global Out-
sourcing 100”. The ranking shows that ISS is re-
garded as a global, professional! and reliable out-
sourcing partner and is an important milestone in
achieving our vision of becoming the world's great-
est service organisation.
We progressed the implementation of our strategy
and moved closer to realising our vision. We con-
tinued to align the organisation behind our value
propositions and optimising delivery to selected
customers by investing in leadership and segment
capabilities and implementing standard procure-
ment processes to extract synergies. We continued
divesting activities that are non-core to the delivery
of our promise. We are transitioning towards a
more focused approach to customer segments,
including certain industries as well as multinationals
looking for a provider able to self-deliver multiple
services globally. Emerging markets continued to
support growth and margins and are becoming an
ever bigger part of our global footprint.
Our strategic focus on delivering portfolio-based
services led to sustained organic growth in the port-
folio business. Historically, the portfolio business"
share of total revenue has been 75% — 80% and
during the period 2009 to 2013 our portfolio busi-
ness' share of total revenue increased within this
range.
405014EogSN73906
Global Corporate Clients
In 2012, ISS won three new multinational IFS con-
tracts with Barclays, Novartis and with Citi in the
Asia and Pacific regions. These contracts are some
of the largest in ISS's history and represent signifi-
cant milestones for ISS in the efforts to confirm our
position as a leading global facility services provid-
er. At the end of 2013, all three contracts were fully
operational in all key geographies.
In 2013, these wins were followed by the win of an
IFS contract covering all of Europe with H.J. Heinz,
an international food producer, and an IFS contract
with Nordea Bank in the Nordic region. The new
facility management partnership with H.J. Heinz,
includes a five-year contract for a full IFS solution,
including catering, cleaning, property, reception and
security services to 15 food manufacturing and
office locations in eight countries. The IFS contract
with Nordea Bank covers 39 office buildings in the
Nordic region and ISS provides facility manage-
ment, property, cleaning, catering, security and
support services as part of the contract. The reve-
nue generated from Global Corporate Clients
amounted to DKK 6.5 billion in 2013, an increase of
more than 60% compared with 2012.
In addition to the new Global Corporate Clients
contracts, several other important contract wins
were secured in 2013, both involving new contracts
and expanding the scope of existing contracts. Go-
ing forward, our Global Corporate Clients organisa-
tion will continue to focus on mobilising and start-
ing-up the new contracts as well as on winning new
contracts within selected customer segments where
ISS can offer market-leading value propositions.
Divestments
The ongoing review of the strategic rationale and fit
of business units under The ISS Way strategy has
led to the identification of certain activities that are
non-core to The ISS Way. In 2013, we divested the
pest control activities in 12 countries, i.e. Australia,
Austria, Belgium, Denmark, Germany, Italy, the
Netherlands, New Zealand, Norway, Portugal,
Spain and Switzerland for a total enterprise value of
approximately DKK 2 billion. Other divestments
included the Nordic damage control activities and
minor activities within property services, cleaning
services, security services and support services in
the Nordic and Western Europe regions and the
USA. The divestments reflect a more strategic fo-
cus in the countries involved, resulting in a more
focused business platform.
In January and February 2014, we announced the
sale of our landscaping activities in France, our
commercial security business in Australia and New
Zealand, our pest control activities in India and our
security activities in Israel. These divestments in
aggregate have an approximate annual revenue of
DKK 3.2 billion.
At 31 December 2013, six business units have
been classified as held for sale, comprising net
assets of DKK 0.9 billion including the four divest-
ments made in January — March 2014 as described
above. The divestments completed in 2013, result-
ed in a net gain of DKK 662 million recognised in
Other income and expenses, net, an impairment
loss related to goodwill of DKK 202 million and a
DKK 21 million loss on customer contracts. In addi-
tion, classification of certain activities in the West-
ern Europe and Pacific regions as held for sale
during 2013 resulted in a loss of DKK 24 million
recognised in Other income and expenses, net as
well as a non-cash impairment loss on goodwill of
DKK 354 million and DKK 12 million on customer
contracts.
Including the divestments announced during 2014,
to date, our strategic divestment programme is to a
large extent complete. None the less, our strategy
execution process will continue to identify non-core
businesses which will result in further divestments
going forward.
1405014EogSN73907
Highlights of the year I Our performance 8
Financing
The ISS Global Group is indirectly wholly owned by
ISS A/S and is therefore part of the ISS A/S Group.
Group Treasury manages financing activities and
capital structure centrally for the ISS A/S Group as
a whole. The ISS Global Group's financing activi-
ties and capital structure are not assessed inde-
pendently of the ISS A/S Group.
The commitment to deleverage the ISS A/S Group
continued in 2013. With the proceeds from divest-
ment of activities together with the improved condi-
tions to repay debt, ISS A/S in 2013 completed two
excess proceeds offers and conditional partial re-
demptions in an aggregate amount of EUR 325.2
million of ISS A/S's EUR 581.5 million 8.875% Sen-
ior Subordinated Notes due 2016. With these two
processes it has been possible for the ISS A/S
Group to repay more than half of the most expen-
sive part of the debt in 2013, in itself eliminating
DKK 215 million in interest expenses on an annual-
ised basis at ISS A/S Group level.
In April 2013, ISS A/S refinanced its EUR 600 mil-
lion Second Lien Facility and received strong sup-
port from lenders consenting to a three-year exten-
sion of the predominant part of the Group's senior
debt to either December 2017 or April 2018. The
new tranches refinancing the EUR 600 million Sec-
ond Lien Facility at ISS A/S were split between two
senior tranches at ISS Global A/S of EUR 330 mil-
lion and USD 350 million, respectively.
As part of the amendments, lenders approved the
capacity to increase the revolving credit facility by
an additional DKK 1.0 billion and implemented oth-
er amendments intended to increase both opera-
tional and refinancing flexibility around the use of
potential future divestment proceeds as well as
certain post-IPO flexibilities.
In August 2013, the securitisation programme was
extended by one year to September 2015. The size
of the credit facility was kept unchanged, but the
pricing of the programme was reduced by 25 bps
following the extension. Currently, ISS has no sig-
nificant short-term financing maturities.
Following the announcement of the IPO, see below,
ISS was upgraded by rating agencies who currently
assign corporate ratings of ISS A/S of BBB-/Stable
Outlook (S&P) and Baa3/Stable Outlook (Moodys).
ISS A/S announced an IPO
ISS A/S announced on 3 March 2014 its intention
to launch an Initial Public Offering (IPO) of its
shares and on 13 March 2014 the shares were
listed on NASDAQ OMX Copenhagen.
The IPO consisted primarily of an issue of new
shares raising proceeds of DKK 8 billion. Proceeds
from the IPO have, together with amounts drawn
under a new banking facilities agreement, been
used to repay existing credit facilities on 18 March
2014.
The new facility, with investment grade like terms,
is in place with a smaller number of relationship
banks and includes a more attractive and flexible
interest margin depending on our leverage.
For further information regarding the IPO, including
effects from the refinancing, incentive programmes
and corporate governance changes, please refer to
the offering circular for ISS A/S published on 3
March 2014.
Management changes
On 20 March 2013, ISS announced two key ap-
pointments strengthening the Executive Group
Management Board (the EGM). Henrik Andersen
was appointed to the new position of Group Chief
Operating Officer (COO) EMEA. Heine Dalsgaard
was appointed Group Chief Financial Officer
(CFO), replacing Henrik Andersen in August 2013.
Furthermore, on 8 July 2013, ISS announced that it
had further strengthened and expanded the EGM
by appointing John Peri as Group Chief Operating
Officer (COO) Americas & APAC. The appoint-
ments allow ISS to further align the organisation
and focus even more on the markets in which ISS
operates.
Subsequent events
On 29 January 2014, we completed the divestment
of the pest control activities in India.
On 3 February 2014, we announced the extension
of the global IFS contract with HP until the end of
1405014EogSN73908
Highlights of the year I Our performance 9
2018. This is one of the largest global facility ser-
vices agreements in the industry, whereby we will
continue to deliver IFS to more than 500 HP sites in
58 countries across five continents.
On 5 February 2014, we completed the divestment
of the security activities in Israel.
On 28 February 2014, we completed the divest-
ment of our landscaping activities in France.
On 3 March 2014, ISS A/S announced its intention
to launch an Initial Public Offering (IPO) of its
shares and on 13 March 2014 the shares were
listed for trading on NASDAQ OMX Copenhagen. A
detailed description of the IPO is provided above
under "ISS A/S announced an IPO”.
On 31 March 2014, we completed the divestment of
our commercial security business in Australia and
New Zealand.
Apart from the above and the events described
elsewhere in this Annual Report, we are not aware
of events subsequent to 31 December 2013, which
are expected to have a material impact on the
Group's financial position.
Outlook | Our performance 10
Outlook
The outlook should be read in conjunction with
"Forward-looking statements” (see Definitions on
page 4) and Risk management on pages 38-41.
The outlook for 2014 is based on a mixed global
macroeconomic forecast. We expect continued low
positive GDP growth and challenging macroeco-
nomic conditions with possible improvements in
parts of Europe. In emerging markets we expect to
continue to deliver high growth rates which are ex-
pected to be negatively impacted by the slow-down
in certain economies, especially in Asia.
In 2014, we will remain focused on our key financial
objectives; (i) organic revenue growth, (ii) operating
margin and (iii) cash conversion.
We expect to deliver a lower organic growth in 2014
than in 2013. Operating margin in 2014 is expected
to be slightly above the level realised in 2013 and
cash conversion is expected to be above 90%.
1405014EogSN73909
Regional
performance
ISS is all about service. We aim to provide
consistent service globally and across
regions to our customers in more than
50 countries. We have a unique and
leading market position which supports
local, regional and global customers.
Our business characteristics and regional presence
have changed considerably since 2006. We have
transformed ISS from primarily being a European-
based company to becoming a true global player
with a leading market position. We are leveraging
our global presence in order to meet the continuing
growth in demand from multinational corporations
for the delivery of integrated facility services (IFS)
across borders. Our IFS revenue share has grown
significantly and our ability to deliver IFS is a key to
serving global customers and grasping new local
market opportunities.
In 2013, we remained focused on generating profit-
able organic growth and securing payment for work
performed. This led to strong organic growth in
2013 with all regions but the Pacific delivering posi-
tive organic growth rates. The operating margin of
6.1% (2012: 6.1%) was in line with expectations
and favourably impacted by margin increases in the
Nordic region and Latin America. Detracting from
the performance were the strategic divestment of
non-core activities as well as the start-up of multi-
national IFS contracts and the impact of operational
challenges faced in certain countries in Europe and
the Americas.
Our Global Corporate Clients organisation is a key
driver of organic growth, especially in our European
countries of operation, as demonstrated by the
start-up of the Barclays and Novartis contracts.
These contracis are some of the largest in ISS's
history and they were supplemented by the win in
1405014EogSN73910
Regional performance | Our performance 11
2013 of a new large IFS contract with H.J. Heinz in
Europe. Global Corporate Clients also supported
growth in our emerging markets, as illustrated by
the start-up of Citi in the Asia and Pacific regions in
2013.
We are well positioned in emerging markets, where
we have more than half of our employees and gen-
erate 23% of our total revenue. Emerging markets
represent a large growth potential as well as an
opportunity to serve our many regional and global
customers operating there. Going forward, emerg-
ing markets will continue to support our top-line
growth and will be an ever-bigger part of our global
footprint.
Qur seven regions generally follow the
geographical structure, the exception being the
Nordic region, which is presented separately from
the Western Europe region. In order to highlight the
growth and performance of emerging markets, we
present certain information for these markets
separately.
ISS operates in a number of countries which due to
the insignificant amount of revenue we generate
there are not included in this review. Those coun-
tries include, among others: Bahrain, Egypt, Nige-
ria, Pakistan, South Africa and United Arab Emir-
ates.
Western Europe
The markets of the Western Europe region are
generally characterised as developed markets but
with differences from country to country in terms of
IFS market maturity and macroeconomic environ-
ment. Key segments for the region are Business
Services & IT, Public Administration, Industry &
Manufacturing, Healthcare as well as the Hotels,
Leisure & Entertainment segment. 2013 was a
milestone year for ISS in Western Europe, buoyed
by the successful launch of two of the largest and
most complex IFS contracts the FM world has ever
seen: Barclays and Novartis. This illustrates both
the demand for IFS solutions across countries with-
in Western Europe and our ability to deliver in line
with our value proposition and on our promise to
our customers.
Going forward, we will increase our focus on IFS
readiness as demand for this service type continues
to grow, while at the same time working to enhance
organic growth, improve win rates and retain key
accounts. The ongoing analysis of the customer
base and alignment of the business platform will
continue in order to ensure high organic growth rates
and sound profitability for the region. Revenue in-
creased by 1% to DKK 39,704 million driven by
organic growth of 5%. The successful divestment of
non-core activities in 2012 and 2013 reduced reve-
nue by 3% while currency adjustments in 2013 re-
duced revenue by 1%. Operating profit before other
items decreased by 1% to DKK 2,388 million for an
operating margin of 6.0%, down 0.1 percentage
point from 2012.
Several countries delivered strong organic growth
rates, with the United Kingdom, Switzerland and
Turkey all in double digits and Germany, Austria
and Portugal also contributing. A slight increase in
non-portfolio services was seen compared with
2012, but demand før non-portfolio services re-
mained at a relatively low level.
The operating margin for the region was supported
by strong performance in the United Kingdom,
Switzerland and Turkey. Margins came under pres-
sure from challenging macroeconomic conditions
and operational challenges in certain countries as
well as from the start-up of the Barclays and Novar-
tis contracts following initial investments. The di-
vestment of the margin accretive washroom activi-
ties in the Netherlands, Belgium and Luxembourg in
2012 and the pest contro! activities in certain coun-
tries in 2013 also had an adverse impact on the
margin compared with 2012. Lastly, the 2012 oper-
ating margin was positively impacted by a gain of
DKK 92 million related to negative past service
costs for defined benefit plans in Switzerland, while
the 2013 operating margin was positively impacted
by a one-off gain of DKK 64 million related to a
settlement gain on defined benefit plans in the
Netherlands.
Major contract wins, extensions and renewals in-
cluded renewal of the large IFS contract with East
1405014EogSN73911
Regional performance | Our performance 12
Coast Mainline, increase and extension of the IFS
contract with Telefonica and a large cleaning con-
tract win with CO-operative Group Ltd. in the United
Kingdom. Spain has extended and increased the
catering contract with the healthcare State Admin-
istration in Valencia providing food for patients at
11 hospitals. Furthermore, France extended a large
cleaning contract with Eurotunnel and Switzerland
won a large IFS contract with PwC.
Nordic
The markets of the Nordic region are mature and
developed and we hold a relatively large market
share. The strategic focus remains to leverage the
strong market position mainly through the imple-
mentation of best practices, utilising the footprint to
develop solutions and concepts tailored to specific
customer segments. The Nordic key customer
segments are Business Services & IT, Industry &
Manufacturing, Retail & Wholesale and Hotels,
Leisure & Entertainment segments as well as coun-
try-specific segments.
The alignment and centralisation of processes and
organisations in the region continued. In a thorough
analysis of the customer base in certain countries
in 2013, we reviewed the organisational structures
as well as the capabilities and focus of the support
functions. The primary result of the review is an
adjusted business structure tailored to strengthen
our focus on large site-based customers
as well as achieving a lean and cost-efficient struc-
ture for serving small and mid-sized customers.
Along with the new structure, strengthened capa-
bilities for sales, development and operations of
large customers will also be implemented. These
initiatives will continue across the region in 2014.
In order to continue aligning our business platform
with our strategy certain businesses were divested
in 2013, including the Nordic damage control! activi-
ties. Furthermore, we entered into a new partner-
ship with Securitas regarding security services in
Denmark.
Revenue in 2013 was down by 5% to DKK 16,853
million. Organic growth amounted to 1%, while the
divestment of non-core activities in 2012 and 2013
and currency adjustments each reduced revenue
by 3%. Operating profit before other items was
DKK 1,246 million, reflecting an operating margin of
7.4%, up by 0.7 percentage point from 2012.
The organic growth rate of 1% reflects a strong
performance of 10% in Norway driven by increased
sales to large IFS customers. This was offset by
negative organic growth in Denmark, Finland and
Sweden due to lower demand for non-portfolio ser-
vices from a number of large customers and exit of
certain contracts in 2012 and 2013.
The increase in the operating margin to 7.4% was
the result of margin increases in Finland, Sweden
and Denmark due to improvements in the opera-
tional performance across most service lines and
strong customer focus. This was partly offset by a
margin decrease in Norway mainly due to 2012
being positively impacted by one-off income related
to the sale of certain assets.
Contract wins and extensions in the region included
large IFS contract wins with Nordea Bank across
the region and with the Danish Defence Command.
Furthermore, we won local IFS contracts with the
Maersk Group in Denmark and Skanska AB in
Sweden and a catering contract with DNB, the
largest financial services group in Norway. Addi-
tionally, we extended and expanded the IFS con-
tract with Vattenfall, under which ISS now provides
services to all nuclear power plants in Sweden.
Asia
The Asia region consists of large and more estab-
lished markets, such as Hong Kong and Singapore,
as well as developing markets, such as China, In-
dia, Indonesia and the Philippines. The key seg-
menits for the region are Business Services & IT,
Industry & Manufacturing and Retail & Wholesale.
Our ambition is for the region to remain one of the
Group's growth engines, maintain a high level of
profitability, expand our self-delivery capabilities,
and further sharpen our business platform as well
as to continue improving the commercial planning
and strategy towards our selected key customer
segments.
Going forward, focus will be on service excellence
within cleaning and on the transition from input-
based contracts to true output-based contracts.
Further efforts will be directed towards the continu-
ous development of our IFS readiness, identifying
improvement areas and developing skills to im-
prove our delivery capabilities to local and global
IFS customers. Investment in people and leader-
ship development to further strengthen the local
1405014EogSN73912
Regionat performance | Our performance 13
organisations is an important factor in managing
current and future growth in a controlled manner.
In recognition of the recent achievements of ISS in
the region, ISS was in 2013 named Facilities Man-
agement Company of the year in the Asia and Pa-
cific regions at the annual Frost & Sullivan Best
Practices Awards in Singapore.
Our Asia region once again delivered a strong per-
formance in 2013. Revenue was DKK 8,019 million,
an increase of 9%, driven by continued strong or-
ganic growth of 15% while currency adjustments
reduced revenue by 6%. Operating profit before
other items increased by 8% to DKK 608 million
reflecting an operating margin of 7.6%, whereby
Asia once again delivered the highest margin of
any ISS region.
Several countries reported double-digit organic
growth rates, with Indonesia as the largest nominal
contributor in the region based on an organic
growth rate of 25%, which was mainly driven by a
strong, positive effect of contract wins in the fourth
quarter of 2012 and higher minimum wages passed
on to customers. India, Thailand, Hong Kong and
China also continued the positive trends driven by
strong retention of existing customers as well as a
high rate of new sales.
The operating margin decreased slightly from 7.7%
in 2012 to 7.6% in 2013, mainly due to the start-up
of the Barclays and Citi contracts in the Asia and
Pacific regions, which in the short term have influ-
enced the margin negatively following initial in-
vestments. This was partly offset by strøng opera-
tional performance in Thailand, Hong Kong and
Singapore.
During 2013, ISS China extended and increased
the cleaning and support service contract with
Shenzhen Bao'an International Airport and ISS
Hong Kong won a security contract with Discovery
Bay.
Pacific
ISS Australia delivers almost 90% of the revenue in
the region. The strategic focus in Australia remains
on further developing and refining the IFS value
proposition to selected customer segmenits, includ-
ing Public Administration, Energy & Resources
(mainly the remote site resource segment),
Healthcare and the Transportation & Infrastructure
segments (mainly airports). This led to the success-
ful retender of all the remote site contracts that were
up for retender during 2013. Going forward, the fo-
cus will be on further developing the value proposi-
tion to the selected customer segments and the
overall efficiency of the business in the Pacific re-
gion. ISS Australia has focused on implementing
tools for improved control and increased operational
efficiency. This includes implementation of a CRM-
tool to enhance our sales efficiency.
In 2010, ISS Australia entered into a 28-year con-
tract with Sydney's Royal North Shore hospital
(RNS). This is a public private partnership contract
won by a consortium in which ISS Australia is a
major partner. Considering the length and complexi-
ty of the contract, the first few years of operating the
contract have been challenging. We continue to
build experience and knowledge of operating the
contract which can support profitability improve-
ments in future years.
In 2013, the pest control activities in Australia and
New Zealand were divested and in the beginning of
2014, we divested the commercial security activities
in the Pacific region. These divestments will result in
a stronger and more aligned business platform for
ISS in the Pacific region, as it will allow us to focus
on our core activities.
Revenue for the region decreased by 15% to DKK
5,105 million negatively impacted by currency ad-
justments of 10%, while revenue was further re-
duced by 4% from the successful divestment of the
pest control activities in 2013 and with 1% stemming
from negative organic growth. Operating profit be-
fore other items was DKK 253 million equal to an
operating margin of 5.0%, which was 0.2 percent-
age point lower than in 2012.
Organic growth was negatively impacted by the loss
of certain large security contracts and a reduction in
services delivered on certain contracts in Australia.
There has been a pick-up in new sales and in the
fourth quarter of 2013 we achieved significant con-
tract wins and extensions.
The 0.2 percentage point decrease in operating
margin was mainly a result of the divestment of the
margin-accretive pest contro! activities in 2013 as
well as of weaker demand for non-portfolio services
in Australia.
1405014EogSN73913
Regional performance | Our performance 14
Contract wins and renewals in Australia included
the win of a large IFS contract with the global re-
sources company BHP Billiton, the renewal of the
large security contract with Melbourne Airport and
the security contract with Adelaide Airport as
well as the renewal of the large IFS contract with
Eastem Health Hospital.
Latin America
We have built a unique position in Latin America
with a strong geographical presence and a devel-
oped service offering. No one else in the market is
capable of self-delivering a comparable number of
services in the countries where ISS provide IFS.
Focus is on selectively expanding the geographical
platform as markets mature. Key segments within
Latin America are Industry & Manufacturing and
Business Services & IT. The region supports a
number of our multinational IFS contracts and
maintaining a presence in the region is an im-
portant means of targeting this customer segment.
Despite the systematic and customer-focused sales
approach, 2013 was a year of recovery following
the decision to exit certain less profitable contracts
and restore the run-rate profitability from our con-
tract portfolio following restructurings in certain
countries in 2012. During the year, we continued to
focus on strengthening the organisations and pro-
cesses across the region to increase efficiency,
predictability and transparency.
Going forward we remain focused on delivering
profitable organic growth through an assessment of
the customer base and our key selected customer
segments. In addition, we will continue to focus on
having the right organisational structures and man-
agement teams in place to support our aims.
Revenue was DKK 3,708 million in 2013 down 3%
compared with 2012. Organic growth amounted to
7%, which was more than offset by a negative im-
pact from currency adjustments of 10%. Operating
profit before other items increased by 59% to DKK
145 million, reflecting an operating margin of 3.9%,
which was 1.5 percentage point higher than in
2012.
All countries of the region reported positive organic
growth rates driven by a continued high level of
new sales and higher demand for project work,
especially in Argentina and Chile. Brazil returned to
positive organic growth following the steps taken to
exit certain less profitable contracts in 2012.
The increase in operating margin was the result of
improved margins in all countries of the region driv-
en by our continued efforts to improve operational
efficiencies, including amending or exiting certain
customer contracts with unsatisfactory profitability
conditions following the restructurings initiated in
2012.
Contract wins and extensions included large IFS
contracts with Philip Morris in Argentina, ITAU in
the banking segment, Claro in the telecommunica-
tions segment, the international airport in Såo Pau-
lo, all three in Brazil, and Telefonica in Mexico.
North America
ISS has extensive geographical coverage in sever-
al parts of the USA experiencing economic growth
and we continue to focus on enhancing our geo-
graphical footprint in specific metropolitan areas.
Key segments are Business Services & IT, Public
Administration and Transportation & Infrastructure.
The continued focus on developing segments such
as Aviation produced significant contract wins that
contributed positively to the growth performance.
Segmentation of the business will also be a future
focus, our goal being to ensure that clear value
propositions are developed and delivered by indus-
try experts who truly understand individual custom-
er needs and requirements.
Growth in 2013 was primarily driven by the multina-
tional IFS contract with Barclays. We made consid-
erable changes to the operating model of the Bar-
clays contract in 2013, as instead of working with
multiple subcontractors we now self-deliver a signif-
icant portion of the services. This together with ad-
ditional transformations currently being made to the
HP contract shows that the region has the ability to
serve customers with a self-performing operating
model that gives customers the benefit of a con-
sistently high level of self-delivery, ensuring high
compliance with HSE standards and risk processes
at a competitive price. Through these contracts, we
further developed the IFS business, which now
accounts for 31% of our revenue in the region.
The synergies from building up an IFS platform
have not yet been fully realised. A significant
amount of work has been shared across the IFS
1405014EogSN73914
Regional performance | Our performance 15
back office function but there are still synergies to
be achieved from ensuring that the platform is fully
utilised across all our IFS contracts. However, the
geographical size of the region represents a chal-
lenge, making synergies from IFS contracts more
difficult to achieve.
Revenue was DKK 3,459 million, a decrease of 2%
compared with 2012. Organic growth was 2%,
while the adverse impact of currency adjustments
and divestments reduced revenue by 3% and 1%,
respectively. Operating profit before other items
was DKK 101 million resulting in an operating mar-
gin of 2.9%, 1.4 percentage point lower than in
2012.
Organic growth of 2% was primarily driven by the
start-up of the Barclays contract in September
2012, but with the termination of certain less profit-
able contracts and the loss of certain large con-
tracts both detracting from the organic growth.
The decrease in operating margin was mainly due
to the loss of certain large contracts combined with
the initial investments related to the start-up of sev-
eral new contracts. In addition, the margin was
negatively impacted by steps to restructure the
business in the easterm part of the USA. We have
in 2013 strengthened the management team in the
USA to ensure that the business continues to de-
velop and that ISS becomes a competitive market
player going into 2014.
In 2013, the USA won a large cleaning and facility
management contract with Delta Airlines and now
provides services for Delta in three major airports in
the New York City Area. Finally, the USA strength-
ened their portfolio of Airport contracts by winning a
cleaning contract with Phoenix Sky Harbor Interna-
tional Airport.
Eastern Europe
ISS has established a wide geographical reach and
a unique service platform in Eastern Europe with
the capability to self-deliver a full range of services.
The strategic goal is to provide services to multina-
tional blue chip companies. The selected customer
segments are Business Services & IT, Healthcare
and Industry & Manufacturing, while the proportion
of customers in the public sector has deliberately
been reduced.
In 2013, we added two additional international IFS
contracts in the region as we started up the Novar-
tis contract in Slovenia and the Barclays contract in
Lithuania. The skills and competencies required to
manage such contracts are complex but through
our continued focus on IFS readiness and on shar-
ing knowledge and best practice in the region, we
successfully started up and began to operate these
contracts. We have thereby expanded our local
service offering to a full IFS offering in these coun-
tries and thus both strengthening our regional ca-
pabilities and meeting our customers' requirements.
Through these international contracts the countries
in the region gain knowledge and experience,
which can be deployed when targeting new cus-
tomers as well as benefit existing customers.
The efforts to strengthen the management teams
and leadership capabilities throughout the region as
well as developing the sales organisations re-
mained a priority in 2013. This included establish-
ing joint country management teams in the region.
In addition, focus remained on the implementation
and utilisation of shared business development
resources across the region in order to empower
best practise operations resource sharing and drive
regional solution sales.
Revenue increased by 3% to DKK 1,657 million in
2013, driven by organic growth of 5% while curren-
cy adjustments reduced revenue by 2%. Operating
profit before other items increased to DKK 109 mil-
lion, for an operating margin of 6.6%, which was
0.2 percentage point higher than in 2012.
Slovenia, Russia, Hungary and Slovakia all deliv-
ered strong organic growth rates. Organic growth in
Slovenia was mainly driven by the start-up of the
Novartis contract, while in Russia, Hungary and
Slovakia growth was supported by higher new
sales and greater demand for non-portfolio ser-
vices.
The increase in operating margin was mainly a
result of improved margins in the Czech Republic
and Hungary deriving from the strong focus on op-
erational efficiencies and cost savings. This was
partly offset by a margin decrease in Slovenia that
was mainly due to initial investments related to the
Novartis contract.
1405014EogSN73915
Regional performance | Our performance 16
Eastem Europe continued to progress with the
sales strategy focused on providing well-proven
value propositions to multinational blue chip com-
panies in the region. This was illustrated by the win
of a large contract with Telenor in Hungary.
Financial
revlew
In 2013, we remained focused on driving
profitable growth. In addition, in line
with our strategy we successfully
completed the divestment of certain
non-core activities, which allowed us
to repay a large part of our debt.
This combined with our operational
performance was a supporting factor
in the deleveraging of ISS.
Operating profit
The Group's revenue and operating profit before
other items is reviewed in Highlights of the year on
pages 5-9 and in Regional performance on pages
11-16.
Tne Net profit/(loss) decreased from a loss of DKK
5 million in 2012 to a loss of DKK 141 million in
2013. The negative development was mainly im-
pacted by an increase in non-cash expenses relat-
ed to goodwill impairment of DKK 657 million partly
offset by lower financial expenses, net of DKK 372
million.
Working capital and cash flows
Our continued focus on securing satisfactory
payment for services performed and on exiting
customer contracts with unsatisfactory payment
conditions led to a decrease in debtor days of more
than one day.
Trade receivables amounted to DKK 10,299 million
(2012: DKK 11,433 million). The change compared
to 2012 was mainly a result of the continued focus
on reducing our working capital.
1405014EogSN73916
Financial review | Our performance 17
UNDERSTANDING THE FINANCIAL REVIEW HEE
For increased clarity, the commentary in the Financial review has
been structured in accordance with relevant themes to provide
commentary to the sections in the consolidated financial state-
ments. No comments are made to section 6 Governance as this
is covered by the Remuneration report on pages 46-48. Fur-
thermore, no comments are made to section 1 Basis of prepara-
tion and section 8 Other required disclosures as information
indluded in these sections are immaterial.
Changes in working capital was an inflow of DKK
35 million, which resulted in a cash conversion of
100% in 2013 compared with 102% in 2012.
Cash flow from operating activities
Cash inflow from operating activities was DKK
3,043 million in 2013 (2012: DKK 3,243 million).
The decrease was primarily due to a DKK 133 mil-
lion decrease in the cash inflow from operating
profit before other items adjusted for depreciation
and amortisation and a DKK 105 million decrease
in the cash inflow from changes in working capital,
which was partly offset by a DKK 139 million de-
crease in the cash outflow from changes in provi-
sions, pensions and similar obligations.
Other expenses paid of DKK 352 million mainly
related to restructuring projects initiated and ex-
pensed in 2012 and 2013 as well as onerous con-
tracts and the build-up of IFS capabilities in North
America.
Cash flow from investing activities
Cash flow from investing activities was a net cash
inflow of DKK 1,381 million (2012: cash outflow of
DKK 721 million). The cash inflow relating to acqui-
sitions and divestments, net, amounting to DKK
2,169 million, was mainly due to the divestment of
the pest control activities and the Nordic damage
control activities. This was partly offset by invest-
ments in intangible assets and property, plant and
equipment, net, of DKK 756 million (2012: DKK 736
million), which represented 1.0% of revenue com-
pared to 0.9% in 2012.
Cash flow from financing activities
Cash flow from financing activities was a net cash
outflow of DKK 4,548 million (2012: DKK 3,054
million). The amount was mainly made up of DKK
5,664 million in payments from companies within
the ISS Group, DKK 1,179 million in external inter-
est payments, net and DKK 1,022 million in repay-
ments of borrowings. This was partly offset by pro-
ceeds from borrowings of DKK 4,425 million. Re-
payment of borrowings was related to the refinanc-
ing of the Term Loan B and Acquisition Facility B
facilities expiring in 2013, as well as drawings on
working capital facilities.
Strategic divestments and
investments
Divestments and assets held for sale
The ongoing review of the strategic rationale and fit
of business units led to the identification of certain
activities that are non-core to our strategy. In 2013,
we divested the pest control activities in 12 coun-
tries mainly in the Pacific and Western Europe re-
gions for a total enterprise value of approximately
DKK 2 billion. Other divestments included the Nor-
dic damage control activities and other minor activi-
ties within property, cleaning, security and support
services in the Nordic and Western Europe regions
and the USA.
The proceeds from the divestments were used to
repay a significant part of our debt, thereby contrib-
uting to the continued deleveraging of ISS, see net
debt below.
Our continued strategic focus led to six businesses
being classified as held for sale at 31 December
2013, including four businesses in the Nordic and
Western Europe regions, one activity in the Asia
region as well as one in the Pacific region. At 31
December 2013, assets and liabilities held for sale
amounted to DKK 1,962 million and DKK 1,016
million, respectively.
Divestments completed in 2013 and revaluation of
net assets of businesses classified as held for sale
resulted in a net gain of DKK 49 million, which
comprises a gain of DKK 638 million recognised in
Other income and expenses, net as well as im-
pairment losses on goodwill and customer con-
1405014EogSN73917
Financial review | Our performance 18
tracts of DKK 556 million and DKK 33 million, re-
spectively.
Intangible assets, goodwill and goodwill
impairment
Intangible assets at 31 December 2013 were DKK
20,543 million and comprise mainly goodwill and
customer contracts.
At 31 December 2013, goodwill was DKK 18,813
million, a decrease of DKK 2,404 million relative to
31 December 2012 which was mainly due to for-
eign exchange adjustments of DKK 817 million,
impairment losses of DKK 866 million and transfer
of assets classified as held for sale of DKK 594
million. Of the total impairment losses, DKK 310
million derived from impairment tests in France due
to an update of the assumptions in the business
plan and DKK 556 million derived from completed
divestments and businesses classified as held for
sale, mainly in Western Europe and the Pacific
region.
Capital structure
Equity
Total equity amounted to DKK 2,179 million at the
end of 2013 equivalent to an equity ratio of 4.7%.
The DKK 1,476 million decrease in equity was pri-
marily driven by dividend paid of DKK 1,120 million,
negative currency adjustments relating to invest-
ments in foreign subsidiaries of DKK 539 million
and the net loss for the year of DKK 141 million
which were partly offset by actuarial gains of DKK
271 million, net of tax. The negative currency ad-
justments were mainly related to a depreciation of
AUD, NOK and TRY against DKK.
Net debt
Net debt amounted to DKK 18,091 million, a de-
crease of DKK 2,206 million compared with 2012.
Following the refinancing of ISS A/S's EUR 600
million Second Lien Facility the external debt in ISS
Global A/S increased as the tranches refinancing
the EUR 600 million Second Lien Facility were split
between two new senior tranches at ISS Global A/S
of EUR 330 million and USD 350 million, respec-
tively. This increase in external debt in ISS Global
A/S was more than offset by lower debt to compa-
nies within the ISS Group of DKK 2,019 million and
higher receivables to companies within the ISS
Group as a result of the refinancing, resulting in a
decrease in net debt.
Financial review | Our performance 19
Financial income and expenses, net
Financial income and expenses, net decreased by
DKK 372 million or 18% to a net expense of DKK
1,751 million. The decrease was mainly the result
of the redemption of the 11% Senior Notes in De-
cember 2012.
In 2013, financial income and expenses, net, main-
ly comprised DKK 1,347 million of external interest
expenses, net, DKK 238 million in net loss on for-
eign exchange and unamortised financing fees
DKK 80 million being expensed as a consequence
of amendments and extension of the Senior Facili-
ties Agreement.
Tax
Effective tax rate
The effective tax rate for 2013 was 44.9% com-
pared with 62.1% in the same period of 2012, cal-
culated as Income taxes of DKK 748 million divided
by the Profit before tax and goodwill impairment /
amortisation and impairment of brands and cus-
tomer contracts of DKK 1,666 million. The rules
concerning limitation on the deductibility of financial
expenses in Denmark, France and Brazil impacted
the 2013 tax expense adversely by approximately
DKK 111 million. The limitation is significantly im-
pacted by non-deductible costs relating to the 2013
refinancing. The effective tax rate amounted to
40.3% when adjusted for the impact of the Danish
limitation on deductibility of financial expenses.
Further, a valuation allowance on deferred tax as-
sets in France and the USA following an update of
the assumptions in the business plans had an ad-
verse impact on the effective tax rate. Adjusted for
this, the effective tax rate was 30.2%.
1405014EogSN73918
Strategy
— The ISS Way
Looking back, we achieved significant
progress in realising our vision in 2013.
We have identified five key value-driving
themes which capture the essence of
The ISS Way and which will act as our
strategic compass in connection with our
implementation efforts going forward.
In line with The ISS Way, they are all
about focusing our efforts on what will
have greatest positive impact on the
delivery of our value proposition and
thereby our own value creation.
Our vision
"We are going to be
the world's greatest
service organisation”
This is an ambitious goal, not least when you con-
sider that we are a team of 533,397 individuals,
with millions of customer interactions every day. To
get there we will self-deliver a consistent and excel-
lent service performance, as defined in our value
proposition, enabling our customers to focus 100%
on their core business.
Our vision gives us a clear sense of purpose and
promotes pride in the role we play, individually and
as an organisation, and inspires us to drive the
accelerated implementation of our five strategic
themes described below under The ISS Way. It is
the responsibility of our leaders to transfer the vi-
sion into a shared ambition among all our employ-
ees so as to make the difference between good
and great every day on every site.
1405014EogSN73919
Strategy — The ISS Way | Our business 20
How will we know when we have reached our vi-
sion? When our customers as well as our employ-
ees have become loyal ambassadors and active
promoters of the ISS brand and the services we
deliver. We measure this through our globally ap-
plied employee and customer net promoter score
methodology.
The following sections outline our overall strategic
direction and the strategy we are pursuing to fulfil
our vision. However, before we move to the details
of the strategy, we will outline some key elements
of the market in which we play an active role.
Our marketplace
The market for facility services has an estimated
value of =USD 1 trillion (outsourced market).
The market includes services such as cleaning,
catering, property maintenance and security. Ser-
vices are delivered on a recurring basis such as
daily cleaning of facilities or the running of an in-
house canteen. Services can be delivered as single
services, multi-services and/or integrated facility
services (IFS). Furthermore, the services can be
offered to customers as a self-delivered service or
as a managed service, which means the service is
managed by one party (the facilities management
firm) on behalf of the customer and delivered by
other parties (sub-contractors). In addition to recur-
ring business, services can also be delivered on an
ad-hoc basis such as hospitality events. These so-
called once-only jobs are typically delivered as sin-
gle-services directly on order from the end-user and
are often provided by existing service providers. In
our case, approximately 80 percent of our revenue
is based on recurring business (portfolio business)
while the balance comes from once-only jobs (non-
portfolio business).
The contractual relationship with the customer is
either "input-based” or "output-based”. Generally
speaking, the former involves committing an agreed
number of full-time employees to the delivery of the
given service at a set cost plus a margin to the pro-
vider while the latter (also known as a "performance
contract”) involves establishing together with the
customer specifications for the result (the "output”)
of our service delivery, e.g. a certain measurable
level of cleanliness. Traditionally, the market has
been dominated by input-based contracts while
output-based contracts are gaining ground.
There is also a geographical aspect to the market.
Some markets are mature and have shown them-
selves to be receptive to new developments, e.g.
output-based contracts and IFS, not least the mar-
kets in Europe, while the emerging markets are
growing quickly from a base dominated by the more
traditional input-based contract structure. There are
also differences within the overall market types
(mature and emerging). In the markets of northern
Europe, iFS is a known quantity where a material
part of the market is already receptive to service
bundling and integration while in the southern Eu-
ropean markets service integration is at a more
nascent stage.
In other words, there are many different ways to
address this market and it has many different as-
pects to consider. We therefore see it as para-
mount that our strategy clearly defines which part of
the market we are targeting.
Our market focus
Our market choices have naturally focused on iden-
tifying the market segments where our value prop-
osition resonates and that have the greatest poten-
tial to contribute to the value we want to generate
for our stakeholders. In this vast and diverse mar-
ket, ISS has chosen to focus on large and medium-
sized Business-to-Business customers such as
banks, hospitals, the food manufacturing industry or
remote sites where the need for our services
makes a difference to their business as a strategic
partner helping to fulfil their objectives. We provide
these customers with a value added offering which,
in addition to a cost-efficient solution, delivers
among other things risk management and a sus-
tainable and transparent solution.
Our focus is on the self-delivery of on-site facilities
services within cleaning, property services and ca-
tering, globally and locally. We deliver these offer-
1405014EogSN73920
Strategy - The ISS Way | Our business 21
ings as single service, multi-services or IFS. We
further provide other support services, security and
facilities management principally as part of IFS
contracts but also as single services. Our core ser-
vices share a number of traits. They are site-based,
asset-light, personnel-intensive, suitable for self-
delivery and integration with the other services we
provide. We also provide mainly services, which
are delivered on a recurring basis and thus give us
greater top-line transparency. Our intention is that
non-portfolio ("once-only”) jobs will principally be
provided to our existing customers as an integral
part of our overall offering.
How do we meet the customer's
needs?
Basically, our job is to take over on-site facility ser-
vices that are non-core for our customers. Hence,
we ensure that facilities are clean, that users are
courteously greeted and guided, that facilities have
a consistently comfortable temperature and are
properly maintained, that users can get a coffee or
a meal, that access is monitored and controlled and
that the delivery of all this is orchestrated in an effi-
cient manner. In some cases, we provide only one
service, and in some cases we provide many ser-
vices. In this way, we meet the basic needs of the
customer by providing a service vital to ensure the
proper and orderly operation of their facility.
RER EGNET N.S TERE
Service performance.
EFFECTIVENESS
" …facilitating
our customers”
purpose…
EASE | EXPERIENCE
through people
empowerment
However, the actual delivery of the service is only
part of the value we contribute. The elements of our
value proposition actually assist customers in living
up to their specific purposes and priorities, e.g.
when:
« a customer in the oil and gas industry requires
us to deliver reliable and consistent health and
safety compliance given the hazardous envi-
ronments in which they work;
« a hospital demands our reliable delivery of spe-
cific and measured levels of hygiene to minimise
the risk of cross-infection and with the overall
purpose of healing patients; or
+ a slaughterhouse needs us to help them meet
certain regulatory requirements for cleanliness
levels and to minimise the risk of infections or
food poisoning and overall purpose of ensuring
quality and avoid product recalls.
Our self-delivery model is a fundamental compo-
nent to successfully delivering our value proposition
to the customer. Without our own frontliners where
we can establish a common corporate culture,
brand, values, processes and procedures (to name
but a few) we would not be able to lead the way in
service performance that facilitates our customers'
purposes. Our self-delivery model allows us to ad-
dress core customer needs such as risk transfer,
brand protection, flexible delivery and integration of
services. Caring as if the customer's business were
our own is at the heart of each empowered ISS
individual who makes a difference in facilitating our
customers' purpose. Ultimately, it is about unleash-
ing the potential of "The Power of the Human
Touch” which is our lever in becoming the world's
greatest service organisation.
Self-delivery allows us to provide the customer with
a transparent and sustainable solution as we can
impact the cost of delivery through the implementa-
tion of our best practices, processes and service
integration. With our own frontliners, we are also
able to share site-level information with customers
to facilitate strategic and operational decision-
making by the customer with respect to the optimi-
sation of their facility portfolio.
1405014EogSN73921
Strategy -- The ISS Way | Our business 22
What does this imply for our
strategic direction?
To continue to deliver — and refine — this value
proposition, requires that we continue the imple-
mentation of our strategy. We are aligning the or-
ganisation behind our value proposition by invest-
ing in leadership and supplementing service and
segment capabilities (excellence) where necessary.
We are divesting businesses that are not core to
the delivery of our promise. We are transitioning
our commercial focus towards a more specific ap-
proach to customer segments where our value
proposition clearly resonates. We are also looking
to align our business behind optimising delivery to
our chosen customers. We are working to ensure
that the organisation is IFS ready,
as this delivery type continues to grow apace as
customer demand continues to evolve. We further-
møre seek to extract synergies such as through
implementing standard procurement processes.
Our characteristics will change as a consequence
of our strategy and as we continue on our journey
of strategy implementation. Our customer segment
mix will evolve and our IFS activities will grow as a
percentage of Group revenue. Emerging markets
will also be accretive to our top-line growth and be
an ever-bigger part of our global footprint.
The ISS Way
We are on the right path. We have the right strate-
gy. We continue to implement this strategy. We just
want to do it quicker. Going forward we have there-
fore identified five strategic themes which we will
focus on and which will move us closer to realising
our vision. These are: 1) Empowering people
through great leadership; 2) Transforming our cus-
tomer base; 3) Ensuring a fit for purpose organisa-
tion; 4) IFS readiness; and 5) Striving for excel-
lence — please see below for elaboration.
The past years have been an exciting period for
ISS — not least in terms of our transformation into a
global provider of facility services. The continued
implementation of The ISS Way — in the form of the
five strategic priorities — will take us to the next lev-
el of service performance to the benefit of ali our
stakeholders.
E] 1. Empowering peo-
ple through great leadership
Leadership is our key strategy
enabler. Great leaders extract
the value embedded in The
ISS Way by establishing a
sense of purpose and driving
alignment. Through effective
communication, our leaders
empower people, motivate the
organisation and attract new
talent. We will continue to in-
vest in leadership through de-
velopment programmes — at
many levels of our organisation
— and in the implementation of
our Leadership Principles.
We have established a number
of measures to follow the de-
velopment of leadership at ISS.
We have a globally aligned
measure of customer and em-
ployee satisfaction (the "net
promoter score” methodology)
as well as a leadership survey
measure. There is a direct cor-
relation between these scores
and the financial and opera-
tional measures we follow —
strong leadership and employ-
ee engagement translates into
strong financial performance.
Aa 2. Transforming our
customer base
We must make conscious
choices with respect to our
customer focus to deliver a
unique and compelling value
proposition. Making choices
also means making trade-offs.
Implementation of The ISS
Way will continue to drive the
1405014EogSN73922
transformation of our customer
base towards customers who
are more likely to appreciate
the benefits of our offering and
with whom our value proposi-
tion resonates. We must match
our value proposition with our
customer base.
3 3. Fit for purpose
organisation
Transforming our customer
base will require organisational
changes. Over time, we will
migrate from a service-based
to a customer-based organisa-
tion model. Ensuring a cus-
tomer-oriented, lean and effec-
tive organisation is at the heart
of The ISS Way. By extracting
synergies, sharing best prac-
tises, enabling the deployment
of excellence and balancing
group standardisation with
local adaption, we can optimise
the delivery of our value prop-
osition. Furthermore, ensuring
that the organisation mirrors
our choices on the customer
base facilitates our commercial
strategy and allows us to con-
tinue to right-size the organisa-
tion and optimise above unit
costs (overhead).
& 4. Ready to
deliver IFS
Our IFS revenue has almost
trippled since 2006. Our ability
to self-deliver the services
needed to run a facility as a
Strategy — The ISS Way | Our business 23
"one-stop shop” for customers
locally, regionally and globally,
is at the core of our differenti-
ated value proposition. IFS
readiness is therefore key to
serving global customers and
grasping new local market op-
portunities. To this end, we
have established a number of
IFS Centres of Excellence
globally. These centres are
used as showcases to demon-
strate to customers and ISS
managers, the benefits and
workings of IFS.
2 5. Striving for excel-
lence
To become the world's great-
est service organisation, we
must identify and implement
relevant excellence initiatives
per site in an aligned and
standardised way. To achieve
this, excellence must permeate
the entire organisation from
procurement to frontline train-
ing. It is not about implement-
ing everything — it is about
identifying, prioritising and driv-
ing the excellence initiatives
that generate the most value.
An example is our efforts in
procurement where we have
established a central global
procurement team which has
mapped our major spend cate-
gories. Extracting procurement
benefits on these major cate-
gories is well under way and a
substantial further savings po-
tential is being pursued.
KPIs — Measuring our performance | Our business 24
KPIs — Measuring
our performance
Achieving our vision of becoming the
world's greatest service organisation is an
ambitious goal. To ensure that we are
moving in the right direction and pro-
gressing in terms of our five strategic
themes, we measure our performance
using a wide range of financial and
non-financial KPIs.
At ISS, we have a long history of measuring our
financial performance at all levels of the organisa-
tion — from Group level and all the way down to the
individual contracts. We measure our financial per-
formance throughout the Group mainly in terms of
our three primary financial KPIs: 1) organic growth;
2) operating margin; and 3) cash conversion. These
KPIs are well-established and integrated in bonus
plans throughout the organisation to ensure that
objectives are aligned at all levels of the organisa-
tion.
FINANCIAL KPIs
DESCRIPTION QF MEASURE
In addition to our three primary financial KPIs, we
measure a number of non-financial KPIs at various
levels of the organisation. In recent years, we have
worked on implementing balanced scorecard re-
porting and on defining which KPIs, financial and
non-financial, could be relevant for measuring and
reporting on a regular basis. As we continue our
strategy implementation and progress on our five
strategic themes, we also continue to implement
additional relevant KPIs.
The following are examples of the most significant
financial and non-financial KPIs at Group level that
we measure and report on a regular basis. The list
is not exhaustive, as we measure a number of oth-
er KPIs at Group level as well as at other levels of
the organisation.
Most of the KPIs are relevant for all five strategic
themes. The descriptions set out below refer only to
the theme(s) that are the most relevant for each
KPI.
REFERENCE TØ STRATEGIC THEME
Organic growth
new customers
Operating margin
more efficiently.
Cash conversion
and borrowings.
1405014EogSN73923
Measures our ability to grow our business
organically by increasing sales to existing and
Measures our ability to improve operational
performance by managing costs and working
Measures our ability to convert operating
profit into cash. A strong cash conversion
allows us to deleverage by repaying loans
|A| Transforming our customer base
Ej Ready to deliver IFS
A Transforming our customer base
Fit for purpose organisation
G Ready to deliver IFS
Striving for excellence
Aa Transforming our customer base
Fit for purpose organisation
Striving for excellence
NON-FINANCIAL KPisS
Employee engagement
Employee Net Promoter Score
(E(NIPSN
Lost working days
Customer Net Promoter Score
(NPS)
Revenue by segment
Revenue by sensice
Revenue by delivery
Share of revenue self-delivered
Portiolio value including grow th
and 1055 rate
Cost percentage benchmark
IFS share of revenue
1405014EogSN73924
delivery types.
KPIs — Measuring our performance | Our business 25
DESCAIPHION QF MEASURE
Measures the engagement of cur employees
on a scale from i to 5. The measure and the
result of the survey for 2013 is described in
"Qur employees".
Measures the loyalty of our employees
through a direct question of how likely the
employees is to recommend 155 io others a5 a
place to work.
The estimated number of full-day equivalent
working days lost due to warkplace injury
and/or work-related iliness for people
employed in the 12-mønth reference period.
Ieasures inhe loyalty of our customers
through a direct question of how likely the
customer is ta recommend 155 to others a5
business pariner.
ileasures the revenue solit betvseen our
identified customer segments.
Measures the revenue split betøveen our
senÅces.
Measures ihe revenue solit between our
Mleasures praportion ef self-delivered
revenue to total revenue.
tideasures the revenue value of cur recurring
business (i.e. once-only jobs are not
induded) based on current base of customer
contracts as well as the portfolio grovdh and
loss rate.
Measures the level of variable and fixed costs
per country for benchmarking purposes.
Measures ihe relative share of FS revenue to
total revenue.
|
i
1
i
i
'
|
!
!
i
BG DB
eres mr
Empowering people through great
leadership
Empowering people through great
leadership
Empowering people through great
leadership
aA Transførming our customer base
Striving for excellence
aa Transtorming cur customer base
Aa Transformir.g Cur custorner base
Aa Transforming our customer base
8 ready to deliver IFS
Striving for excellence
aA Transforming our customer base
Transforming our customer base
Fit for purpose organisation
Ready tø deliver IFS
Striving for excellence
Business
development
Consistent with our strategy, we have
developed our business substantially over
the past decade. Our characteristics have
changed — and they will continue to
change as we continue on our journey
of strategy implementation.
Our business model has transformed from a prod-
uct-oriented to a customer-oriented approach fo-
cusing on developing leading value propositions to
our chøsen customer segments founded on our
philosophy of self- delivery of excellence within
each of our service offerings.
During 2013, we continued to make progress in
developing our business. Focused on customer
needs, we continued to leverage efficiencies and
implement best practices globally in order to align
the organisation behind our value proposition and
the consistent delivery of excellence. We have,
over the past decade, built global capabilities in the
delivery of a well-defined set of services which are
equally well-suited for delivery as a single service
or as part of an IFS offering. The ISS Way is fo-
cused 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 craft market-leading value
propositions by customer segment. We are unique-
ly positioned to grasp the huge opportunities in our
markets and we are putting our global footprint to
work by meeting increased demand from multina-
tional corporations for the delivery of IFS across
borders.
The progress we have made and how the charac-
teristics of our business have changed since 2006
is demonstrated by the following three measures:
= Revenue by customer segment
«+ Revenue by service delivery type
+ Revenue by service type
1405014EogSN73925
Business development | Our business 26
Revenue by customer segment
Revenue is classified into ten customer segments
identified by ISS, based on the section classifica-
tion level of the International Standard Industrial
Classification.
Our service concepts are tailored to address specif-
ic customer needs in order to provide added value
offerings to our selected customers. This entails
defining variations of our service offerings built on
our fundamental competencies and presenting an
integrated solution of services customised for a
given segment. We focus on key accounts, large
and medium-sized Business-to-Business custom-
ers where the need for our services makes a differ-
ence to their business as a strategic partner helping
to fulfil their objectives. It is also within this segment
that our value proposition resonates fully as these
customers demand a value-added solution with
characteristics such as risk management and brand
protection. This segment already represents a ma-
jority of our revenues and we plan to continue build-
ing strategic relationships with our largest custom-
ers.
From an industry segment perspective, Business
Services & IT, Industry & Manufacturing, Public
Administration and Healthcare are our largest and
most important customer segments, and our focus
remains to develop service solutions for these
segments. Not least Business Services & IT has
grown as a result of our focus on this segment
through our Global Corporate Clients organisation
and regional and national sales force efforts. This
focus produced several major contract wins, such
as the multinational IFS contract with Barclays in
2012 and Nordea in 2013, increasing revenue in
the Business Services & IT segment, which in-
creased its share of revenue to 29% and thereby
remained the largest customer segment in 2013.
The share of revenue from Industry & Manufactur-
ing remained on a level with 2012 at 14% in 2013,
while revenue from Public Administration de-
creased from 14% in 2012 to 13% in 2013. The
slight decrease is a result of divestments, the im-
pact from reduced public spend in several countries
in Western Europe and the decision to exit public
sector customers in certain regions. The revenue
share from Healthcare was 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 IFS.
In a single-service outsourcing, the customer buys
one service solution from ISS, for example by out-
sourcing their catering services.
In a multi-service outsourcing, which consists of
two or more services, but not a fully integrated solu-
tion, the customer achieves the same benefits as
with single-service outsourcing, but with the addi-
tional benefits of service integration where possible.
In an IFS solution, ISS delivers two or More ser-
vices under one contract with a single point of con-
tact on-site, which allows us to integrate the facility
service functions taken over by ISS at the custom-
er's premises. The customer receives both the full
potential of single-service outsourcing and the ad-
vantages of integrating services, including cost
efficiencies and a more efficient and flexible service
set-up.
Our strategy clearly focuses on IFS solutions to our
selected customers. This has over the past decade
led to significant growth in our IFS revenue, from
approximately DKK 8 billion in 2006 to approxi-
mately DKK 21 billion in 2013. Our IFS solution
revenue base has been fully organically grown
through our Global Corporate Clients organisation
as well as at country and regional level.
We will continue to ensure that our organisation is
ready to deliver IFS, something that we have identi-
fied as one of the key focus areas of our strategy.
Accordingly, we expect our IFS revenue to grow
further as we continue our strategy implementation.
1405014EogSN73926
Business development | Our business 27
REVENUE BY CUSTOMER SEGMENT
% of Group revenue
EEN 29% Business Servicer & IT
CR 14% industry & Manufacturing
” 13% Public Administration
11% Healthcare
7% Retail and Wholesale
å 7% Transportation & Infrastructure
i 4% Energy &% Rezourcez
al % Hotels, Leisure & Entertainment
od 4% Food & Beverage
' 3% Pharmaceuticals
4% Other
0 5 10 15 20 25 30
REVENUE BY DELIVERY HREEE
DKK billion
2013: 57%
2005: 71%
2013: 17%
2006: 15%
sd 2013: 26%
| 2006: 14%
ME Single-sernces
1.3 Multi-services
å Integrated facility services
REVENUE BY SERVICE
DKK billion
BERN 2013: 49%
BEEN 2006: 57%
2013" 20%
2006: 23%
od 2013: 11%
7 2006: 7%
——] 2013: 8%
ml 2006: 5%
cd 2013: 8%
j 2006: 4%
j 2013: 4%
J 2006: 4%
0 10 20 30 40 50
HE Cleaning services
Property services
[3 Catering services
I Support services
3 Security services
-J Facility management
In 2013, IFS generated 26% of our revenue com-
pared with 14% in 2006. Multi-services and single
services generated 17% and 57%, respectively,
compared with 15% and 71% in 2006. The increase
in the share of revenue origin from delivering IFS or
multi-services increased by 14 percentage points
from 2006 to 2013 with a similar reduction in the
share of revenue stemming from delivery of single
services. This illustrates that we have continued to
attract customers who see the benefits of our IFS
offering, and have thus progressed in implementing
our strategy.
The relative share of revenue origin from delivering
multi-services or IFS solutions is increasing in all
regions, with the largest increases seen in Western
Europe (primarily in the United Kingdom, Switzer-
land, Germany, Spain and Turkey), North America
and Asia, driven by the large multinational IFS con-
tract wins in recent years but also by large local
multi-service and IFS contracts. Multi-service and
IFS contracts allow ISS to exploit synergies in the
provision of services and create stronger customer
relationships.
Revenue by service type
ISS offers a range of facility services within cleaning
services, support services, catering services, secu-
rity services and facility management. Our focus is
to understand customer needs and provide the
services required to meet them.
The transformation from primarily being a cleaning
provider to becoming a full facility service provider
is illustrated by our increasing volume of non-
cleaning services and the fact that non-cleaning
services now make up 51% of our business com-
pared with 43% in 2006. Individually, all service
types have grown in absolute terms.
Cleaning services have been at the heart of our
operations for a very long time, and over the years
we have developed a wide range of cleaning ser-
vices — from providing basic general cleaning to
highly specialised niche cleaning services. Our
cleaning services offering encompasses a range of
services within daily office and facility cleaning for
commercial customers, industrial cleaning, cleaning
in transport systems, dust control, washroom ser-
vices and specialised cleaning, such as cleaning of
nuclear plants, hospitals or food production facili-
ties. Our cleaning service offering in many instanc-
Business development | Our business 28
es also serves as an entry point to supply additional
services to customers.
In 2013, cleaning services remained our largest
business area with revenue of DKK 38.5 billion,
representing 49% of Group revenue down from
57% (DKK 32.1 billion) in 2006. In line with our
strategy to broaden the service platform, cleaning
services' relative share of Group revenue has con-
sistently declined in recent years, while the revenue
share from support services, catering services and
security services in particular has steadily in-
creased. Since 2006, the cleaning services share of
revenue has therefore continued to decrease partly
as a result of the building of the service platform
through acquisitions of services other than clean-
ing, especially in 2007-2009, and partly as a result
of the subsequent utilisation of the existing service
platform to grow organically since 2010. In the short
term, we may, experience a slight increase in the
cleaning services share of revenue as we continue
to divest businesses that are non-core to our strat-
egy.
Property services includes building maintenance,
technical maintenance, landscaping and pest con-
trol.
In 2013, revenue from property services was DKK
15.3 billion, representing 20% of Group revenue,
down from 23% (DKK 12.6 billion) in 2006. Property
services revenue was adversely affected by a
number of divestments completed in 2011, 2012
and 2013, including the pest control! activities in 12
countries as well as the Nordic damage control
activities in 2013. These divestments involved non-
portfolio-based services and thereby underline the
strategic focus on portfolio-based on-site services.
Catering services includes in-house restaurants,
hospital canteens, catering services to remote
sites, corporate catering and office catering ser-
vices.
In 2013, revenue from catering services amounted
to DKK 8.5 billion (2006: DKK 3.6 billion) equal to
11% of Group revenue, which is an increase of 4
percentage points from 2006 despite the divest-
ment of the coffee vending business in Denmark
and Norway in late 2011. In 2013, catering services
continued to be positively impacted by cross-selling
to existing customers combined with an increased
level of catering services delivered under some of
the large IFS contracts.
1405014EogSN73927
Business development | Our business 29
Support services includes the operation of recep-
tions, internal mail handling, scanning, other office
logistics, call centres, manpower supply and out-
placement services.
In 2013, support services accounted for approxi-
mately 8% of Group revenue, up from 5% in 2006.
In absolute figures, revenue increased from DKK
2.9 billion in 2006 to DKK 6.5 billion in 2013. In
2013, support services were favourably impacted
by an increase in services provided to Global Cor-
porate Clients customers and cross-selling of ser-
vices mainly to cleaning customers, which was
partly offset by lower demand for manpower supply
services.
Security services includes manned guarding, ac-
cess control and patrolling of customer facilities and
the installation of alarm and access systems.
Revenue was DKK 6.3 billion, equivalent to 8% of
Group revenue in 2013, an increase of 4 percent-
age points from 2006 (DKK 2.4 billion). The in-
crease is mainly due to strategic acquisitions during
the period, including the acquisition of the Indian
company SDB Cisco Ltd. in 2010 which added ap-
proximately DKK 400 million in annual revenue.
The growth in our security services mainly takes
place in the emerging markets while in certain ma-
ture markets we see greater benefits in establishing
strategic partnerships with large security service
providers. This led to the divestments of security
activities in Norway, the Netherlands and Denmark
in 2012 and 2013, respectively.
Facility management includes on-site manage-
ment of facility services, change management,
space management and consulting. Revenue in-
creased to DKK 3.3 billion in 2013 (2006: DKK 2.1
billion), equivalent to 4% of Group revenue, the
same relative share as in 2006.
1405014EogSN73928
Corporate
responsibility
We believe that long-term sustainable
business success relies on a high level
of Corporate Responsibility (CR), as
economic, social and environmental
issues are inevitably interconnected.
Due to our long-held corporate values
for quality, honesty and responsibility,
our commitment to CR has evolved
organically, and today it is an integral
part of our corporate values and our
strategy The ISS Way. In addition,
credible and effective risk management
of HSE and labour law management is
a major part of the value proposition
we offer.
As a global company with more than 533,000 em-
ployees serving both private and public sector cus-
tomers in more than 50 countries, we influence the
lives of many people every day through providing
employment and training as well as safe and
healthy work environments for millions of employ-
ees and customers in the facilities we service.
Our business is based on human capital. We need
capable and engaged employees who are motivat-
ed and proud of working at ISS to ensure a positive
customer experience. We believe, that having
sound CR policies embedded in the way we con-
duct our business is the best way to motivate our
key resource, our employees, and thereby to take
care of our customers. If our employees feel safe,
satisfied and engaged, our customers will experi-
ence the service we deliver in a more positive way.
1405014EogSN73929
Corporate responsibility | Our business 30
Furthermore, CR is becoming increasingly im-
portant for our customers as they strive to improve
their own business performance and make a posi-
tive impact on society.
The leading global companies require a consistent
CR performance from their partners, which is in-
creasingly becoming a key factor in winning and
retaining contracts with most customers. It is there-
fore important for us to be able to demonstrate that
we understand their CR goals and are capable of
addressing them. Our systematic approach to CR,
such as our Group Health, Safety and Environment
management system, supporis this ability and un-
derstanding and helps us in our efforts to become a
preferred partner to our customers and the employ-
er of choice in our industry.
We respect, support and promote human rights and
are aligned with the ambitions stated in the United
Nations Declaration of Human Rights and the Core
Conventions of the International Labour Organisa-
tion. ISS has made a strong commitment as a sig-
natory and supporter of the United Nations Global
Compact since its inception in 1999. in line with
membership regulations, we are committed to
aligning our strategy and operations with the ten
Global Compact principles on human rights, labour
rights, environmental protection and anti-corruption.
COMPULSORY REPORTS
This CR chapter does not constitute ISS's full report
on CR. The full CR Report as per section 99a of the
Danish Financial Statements Act is available at
www.responsibility.issworld.com /report2013 and in
accordance with guidelines from the UN Global Compact
to the signatory companies. The CR Report also serves as
ISS's communication on progress in implementing the ten
principles of the Global Compact.
Our approach to CR
We have adopted a principles-based approach to
CR that contributes to sustainable development as
defined by the international community. This ap-
proach effectively integrates universally accepted
principles into the way we conduct our business,
forming a foundation that is embedded in our cor-
porate values, our Code of Conduct and our strate-
gy. We have developed and rolled out across the
Group a strategy for Health, Safety and Environ-
ment (HSE) and CR. This strategy supports the
overall Group strategy and the HSE Vision "100":
1: We aim to be number 1 in our industry and rec-
ognised as an industry leader in the way we de-
liver Health, Safety and Environmental perfor-
mance;
0: We operate with 0 fatalities at our workplaces;
and
0: We incur 0 serious incidents and occupational
injuries at our workplaces.
Our initiatives and actions
For the past four years we have built and imple-
mented an operational framework to create a con-
sistent approach to HSE across the Group. The
objective is to achieve continuous improvements in
quality and performance. The Group HSE manual,
based on four international standards (OHSAS
18001, ISO 14001, ISO 22000 and ISO 9001), pro-
vides a systematic approach to HSE management
across the Group. Our systematic approach sup-
ports the delivery of our services consistently
across the world and thereby helps our customers
reduce their risks.
To improve our overall HSE and CR performance,
a Group HSE and CR action plan is issued each
year. The plan is based on our current HSE and CR
performance, and the stated targets and actions
are reviewed and amended annually as deemed
appropriate to meet our HSE Vision. Actions that
countries were required to incorporate in their coun-
try action plans in 2013 were for instance:
+ Individual Personal Safety Action Plan for man-
agement including KPIs (lagging and leading in-
dicators).
+ Establishment of an HSE Leadership Team
comprising the country management team and
the country's HSE responsible.
Corporate responsibility I] Our business 31
A part of the overall strategy for HSE and CR is to
demonstrate our performance through measuring,
monitoring and reporting. To support this goal, in
2011 we began to implement an HSE IT tool, a
performance management system that enables us
to monitor and document our HSE performance,
compliance and risk management. The implemen-
tation continued in 2013, and the system has now
been implemented in all regions of the Group. Our
HSE system has two main purposes; first and very
importantly raising the awareness for employees
and stakeholders to ensure that HSE gets priori-
tised, and secondly improving the quality of our
reporting globally. We believe that a systematic
approach to reporting, investigating and developing
corrective actions will improve our HSE culture.
More importantly, it will also help to ensure that
responsibility and ownership of HSE is transferred
to operations, i.e. the individual ISS regions, coun-
tries and business units.
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 keep
ISS management and external stakeholders in-
formed of our performance and track progress to-
wards the achievement of our HSE and CR com-
mitments.
In order to stay on course and keep HSE in con-
stant focus, we run an annual global campaign "Me
and You'. The campaign covers safety, health and
the environment and emphasises that HSE is a
common responsibility and that we all play an im-
portant role in HSE. Since the launch in 2010, the
campaign has been repeated each year but with
changing focus points reflecting the challenges
currently faced within the three areas. In 2013, the
safety campaign focused on working at heights,
slips, trips and falls, driving safely and working
alone. The health campaign focused on a healthy
back, chemicals and personal protection equip-
ment, while the environmental campaign focused
on reducing energy, reducing waste and conserving
water.
Environment is one area that we plan to focus on
even more in the coming years. The main environ-
mental impact from ISS's operations derives from
our cleaning services and consists of the use of
chemicals as well as water and energy consump-
tion. We also emit CO2 through the use of cars in
our operations and travel activities.
1405014EogSN73930
There are three ways we can influence the extent
of our impacts:
« Through conscious behaviour in terms of con-
sumption at our own sites;
+ Through the design of processes and the
equipment we use at customer sites;
«+ Through the portfolio of services we offer to our
customers.
We have developed the Green Cleaning Tool, a
simple computer-based program to help our opera-
tions develop and offer our customers cleaning
solutions that use less chemicals, less energy and
less water. We are now able to govern our own
impact on the environment in a more structured and
systematic way with the implementation of the HSE
manual, including the management and reporting
system, In addition, many ISS operations are
already certified to environmental standards such
as ISO 14001.
In 2013, we also continued to roll out the ISS Green
Offices Programme (GOP) bringing the number of
participating countries to eight. The GOP is an of-
fice-based programme designed to reduce the envi-
ronmental impact of our own ISS offices and daily
work practices. By changing our behaviour, we can
reduce our environmental footprint by using re-
sources efficiently and disposing our waste respon-
sibly.
Other CR initiatives
Our supply chain is part of our value proposition
and to ensure that our suppliers, subcontractors
and other providers are aligned with our commit-
ment, we have developed and implemented the
ISS Supplier Code of Conduct. It contains ISS's
key principles and requirements to our suppliers,
subcontractors and other providers with respect
to responsible social, environmental and ethical
practices.
All suppliers — and their sub-suppliers — must com-
ply with this code and ISS expects all suppliers to
communicate the obligations set out in the code
and ensure compliance with the code throughout
their organisations and supply chains.
1405014EogSN73931
Corporate responsibility | Our business 32
We have also developed a supplier self-
assessment questionnaire for our major suppliers
dealing with 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 CR scope. In 2013, we fol-
lowed up on this process with an audit carried out
at a supplier's factory in Ningbo, China.
Our performance and targets
Consistent with the ISS values, our highest priority
is to protect our employees from injury. We will be
steadfast in our commitment to make our workplac-
es free from hazards, and we will operate under the
assumption that all injuries can be prevented and
that injuries are unacceptable. Our goal will always
be zero injuries and zero environmental incidents,
and this must be clear to everyone in the organisa-
tion.
The following Group targets were established for
2013:
1. Fatalities
In accordance with the HSE Vision, our first priority
is to prevent fatalities at our work places. Our
Group target is zero.
2. Lost Time Injury Frequency (LTIF)
The Group target for 2013 was to reduce LTIF by
45% relative to our baseline figure to less than 7.
3. Lost Work Days (LWD)
The Group target for 2013 was a reduction of 35%
per 1,000 exposure hours relative to the baseline
figure in 2010.
4. Audits
To carry out audits on CR issues of at least 20% of
the countries we operate in.
5. Employee engagement survey
Conduct an annual survey with the target of having
given 400,000 of our employees in 50 countries an
opportunity to respond to the questionnaire by the
end of 2013.
Our performance in relation to the targets is sum-
marised on the next page.
Sadly, the 2013 reporting shows a number of fatali-
ties associated with our operations: six people have
died at our workplaces in 2013. As our HSE Vision
is zero fatalities at our workplaces, the number of
fatalities is not acceptable. To achieve our HSE
Vision of zero fatalities, we are focusing our efforts
on embedding HSE culture in our operations. As
five of the fatalities were trafic-related, our focus for
the global safety Campaign in 2014 will be driving
safely. We are also working on making safety a
common responsibility. We will focus our efforts
going forward on getting management at all levels
to understand
Going forward
We believe that we have a solid foundation for both
systematic risk management and reporting sup-
ported by management systems and IT tools. Going
forward, our focus is on embedding hazard identifi-
cation and risk management in our operations and
continuing to improve our incident investigation
performance. We will also further develop the value
propositions for our customers by identifying the
needs, providing solutions and outcomes based on
our skills and experience in these areas.
Corporate responsibility I Our business 33
hedde Je 3
Target Performance
2013 2013 2012 2011 2010
Fatalities Zero 6 7 7 5
Lost Time injury Frequency (LTIF) Less than 7 7 8 10 11
Lost Work Days (LWD), % More than 35 34 17 0
Audits on CR (% af countries) More than 20 28 30 25
Employee engagement survey 400,000 337,154 235,548 150,000 -
1405014EogSN73932 KEE
Our employees
Our 533,397 employees worldwide
represent ISS on a daily basis when
they deliver our services and engage
with our customers. Our customers
are constantly evaluating the strength
of the ISS brand based on their interac-
tions with our people. When we are
recognised as a great company it is
because our employees are delivering
a great service day in and day out,
365 days a year. This reinforces our
firm belief that by engaging and
empowering our employees we can
ensure that our people choose to do
the right thing and that they are great
ambassadors of ISS no matter where
they live or work.
The importance of great leadership
We place strong emphasis on leadership and the
quality of the people that we appoint to leadership
positions because that is the root of our people's
engagement and what gives ISS the strength that
differentiates us from the competition.
Ensuring the right leadership behaviour is a high
priority for us as it enables us to continuously im-
prove our services and to do so in a values-based
way. Our approach to leadership is expressed in
our Leadership Principles and in the way we have
integrated them into how we select and develop our
leaders. From the recruitment process to the annu-
al appraisal our Leadership Principles is part of
living the ISS culture.
Ås our greatest strategy enabler, leadership is the
key focus of our Human Resources strategy around
the world. We make this happen by focusing on five
key initiatives:
1. Leadership development — Ensuring global and
regional leadership devetopment programmes are
1405014EogSN73933
Our employees | Our business 34
in place and adhere to our strategy and Leadership
Principles.
2. Performance management — Ensuring each
employee has a purpose for their role as well as
objectives which are aligned with the overall pur-
pose of the Group.
3. Talent management — Focusing on talent identi-
fication through the succession planning process
and working with regions on development plans to
prepare people for key roles.
4. Succession planning — Creating a continued
focus on succession planning to mitigate risk and
drive our strategy.
5. Engagement and pride — Using a global survey
to measure employee engagement and alignment
to the purpose of ISS.
Our Human Resource vision guides the HR agenda
of ISS:
"it is our ambition that all leaders at every level of
the organisation lives and breathes according to the
ISS Leadership Principles — promoting teamwork
and collaboration across borders and business —
ensuring that each and every one of our more than
533,000 employees work towards our shared vision
of being the greatest service organisation in the
world”,
Great leaders are able to connect the frontline em-
ployees to the senior executives, ensuring that the
organisation as a whole understands its purpose
and how it creates value to our customers. It is this
alignment of purpose, which drives the empower-
ment of our frontline employees.
Leadership development and
training
Communication and training are two key elements
of developing leadership at ISS. To this end, we
have invested heavily in leadership programmes at
ISS since the launch of The ISS Way in 2008. We
1405014EogSN73934
launched the Strategy and the Value Chain pro-
gramme in 2010, which was mandatory for regional
and country management and held at least once in
every region. We continue to run the ISS Ad-
vantage senior manager induction programme,
which is also focused on our strategy and the ISS
value chain management tool.
More recent additions are the Leadership Mastery
programme for top management and a number of
programmes at supervisor level, which provide our
employees with the essential understanding of the
key elements of our strategy and give them tools
relevant in their daily work. Ensuring that our lead-
ers are equipped to communicate the strategy and
engage the organisation is a key focus area for
leadership development; and equally that they have
the tools and skills necessary for financial and op-
erational follow-up.
Fundamentally, all the programmes revolve around
the same themes, although individually adjusted to
match the target group. In Leadership Mastery — a
comprehensive five-module programme for select-
ed top leaders — the focus is on personal leadership
development and behaviour, developing a team as
well as securing a deep understanding of our strat-
egy and facilitating a greater understanding of cus-
tomers and employees.
For supervisors, the key messages and tools re-
volve around e.g. the overall strategic direction of
the Group, our leadership fundamentals and "the
Human Touch” concept, the purpose and applica-
tion of the ISS Value Chain, key principles for de-
signing a value proposition for the customer as well
as financial management. Our supervisors are spe-
cifically in focus here. After all, they have the daily
delivery responsibility to, and interaction with, our
customers and frontline employees. It is essential
that their conduct is consistent with the business
fundamentals of The ISS Way and that they are
able to instill these fundamentals in their teams.
Furthermore, relatively high frontline employee
turnover is a natural part of our business and there-
fore it is essential that we have continuity at super-
visor level by investing in them and providing a
clear career progression path.
Empowering our people
An organisation where all employees push towards
the same objective and understand the role they
Our employees i Our business 35
play is powerful and as a result it is one of the
strengths that we rely upon to be able to move
quickly and respond to our customers' needs while
operating in a consistent manner across the globe.
Empowering our people and enabling them to take
responsibility for their roles and how they interact
with our customers also drives a feeling of cohesion
with the company. Having the feeling of being part
of the company also makes it easier to engage in
what we do and take pride in the difference we
make to our customers.
Creating a sense of purpose is extremely important
in this respect. To facilitate the process of employ-
ees defining and living their own purpose, we intro-
duced "The Apple” concept in certain countries in
2011. The idea is for each employee to find their
own "Apple” i.e. their contribution (and the contribu-
tion of their colleagues on site as a team) to the
realisation of our customers" value propositions and
the job satisfaction this provides. The apple con-
cept is gaining momentum with various guides and
award systems under development. It is expected
to continue to contribute to creating a greater sense
of purpose and thereby engagement at ISS — em-
ployee-by-employee and site-by-site.
Creating engagement and pride
Employee engagement is a key driver of the cus-
tomer experience. Measuring and improving em-
ployee engagement is therefore a key focus area at
ISS.
In 2011, we piloted a global Employee Engagement
Survey (EES) and the scope of the survey has
since been expanded year by year. In 2013, we
invited more than 300,000 employees across all
continents to participate in the engagement survey
with close to 200,000 responding. Intentionally, we
use the same questions globally to compare the
results around the world. Based on the results of
the survey, which showed an overall employee
engagement of 4.3 (2012: 4.4) out of a possible 5,
we know we have a high degree of engagement in
the company, and we know what is important for
our people in their work environment.
1405014EogSN73935
Engagement builds upon a sense of purpose and
pride in our people and:
+ a strong belief in ISS's goals and values;
. 2 willingness to "go the extra mile” for our cus-
tomers;
.s a strong desire to stay with ISS;
.…+ employees who believe in ISS and in what they
do; and
+ managers who understand and lead our people
as individuals.
Besides measuring employee engagement in itself,
we also measure four key drivers of employee en-
gagement:
Capability: "I feel able to do my job well”
Motivation: "| am motivated to do my job well"
Pride: "I feel proud to work for ISS”
Retention: "I would like to continue working for
ISS”
Knowing what lies behind the employee's engage-
ment is critical in driving employee engagement.
Through our survey, we are able to provide man-
agers at all levels with specific information about
their teams and their employees, allowing them to
address the causes of low engagement and help
make individual employees feel a higher sense of
engagement. The five key priorities in our Human
Resource strategy also provide support and focus
for our managers and leaders.
We continuously work to improve our insights into
what drives engagement in our employees and how
we can become better at creating a sense of pride
in the services each of us deliver, as well as the
difference we make to our colleagues, to our cus-
tomers, and to the society we live in. We will also
work further on connecting employee engagement
scores to our customer satisfaction scores as we
strongly believe that the two are connected and that
they are key drivers of financial and operational
performance.
GLOBAL EMPLOYEE ENGAGEMENT SURVEY RESULTS
Our employees | Our business 36
Diversity
As one of the largest private employers in the world
and with operations in more than 50 countries, we
are committed to fostering, cultivating and preserv-
ing a culture of diversity and inclusion. With more
than 533,000 employees, ISS embraces and en-
courages diversity in its broadest terms, including
age, gender, ethnicity, nationality, culture, lan-
guage, religion, physical ability, education and
skills.
At ISS, we recognise that our diverse workforce
gives us a key competitive advantage and we con-
sider our employees to be our most valuable asset.
Diversity makes ISS creative, productive and an
attractive place to work.
We recognise the importance of promoting gender
diversity at management levels. When making ap-
pointments to management leve! positions at ISS,
we are committed to selecting the best person for
the job based on qualifications, experience and
competencies, while also considering other factors,
such as diversity.
In order to promote, facilitate and increase the
number of women in management level positions at
ISS, we adopted a diversity policy in March 2013
defining a number of objectives to be pursued. This
includes initiatives such as ensuring that female
candidates are identified for vacant positions, de-
veloping succession plans aiming at identifying
female successors as well as tabling the matter of
women in leadership at ISS for discussion at least
once a year at the EGM and the GMB level.
Overall engagement Capability
3 3
Motivation
Pride Retention
Employee and trade union relations
We want to ensure that our people take pride in
what they do, the role they fulfil and the difference
they make every day at our customer locations
around the world.
Being among the first signatories to the UN Global
Compact we are fully committed to observing the
basic human rights of all of our employees and to
contribute to the improvement of employment con-
ditions within the service industry. In line with this
decision, we have a global agreement with Union
Network International (UNI), and we support the
social dialogue between management and employ-
ees through works councils and employee repre-
sentatives.
In June 2013, we renewed this commitment by
signing another agreement with the European
Workers Council for the continuation of our rela-
tionship. We see these agreements as a basis for
how we work together rather than as a limit to what
we can do together.
Employee retention
The service industry generally has a high degree of
employee turnover, as part of the industry is often
considered suitable for short-term or secondary
employment. To counter that we put a lot of effort
into retaining our employees, e.g. our five key initia-
tives explained above all support our retention ef-
forts, which are key to our strategy.
1405014EogSN73936
Our employees ! Our business 37
In 2013, our total workforce headcount remained
stable despite a number of divestments being
made. A total of 74% of our employees were full-
time employees, which is a slight increase from last
year. This is an important indicator, as generally
full-time employees develop stronger ties with ISS.
Employee seniority provides another perspective
on employee loyalty towards ISS, In 2013, 68% of
the Group's employees had been with ISS for more
than one year, a slight decrease from 69% in 2012.
2013 2012 2011
Total employees 533,397 534,100 534,400
Full time employees 74% 73% 73%
Total employees > 1 year 68% 69% 66%
Risk
management
We consider risk as an integrated part
of doing business. Risk-taking provides
opportunities, but it can also hinder
the achievement of our goals. Risk
management reduces risk and ensures
that the risks we take on in respect
of our customers and ourselves are
calculated and well-managed. Effective
risk management is therefore an
important tool in helping us reduce
uncertainty and ultimately achieve
our objectives.
Risk governance
Operational and financial risks are managed in ac-
cordance with policies adopted by the Board of
Directors (the Board). It is the responsibility of
RISK GOVERNANCE STRUCTURE
Risk management | Our business 38
directors and managers at all levels of the organisa-
tion to ensure that the assessment of risk is formal-
ised and that risk is understood, appropriately man-
aged and reported in accordance with the ISS
Group Risk Policy. Our risk governance structure is
illustrated below. The ISS Group Risk Policy and
other Group policies set out the requirements and
minimum levels of achievement necessary to im-
plement the risk management requirements of the
ISS Corporate Governance Guidelines.
Operational risk
Generally, we are exposed to operational risks
through our actions and activities at own premises
as well as at customer premises. Operational risks
are assessed based on the activities of each oper-
ating company, historic and current claims events,
and the markets in which the companies operate.
Furthermore, operational risks are assessed on an
individual site-by-site basis at customer premises
where we provide our services.
BOARD OF DIRECTØRS
AUDIT AND RISK COMMITTEE
EXECUTIVE GROUF
MANAGEMENT BOARD
and policies
ETT FESTER TD
STENENE NETTER
e Reviews and monitors key risks and related risk management,
action plans and controls
Approves Group Risk policies
e Monitors performance of risk management and key risks
ae Decides Group Risk Policy and key risk strategies
e Ensures alignment of risk management activities and business strategy
& Supervises
compliance
with internal
risk standards
Monitors risk and evaluates risk management
Implements the Group Risk Policy and other related risk policies
Ensures sufficient resources to support major risk management projects
Ensures appropriate parties are aware of their risk responsibilities
Develops risk recommendations
Ensures that risks are adequately identified and managed
s Monitors risk activities and initiatives
1405014EogSN73937
When considered appropriate, operational risks are
insured through global or local insurance pro-
grammes. This is managed centrally by Group Risk
Management.
In general, we believe that the Group is not subject
to material operational risks except for risks com-
mon in the ordinary course of business in the ser-
vice industry.
Financial risk management
We are exposed to financial risks as a result of our
operating activities, investing activities and financ-
ing activities. The Group's financial risks are man-
aged centrally by Group Treasury based on policies
approved by the Board. The Group's financial risk
management is described in detail in the notes to
the consolidated financial statements.
Status on 2013 and focus areas
for 2014
In 2013, we focused on embedding risk processes
and controls throughout the organisation to raise
awareness of risk responsibilities and ensure that
risk management is embedded in relevant busi-
GROUP KEY RISKS
Risk management i Our business 39
ness processes, For this purpose, selected stake-
holders have been trained in risk management and
related tools. Examples of training activities are
internal training seminars for local risk managers,
local legal professionals and local internal auditors.
In 2014, our focus remains on improving our risk
management through incorporating it in existing
activities and processes and by monitoring relevant
risk-related indicators.
Group key risks
We use a risk mapping approach to keep the Board
as well as the various management levels within
the Group informed of the key risks the Group fac-
es, their potential impact and likelihood of occur-
ring. The framework deployed for risk reporting and
risk assessment is consistent with acknowledged
risk and control frameworks.
Each of the key risks are presented in detail below
together with current and planned risk mitigating
initiatives aimed at mitigating the risk to an appro-
priate level. Implementation is monitored at Group
level.
Major
mot op
Significant
Economic impact
Minor
Remote Unlikely Possible
Likelihood of risk occurring
1405014EogSN73938
Probable
oOo NWMW GYU h WN må
Contract governance
Growth strategy — ISS service delivery model
Operational risks and contract execution
Financial reporting, fraud and corruption
Customer retention and competition
Macroeconomy
Employee risks
Growth strategy — market demand
Regulatory environment
GROUP KEY RISKS
1. Contract governance
The Group 15 subject to risks associated with our contracts,
including our ability to correctly assess pricing terms, employee
and other financial obligations, the increased complexity of our
integrated facility services (IFS) contracts and the potential early
termination or change of scope of contracts by customers. The
profitability of our contracts will generally depend upon our ability
to successfully calculate prices by taking all economic factors, legal
and other risk elements into consideration, and to manage our
day-to-cday operations under these contracts.
2. Growth strategy — ISS service delivery model
Our organic growth strategy relies on various factors including our
ability to cross- and up-sell, our ability to continue to self-deliver
IFS to local and multinational customers and the recognition by
such customers that we are one of very few service providers
positioned to provide such services, whether on a global or a
local scale
3. Operational risks and contract execution
Operational error or contract non-compliance in general
constitutes a risk that could result m unexpected costs.
Furthermore, as our services are increasingly becoming an
integrated element of our customers" value streams, there 1s a
risk of Causing a disruption of our customers" business operations
and/or brand damage, if operational procedures or contract
requirements are not complied with.
4. Financial reporting, fraud and corruption
Our decentralised structure of financial IT systems and operational
control structures increases the tisk of financial fraud and
corruption. Our growing emerging market presence also increases
our exposure to compliance risks in countries where improper
practises may be common. Overall, this risk encompasses scenarios
such as overstatement of revenue, false or misstatement of
expenses, misappropriation of assets, kick-backs, bribery,
over-pricing and theft.
5. Customer retention and competition
Qur strategic direction towards increasing the share of 1FS
customers will gradually increase our customer concentration.
Our ability to target selected customer segments with attractive
and competitive value propositions is the key to attracting and
retaming IFS, multi-service and single-service customers. Failure to
develop and execute on value propositions may lead to increased
price competition and increasing contract portfolio losses. In
general, the facihty services market 1s fragmented with relatively
low barrters to entry and there Is significant competition from
local and regional companies
1405014EogSN73939
Risk management | Our business 40
MITIGATING MEASURES
Contract governance is managed through various management
policies, frameworks and procedures. Among other measures, we
have developed a formal framework and IT tool for contract risk
management and contract approval as well as a formal procedure
for the approval of large contracts. In addition, for specific
customer industries contract risk reviews are performed by
Group Risk Management and contract governance is included
in Group Internal Audit's scope.
We evaluate our existing business platform — in terms of the services
delivered, our capabilities and the geographies in which we operate
— on an ongoing basis and as part of the annual strategy process to
ensure that it reflects both the current and future requirements of
our customers.
In 2012, we developed insight&ISS, our management information
system, to address this and other risks in relation to large and
complex contracts. The system allows information to be collated,
reviewed and analysed on a global basis to provide information on
and support operational and financial contract management.
Further, the risk is managed through a continuous focus on
operational excellence and implementation of our five process
frameworks, which cover all processes from sales to operations as
well as detailed risk and compliance analysis when entering new
markets and segments.
We apply best operational practices through the implementation
of our transition and operation process frameworks. Further, by
using our facility management IT system, FMSØISS, the operating
processes are automated, which ensures that services are delivered
and managed according to these process frameworks. Additionally,
our management information system, Insight&e!SS, mentioned
above under ”Growth strategy”, addresses this risk and for selected
contracts, where ISS maintains critical infrastructure for the
customer, operational risk reviews are performed as part of the
global risk management framework. The ongoing implementation
of our Group HSE manual is also an important tool in terms of risk
mitigation.
A well-established and documented financial controlling process
Is mM place at corporate level for analysing and reviewing financial
reporting from subsidraries. This is described mn detail in the chapter
"Internal controls related to financial reporting”. Furthermore,
Group Controlling, Group Treasury and Group Internal Audit
evaluate and implement additional measures tø increase transpar-
ency over interfaces to local finance systems. A review of the
integrity and robustness of interfaces has been embedded as a
standard item In internal audit assignments in 2013. Implementa-
tion of key controls is also monitored through the system of Control
Self-Assessments. Additionally, e-learning modules on anti-corrup-
tion, anti-bribery and competition laws have been deployed at
corporate level in the ”ISS Advantage” course, which is attended
by all country management teams, senio: officers executives and
procurement personnel.
To address the risk, implementation of our sales and operation
process frameworks continues as well as the roll out of the IT-tool,
CRMGISS, which enables our country organisations to execute on
the sales process framework. Since 2011, we have also carried out
global customer surveys covering most of the Group's revenue and
enabling us to measure customer satisfaction (Net Promoter Score)
and work on developing improvernents.
RISK FACTORS
6. Macroeconomy
We believe that growth in the demand for our services generally
correlates with economic conditions, including growth in the gross
domestic product (GDP) of the countries we operate in. We believe
that the facility services industry is less sensitive to macroeconomic
cycles than a number of other industries are. However, economic
downturns or otherwise uncertain economic outlooks in the
markets in which we operate or on a global scale could adversely
affect demand for outsourcing facility services.
Periods of recession or deflation may adversely impact prices,
payment terms and demand for services, particularly if customers
downsize their businesses ør reduce their demand for services.
During the recent economic downturn, in certain regions and
customer segments, we have experienced reduced activity levels
that have adversely impacted our revenue and depressed our
operating margins.
7. Employee risks
Employee qualifications
Our continued success strongly relies on our effective 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. Similarly, qualified local and regional
managers åre essential in order to ensure best practices beng
shared across the Group, effective management continuity and
the implementation and management øf our growth strategies
as well as Group policies and operational processes.
Employee retention and attraction
Our competitive strength is highly dependent upon our ability to
attract, train and retain employees at all levels of the organisation.
8. Growth strategy — market demand
Our organic growth strategy depends on the underlying GDP
growth outlook, the current and future trend across both the
private and public sectors to continue to outsource facility services,
bundle services and procure contracts nationally or internationally
as well as to sustain robust growth in emerging markets. In
particular, the growth of our business depends on the continued
growth in demand for the outsourcing of facility services, either
as single services, multi-services or IFS.
Our ability to accurately project near-term and future growth
rates from Global Corporate Clients or m key markets may cause
financial results to significantly deviate from budgets due to
reduced volumes or capacity constraints to manage high growth
rates in parts of the business.
9. Regulatory environment
Due to the nature of our industry and the global reach of our
operations, we are subject to a variety of laws and regulations
governing areas such as labour, employment, immigration, health
and safety, tax (including social security, salary taxes and transfer
pricing), corporate governance, customer protection, business
practices, competition and the environment. We incur, and expect
to continue to incur, substantial costs and to commit a significant
amount of our management's time and resources to comply with
increasingly complex and restrictive laws and regulations.
1405014EogSN73940
Risk management | Our business 41
ETTER SNT TS
We monitor market developments on an ongoing basis, both
locally and globally, as part of our general management and
annual strategy process and we have taking appropriate steps to
adapt our cost structure In addition, we strive to predict market
dynamics and market trends within the services industry that could
affect our business in the long term. For example, in Cooperation
with the Copenhagen Institute for Futures Studies, we have carried
out a study on the future of Facility Management seen in a global
perspective The study is available at www.issworld.com.
Our management structure and processes are set up to support
the continuous improvement of local managers" and employees"
qualifications. For example, our operation process framework
best practices are shared and implemented through formalised
train-the-trainer programmes supporting continuous improvement
and compliance with Group policies and procedures as well as the
enhancement of our local managers" and employees' capabilities.
Our HR strategy has five priorities that all work towards attracting,
engaging and retaining our employees, i.e. 1) Leadership
development, 2) Engagement, 3) Talent management, 4)
Succession planning and 5) Performance management These
are further described in the chapter ”Our employees”, mcluding
global employee engagement surveys, which we have carried out
since 2011 to gain insights into where and how we can improve
employee engagement.
Whereas the key growth building blocks have alf been established,
ihe existing strategy and business platform is evaluated and
refined on an ongoing basis. Further, we strive to meet our
customers” requirements by adapting appropriate sales,
operational and risk management processes to reflect the needs
of our customers. To address the risk we also apply our standard
operational procedures and perform detailed risk analysis before
entering new markets or segments.
Both locally and globally we strive to monitor and føresee changes
in legislation, which could have a negative impact on our financial
performance. Operationally several measures are in place as an
integral part of Group policies such as the Group Corporate
Governance Guidelines and the operational excellence framework,
including the contract risk framework. As part of the formal
contract framework, contract price regulation mechanism nisks as
well as other uncertamnties must always be considered, assessed
and approved before a contract is signed to mitigate the potential
risk of unexpected costs. Other examples are HSE standards based
on best practice being implemented across the Group as well as
mandatory training modules in anti-corruption, anti-bribery and
competition laws for our møre than 2,000 top managers
throughout the Group. As of end of 2013 more than 4,000
training sessions have taken place
Corporate
governance
Corporate governance practices at ISS are
implemented in a dynamic process with
the Board of Directors continuously as-
sessing the need for adjustments to bene-
fit ISS stakeholders and the Group itself.
The management team of the Group formally con-
sists of the Board of Directors and the Managing
Directors of ISS Global A/S. Since ISS Global A/S
has no operating activities of its own, the Group
relies on the management team of ISS A/S, the
ultimate parent company in Denmark. As a subsidi-
ary of ISS A/S, ISS Global A/S is subject to the
same corporate governance policies applicable in
ISS A/S, which is described in the sections below.
The Board of Directors regularly reviews the
Group's corporate governance in relation to the
Group's activities, business environment and statu-
tory requirements.
Corporate governance policies and procedures at
ISS take into account the Danish Companies Act,
the Danish Financial Statements Act, International
Financial Reporting Standards (IFRS), the Danish
Venture Capital and Private Equity Association's
(DVCA) Guidelines for Responsible Ownership and
G5CP 33%
SEER
ENEDES ET TINS ER
Corporate governance | Governance 42
Good Corporate Governance as well as corporate
governance practices for companies of ISS's size
and global reach.
Shareholders
ISS A/S is a limited liability company incorporated
and operating under Danish law. The company's
share capital is indirectly owned by funds advised
by EQT Partners (EQT), funds advised by affili-
ates of The Goldman Sachs Group, Inc. (GSCP),
as well as the Ontario Teachers' Pension Plan
Board through 2337323 Ontario Limited (OTPP)
and KIRKBI Invest A/S (KIRKBI). At 31 December
2013, EQT and GSCP indirectly hold approximate-
ly 40% and 33% of the share capital, respectively.
OTPP and KIRKBI indirectly hold approximately
18% and 8% of the share capital, respectively.
The remaining approximately 1% of the share
capital is indirectly held by certain current and
former members of the Board of Directors, current
and former members of the Executive Group
Management Board as well as a number of cur-
rent and former senior officers of the Group
through Director and Management Participation
Programmes as described below.
SSR KIRKBI 8% EH
FS INVEST ti S.Å R.L (LUXEMBOURG) .
(ESF YES
ISS WORLD SERVICES A/S
STN TE ml
OPERATING SUBSIDIARIES i
" Certain current and former members of the Board of Directors, current and former members of the Executre Group Management Board as well as 3 number of current and
former semo….1 officers of the Group have invested, directly or indirectly, m shares, warrants or loan notes in FS Invest 5,å r] (FS Invest), 1S5's ultinate parent company The total
number of shares held by these directors and officers is approximately 19% of the total share capital.
1405014EogSN73941
1405014EogSN73942
Corporate governance | Governance 43
AGENDA ITEMS TO BE TRANSACTED BY THE BOARD OF DIRECTORS EACH YEAR
December
» Approval of annual budget
Review of material risks, including risks related to
financial reporting, and risk management reporting
- Review of Remuneration Policy and Overall
Guidelines on Incentive Pay
November
» Approval of Q3 report
October
Review and assessment of the competencies and
composition of the Board, including assessment æ
of independence of board members
» Review of charters for committees and
composition of members
" Consider the composition of the EGM, as well
as development, risk and succession plan
« Evaluation of (i) performance of individual
members of the Board (ii) performance of the
EGM and (iii) cooperation between the Board
and the EGM, including presentation of results
Consider the Group's activities with the view
to ensure relevant diversity in other management
levels and set specific targets in this regard
August
» Approval of Q2 report
s Review of whistleblower system
Management
ISS has a two-tier governance 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 management. The two bodies
are separate and have no overlapping members.
Board of Directors
The Board has seven members elected by the
general meeting for a term of one year. Board
members are eligible for reelection. Four members
are considered independent, while three members
represent the Group's controlling shareholder due
to their affiliation with EQT, GSCP and OTPP.
February
» Annual general meeting preparation
" Review of capital structure and financing, etc.
« Review of Dividend and Share Buyback Policy
. Review of Corporate Governance, including
Rutes of Procedure of the Board and the EGM
and other corporate governance documents
March
2 Approval of Annual Report, including review
of going concern assumption
+ Approval of CR report
s Session with external auditor and Head of
Group Internal Audit without the EGM
April
» Constitution of the Board, including election
of Chairman and Deputy Chairman
May
» Approval of Q1 report
" Review of insurance cover, including D&O
June
s Approval of engagement of the Group's
external auditor including fees upon
recommendation from the Audit and Risk
Committee
- Review of material risks, induding risk related
to financial reporting, and risk management
reporting
" Approval and review of overall strategy,
business and action plan, induding review
of necessary competencies and financial
resources
In addition to the board members elected by the
general meeting, three employee representatives
also serve 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 company's
Articles of Association. Employee representatives
serve for terms of four years. The current employee
representatives joined the Board following the an-
nual general meeting in March 2011. The employee
representatives have the same rights and obliga-
tions as other members of the Board.
The Board functions in accordance with applicable
statutory rules, the Articles of Association and its
rules of procedure, which provide guidelines for the
Board's work in general. Board resolutions are
passed by simple majority, and in the event of
equal votes, the Chairman, or in his absence the
Deputy Chairman, shall have the casting vote
The Board convenes at least six times a year, in-
cluding for one strategy meeting each year.
Extraordinary meetings are convened by the
Chairman when deemed necessary or when re-
quested by a board member, a member of the EGM
or by the external auditors. A total of eight board
meetings were held in 2013. The EGM provides the
Board with a monthly financial reporting package
and the Board is briefed about important matters
occurring between board meetings. The Board ap-
proves the strategy plan, the annual budget and
certain large acquisitions, divestments and custom-
er contracts based on recommendations from the
Transaction Committee (see Board Committees).
The Board annually performs an evaluation of the
performance of the Board, and of its individual
members and the collaboration with the EGM. Re-
muneration to the Board is disclosed in note 6.1 to
the consolidated financial statements and in the
Remuneration report on page 46.
Board committees
Currently, four committees report to the Board, one
of which was established after 31 December 2013.
The Audit and Risk Committee (previously the
Audit Committee) evaluates the external financial
reporting, the main accounting policies and esti-
mates and monitors systems of internal controls
and risk management. Its duties also include su-
pervision of the external auditor and the internal
audit function. In addition, the committee also con-
siders the relationship with the external auditors
and reviews the audit process. The committee con-
sists of three members (currently Henrik Poulsen
(chairman), Morten Hummelmose and Jo Taylor).
The external auditor attends the meetings if re-
quested and must attend at least one meeting per
year at which the EGM is not present. The Head of
Group Internal Audit shall also attend at least one
meeting per year at which the EGM is not present.
The committee held six meetings in 2013.
The Remuneration Committee is described as
part of the Remuneration report on page 46.
The Nomination Committee was established after
31 December 2013 and assists the Board in ensur-
ing that appropriate plans and processes are in
place for the nomination of candidates for the
Board and the EGM and in evaluating the composi-
tion of the Board and the EGM. The committee
consists of three members (currently Lord Allen of
Kensington CBE (chairman), Jennie Chua and
Corporate governance | Governance 44
Morten Hummelmose). As the committee was es-
tablished in 2014, no meetings were held in 2013.
The Transaction Committee makes recommenda-
tions to the Board in respect of certain large acqui-
sitions, divestments and IFS contracts, reviews the
transaction pipeline, considers ISS's procedures for
large transactions and evaluates selected effected
transactions. The committee consists of four mem-
bers (currently Lord Allen of Kensington CBE
(chairman), Morten Hummelmose, Andrew Wolff
and Jo Taylor). The committee held four meetings
in 2013.
Executive Group Management Board
The EGM consists of Group CEO Jeff Gravenhorst,
Group CFO Heine Dalsgaard, Group COO EMEA
Henrik Andersen and Group COO Americas &
APAC John Peri. The primary tasks of the EGM are
to carry out the day-to-day management of the
Group, develop and implement strategic initiatives,
develop Group policies, monitor Group perfor-
mance and evaluate investments as well as acqui-
sitions, divestments and large IFS contracts.
Diversity
ISS recognises the importance of promoting diver-
sity at management levels. When considering nom-
inations to the Board or the EGM, we are commit-
ted to selecting the best person for the position, but
aspire to have diversity in gender as well as in
broader terms such as international experience.
The assessment of candidates is based on an
evaluation of qualifications, experience and compe-
tencies as well as other relevant factors. Emphasis
is put on:
1. experience and expertise (such as industry, fi-
nance, strategy, international business, HR,
management and leadership);
2. diversity (including in respect of age, gender,
new talent and international experience) as well
as diversity of perspectives brought to the Board
or the EGM; and
3. personal characteristics matching ISS's values
and leadership principles.
1405014EogSN73943
To support our commitment to gender diversity, in
March 2013 the Board adopted a target of increas-
ing the number of women on our Board elected by
the general meeting from one to at least two mem-
bers at the annual general meeting in 2017”), The
Board seeks to identify female candidates when
nominating new board members, however, remains
committed to always selecting the best candidate
for the position. Presently, the Board has one fe-
male board member elected by the general meeting
and one female board member elected by the em-
ployees.
In terms of international experience, the Board tar-
gets at all times to have sufficient international ex-
perience at all management levels taking into ac-
count the size and activities of ISS. The EGM is
considered to have the necessary international
experience if half of its members have international
experience from large international companies.
Presently, all four members of the EGM have inter-
national experience.
Group Management Board
The Group Management Board (the GMB) is
headed by the Group CEO and consists of the
Group CFO, the Group COOs, Regional CEOs,
CFO EMEA, CFO Americas & APAC, Head of
Global Corporate Clients, Head of Group Human
Resources, Head of Group Strategy & 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 IFS contracts
and to provide the EGM with input for decision-
making purposes. A member of the GMB is not
permitted to hold directorships in companies
outside the Group unless specific consent is
granted.
Country Management
In each of the countries in which ISS operates,
country management teams are appointed to man-
Corporate governance | Governance 45
age the business in accordance with Group policies
and procedures as well as local legislation and
practice. ISS delegates substantial autonomy and
considerable power to the country management
teams including management of operations in their
relevant markets, financial reporting, local tax and
compliance with local legislation and practices.
The country management teams are set out under
each relevant country on the ISS website at
www. issworld.com.
1 In respect of the specific target for iSS Global A/S, please refer to our website www.issworld.com.
Fa
1405014EogSN73944
1405014EogSN73945
Remuneration
Our remuneration policy aims to attract,
motivate and retain qualified members
of the Board of Directors and the
Executive Group Management Board.
To achieve the objective, remuneration is based on
the individual member's responsibilities and per-
formance. Furthermore, remuneration has been
designed to be competitive and in line with market
practice in comparable listed companies as well as
to support our strategic goals and promote value
creation for the benefit of our shareholders.
Remuneration of members of the Group Manage-
ment Board (the GMB) other than members of the
EGM follows the same principles as laid down in
the remuneration policy for the EGM.
The remuneration policy is reviewed at least annu-
ally and the remuneration policy applicable for 2013
was approved by the Board on 25 June 2012.
Activities in 2013 and objectives
for 2014
In 2013, the Remuneration Committee focused on
establishing a consistent approach to remuneration
for members of the EGM and the GMB. Further-
more, the Committee focused on ensuring that re-
muneration of the EGM and the GMB, respectively,
in general is linked to ISS's results; in line with
market practice in comparable listed companies;
and aligned to the interests of the shareholders.
Qur objective for 2014 is further alignment of remu-
neration programmes. In 2014, we expect to intro-
duce new short-term incentive plans (STIP) for the
EGM and the GMB as well as other incentive plans
subject to the IPO, see "Initial Public Offering (IPO)'
on page 48. Furthermore, the objective for 2014 is
to ensure that the remuneration approach on coun-
try level is aligned with the remuneration policy for
the Group.
Remuneration Report | Governance 46
report
THE REMUNERATION COMMITTEE
The Remuneration Committee was established in 2010 by the
Board tø ensure that ISS maintains a remuneration policy and
overall guidelines on incentive pay for the members of the
Board and the EGM.
The Remuneration Committee assists the Board in preparing
the remuneration policy and the overall guidelines on incentive
pay and recommends to the Board the remuneration of the
members of the Board and the EGM as well as the
remuneration policy applicable to ISS in general.
In 2013, the committee consisted of three members (currently
Lord Allen of Kensington CBE (Chairman), Thomas Berglund,
and Andrew Wolff). The Group CEO attends the meetings
unless when the Group CEO's remuneration is tabled for
discussion. The committee held four meetings in 2013.
In 2013, the Remuneration Committee engaged Kepler
Associates to advise the Committee as external and
independent advisor The role of the advisor is to provide
independent advice to the Committee on remuneration
matters. Kepler Associates do not provide any other services
to lss.
The aim for the incentive schemes expected to
apply for 2014 for the EGM and the GMB and cer-
tain other employees is to take into account the
achievement of targets for employee engagement,
customer experience as well as health and safety
related KPIs. This is in addition to targets for the
Group's key financial objectives (i.e. organic
growth, operating margin and cash conversion),
which are already taken into account.
Board of Directors
Each Board member (except representatives of
EQT, GSCP and OTPP) received a fixed annual
fee in 2013. The Chairman of the Board received 3
times of the fixed annual fee and the Deputy
Chairman 1.5 times. Members of the Board Com-
mittees (except for the Chairman) received an addi-
tional fixed fee and the size depended on the com-
petencies, effort and scope of work required by the
member of each committee. The Chairman of the
Audit and Risk Committee (previously the Audit
Committee) received 1 time of the annual fixed fee
and other Audit and Risk Committee members re-
ceived 50%. Members of other committees re-
ceived 25% of the annual fixed fee.
Members of the Board did not participate in any
incentive schemes in 2013.
Certain members of the Board have invested indi-
rectly in shares of FS Invest as part of the Directors
Participation Programme as described on page 48.
Expenses, such as travel and accommodation in
relation to board meetings as well as relevant train-
ing are reimbursed. If members of the Board have
to travel overseas to attend board meetings, a fixed
travel allowance per meeting may be paid.
Remuneration to the Board is disclosed in note 6.1
to the consolidated financial statement.
Executive Group Management Board
and Group Management Board
The main elements of the remuneration to the EGM
and the GMB in 2013 are summarised in the table
below.
Annual base salary and customary benefits The
members of the EGM and the GMB are remunerat-
ed with a combination of fixed salary and custom-
ary benefits in accordance with market standards.
Annual bonus The EGM and most members of the
GMEB receive a performance-based annual bonus
of up to 60% of their annual base salary, which in
the event of extraordinary performance (significant-
Remuneration Report | Governance 47
ly above budget) can be up to 90% of the annual
base salary. The bonus is subject to achieving per-
formance targets for the Group's key financial KPIs;
organic growth, operating margin and cash conver-
sion. Bonuses and any other variable component of
remuneration are subject to claw-back if in excep-
tional cases it is subsequently determined that
payment was based on information that was mani-
festly misstated. Reclaim in full or in part of the
variable component of remuneration is determined
at the discretion of the Board.
Long-Term iIncentive Programmes The EGM and
the GMB participate in a Long-Term Incentive Pro-
gramme (LTIP). The LTIP is cash-based and the
annual grant has a value of up to 15% of the annual
base salary. Subject to achieving performance tar-
gets for operating profit and net debt and the occur-
rence of a vesting event (e.g. an IPO or a sale of
the majority of shares in ISS to a third party), the
LTIP will pay out in the range of 20% to 150% of
the grant value. The maximum pay-out in such
event is 22.5% of the annual base salary.
Termination and severance payment All em-
ployment contracts of the EGM and the GMB
members may be terminated at 12-24 months' no-
tice, except for one contract where termination is
subject to Portuguese law. Each of the EGM and
the GMB members may terminate their positions
with 6 months' notice. One employment contract
includes a severance payment of approximately
two years' salary in the event of termination by ISS.
ELEMENT OBJECTIVE
Annual base salary Attract and retain high-
performing GMB members
reflecting their position, skills,
competencies and experience
Non-monetary benefits Customary benefrts in
accordance with market
standards to support
recruitment and retention
Annual bonus Drive delivery of short-
term financial results,
implementation of The ISS
Way and behaviour consistent
with the ISS Leadership
Principles
Long-Term Incentive
Programme (LTIP)
Drive delivery of long-term
financial results, retention of
GMB members and alignment
to shareholder value creation
Pension- Except for one member, the
members of the GMB are not
covered by a pension plan of
the Group but shall arrange
for their own pension planning
1405014EogSN73946
AWARD LEVEL
Take Into account competitive
market rate of industry peers
25 well as skills, competencies
and experience
Benefits corresponding to
market standards
Target bonus is 60% of annual
base salary. Maximum bonus
opportunity is 90% and is
awarded for performance
significantly above budget.
Objectives are set for one year
The LTiP focuses on value
creation towards an IPO Target
LTIP grant Is 15% of annual base
salary. The plan 1s cash-based
and the grant vests in case of an
mnitial public offering or other
change of contro! event.
N/A
” PERFORMANCE MEASI
Reviewed annually based on
individual performance and
market alignment
N/A
Measures and weighting:
organic growth (30%), EBITA
(30%), cash conversion (30%),
and individual objectives (10%).
Performance is measured for
each financial year
The LTIP rewards increasing
operating profit and
decreasing net debt. Subject
to achieving performance
targets, the plan can pay out
m the range 20-150% of the
grant value
N/A
1405014EogSN73947
No other members of the EGM or the GMB are
entitled to severance payments. Members of the
EGM and the GMB are subject to non-competition
clauses. Members of the GMB (other than mem-
bers of EGM) are subject to non-solicitation of cus-
tomers clauses for a period of 12 months from the
expiry of their notice periods, except for two mem-
bers who are only subject to non-competition
clauses, and one member who is only subject to a
non-solicitation clause regarding customers and
certain employees. The employment contracts con-
tain no other special termination rights and no
change of control clauses.
Directors? and Management Participation
Programme In 2006, EQT and GSCP established
a Management Participation Programme (MPP)
through which the EGM and a number of senior
officers of the Group have invested. In March 2012,
the programme was re-designed to introduce two
investment profiles. The EGM and certain senior
officers of the Group remained indirect investors in
a mix of shares and warrants of FS Invest, whereas
the remaining senior officers of the Group — having
had the opportunity to settle part of their investment
in cash — invested directly or indirectly in shares or
loan notes of FS Invest. During 2013, the new
members of the EGM and a number of senior offic-
ers entered the MPP by investing indirectly in a mix
of shares and warrants in FS Invest and certain
senior officers of the Group entered the MPP by
investing indirectly in shares in FS Invest. At 31
December 2013, the investments amounted to a
total of DKK 192 million, covering 127 executives
and officers.
Certain members of the Board participate in a Di-
rector Participation Programme (DPP), under
which they have invested indirectly in shares in FS
Invest. At 31 December 2013, the investments
amounted to a total of approximately DKK 15 mil-
lion covering four members of the Board. In addi-
tion, three former members of the Board who re-
signed during 2013 participate in the DPP under
which they have invested in a mix of shares and
warrants of FS Invest, which at 31 December 2013
amounted to a total of approximately DKK 9 million.
REMUNERATION TO THE EXECUTIVE GROUP MANAGEMENT FELTETS
Remuneration Report I Governance 48
At 31 December 2013, the investments under the
programmes were as follows:
PARTICIPATION PROGRAMMES
Number Investment
of measured
DKK million persons at cost
Board of Directors 10 27
Executive Group Management Board 4 19
Corporate Officers 26 48
Country Management 97 125
Total 137 219
In addition, one former member of the Board who
resigned in 2013 has co-invested with EQT and
GSCP for approximately DKK 7 million at 31 De-
cember 2013.
Remuneration to the individual members of the
EGM is disclosed below, whereas total remunera-
tion to the GMB is disclosed in section 6.1 to the
consolidated financial statement.
Initial Public Offering (IPO)
Certain members of the EGM and the GMB as well
as certain other employees are subject to a cash
bonus scheme totaling DKK 13 million triggered by
the completion of the IPO.
In preparation for the IPO, the Remuneration
Committee in January 2014 established selected
incentive schemes to apply for the EGM, the GMB
and certain other employees subject to the comple-
tion of an IPO. The new incentive schemes consist
of both cash-based bonus schemes and share-
based schemes. Cash-based bonus schemes in-
clude a short-term incentive programme which will
be partially settled in restricted share units. Share-
based schemes include a transition share pro-
gramme and a long-term incentive programme. For
further information regarding the incentive
schemes, please refer to the offering circular for
ISS A/S published on 3 March 2014.
2013 2012
Jeff Heine Henrik John Jeff Henrik
DKK thousand Gravenhorst Dalsgaard Andersen Peri Gravenhorst Andersen
Salaries and other remuneration 7,901 2,839 6,431 2,507 7,909 6,420
Bonus 5,044 1,550 4,046 1,451 2,060 1,500
Share-based paymenits - - - - 563 -
Total remuneration 12,945 4,389 10,477 3,958 10,532 7,920
Internal controls relating to financial reporting | Governance 49
Internal controls relating
to financial reporting
We consider our internal control proce-
dures to be an essential management
tool. Care is taken to ensure that a sound
framework of controls is in place for
safeguarding the business, the 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 the financial reporting pro-
cess and to ensure a true and fair view of ISS's
financial reporting without material errors.
The Board of Directors (the Board) has approved
policies, standards and procedures in key areas
related to financial reporting, including the Code of
Conduct, Accounting and Reporting Policies,
Treasury Policies and Procedures and Control Pro-
cedures.
The Audit and Risk Committee is responsible for
monitoring the internal controls and risk manage-
ment systems as well as challenging the Executive
Group Management Board (the EGM) in its as-
sessment of material financial reporting risks. Any
risk that may cause a material error in the Group's
financial reporting is considered a material financial
reporting risk.
Group Internal Audit is responsible for providing
assurance concerning the internal control environ-
ment in accordance with the internal audit plan ap-
proved by the Audit and Risk Committee. Group
Internal Audit operates under a charter approved by
the Board.
The EGM has established a Group Controlling de-
partment responsible for controlling the financial
reporting from subsidiaries and preparing the con-
solidated financial reporting.
1405014EogSN73948
Internal control procedures at Group level have
been established to assess on an ongoing basis
the Group's internal control environment and to
manage identified risks. However, as a risk of mis-
use of assets, unexpected losses, etc., will always
exist, such controls can provide reasonable, but not
absolute assurance against material misstate-
ments, omissions or losses. The aim of the estab-
lished control! environment is therefore to provide
the Board and the EGM with reasonable assurance
that:
+ the financial reporting is reliable and in compli-
ance with internal policies and procedures and
gives a true and fair view of the Group's financial
performance and financial position;
… material risks are identified and minimised;
+ internal controls are in place to support the quali-
ty and efficiency of the business processes and
to safeguard the Group's business and assets;
and
e our business is conducted in compliance with
applicable legislation, standards, regulations 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 of an error occurring and whether such error
may be material. The risk of errors is relatively
higher for accounting areas that require manage-
ment judgement and/or are transactions that are
generated through complex accounting processes.
Accounting areas that require management to
make estimates and judgements are described in
the relevant notes to the consolidated financial
statements, under Critical accounting estimates
and judgements.
On an ongoing basis the Audit and Risk Committee
discusses:
«+ material and relevant new accounting pro-
nouncements and implementation of such;
… evaluation of the overall effectiveness of the
internal 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,
control activities are designed to obtain the desired
assurance. These measures must ensure that all
relevant aspects of a specific area are covered, and
that the combination of control activities monitors all
relevant aspects of the business. The control activi-
ties are based on the risk assessment made by the
EGM. The purpose of the contro! activities is to
prevent, detect and correct any material misstate-
ments in the financial reporting.
The Group has implemented a formalised financial
reporting process that includes the reporting re-
quirements and related control activities illustrated
in the table to the right.
Whistleblower policy
ISS has developed a whistleblower policy to enable
employees, business partners and other stakehold-
ers to report suspected violations or concerns relat-
ing to any matter of exceptional gravity or sensitivi-
ty. The whistleblower system can be accessed from
a link on ISS's website and is supported by an ex-
ternally hosted IT system to secure a reporting tool
in full confidentiality. Reports filed through the whis-
tleblower system are managed by Head of Group
Internal Audit and Group General Counsel under
instruction from the Audit and Risk Committee.
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.
1405014EogSN73949
Internal controls relating to financial reporting | Governance 50
REPORTING
CONTRØL ULLA]
Financial performance and financial position
All countries must report a full
Income statement, statement
of financial position, statement
of cash flows, portfolio analysis
and three-months forecasts
etc. on a monthly basis.
Cash flow forecasts
All countries must report
brweekly their daily cash
flow forecasts for a rolling
three-month period
Business reviews
All countries must report a full
income statement, statement
of financial position, statement
of cash flows, portfolio
analysis, three-month forecasts
and contract performance etc.
on a monthly basis.
Budgets and financial plans
All countries must prepare
budgets and plans for the
following financial! year in
a pre-defined format
Full-year forecasts
All countries must update and
report therr fuil-year estimates
twice a year.
Strategy reviews
Country management must
provide annual updates of a
predefined strategy template,
including both assessments
and conclusions on each of our
business fundamentals. This is
combined with figures related
to our markets supporting the
conclusion,
Acquisitions and divestments
All acquisition and divestment
proposals must be presented in
a predefined report format and
valuation model for approval.
Large contracts
Certain large contracts must
be presented in a predefined
format focusing on risk
evaluation for apprøval
Control self-assessments
Every six months, country
managements must self-assess
the implementation of certain
key internal control activities
and develop plans to close any
Implementation gaps.
Group controlling monitors
and controls the reporting for
significant deviations from
the budget.
Actual figures are continuously
monitored and validated by
Group Treasury for deviations
from the forecasted figures.
Monthly meetings between
regional management and
country management with
23 focus on the current
performance and the state
of the business
Regional management teams
review the proposed budgets
and plans with the countries
Monthly meetings between
regional management and
country management with a
focus on the current perfor-
mance and the state of the
business
Annual meetings held with
country managers at which the
strategy is discussed and
priorities and plans for the
coming year are agreed.
Transaction Committee/Board
approval is required for large
or strategic acquisitions and
divestments.
Transaction Committee/Board
approval is required
Group Internaf Audit performs
ongoing audits based on the
countries" control
self-assessment
1405014EogSN73950
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.
Monitoring
Every 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
operating country is sufficient to prevent material
errors in the country's financial performance and
financial position reported for consolidation purpos-
es. The regional management teams provide gov-
ernance of the country operations.
Additionally, in order to ensure that adequate inter-
nal control procedures are maintained locally Group
Internal Audit visits the country organisations regu-
larly. These visits take place according to a plan for
the year approved by the Audit and Risk Commit-
tee. The findings and conclusions of internal audits,
including recommendations on how to improve the
control environment, are presented in reports ad-
dressed to country and regional management
teams, representatives of the 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 and Risk Committee,
which evaluates the results reported and uses the
conclusions to assess the general control environ-
ment when reviewing the internal audit plan for the
coming year.
External audit
The Board nominates the external auditors for elec-
tion at an annual general meeting. The nomination
follows an assessment of the competencies, objec-
tivity and independence of the external auditor and
Internal controls relating to financial reporting I Governance 51
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 or participate in recruit-
ment for senior 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 auditors'
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 and Risk Com-
mittee.
The Board reviews the Annual Report at a Board
meeting attended by the external auditors. The find-
ings of the external auditors and any major issues
arising during the course of the audit are discussed,
and significant accounting policies and critical ac-
counting estimates and judgements are reviewed.
Consolidated financial statements | Financial statements
Consolidated financial
statements
1405014EogSN73951
Consolidated financial statements | Financial statements 53
The consolidated
financial
statements and Consolidated financial statements
Consolidated income statement 54
notes Consolidated statement of comprehensive income 55
Consolidated statement of cash flows 56
Consolidated statement of financial position 57
Consolidated statement of changes in equity 58
Section 1 Basis of preparation 60
Note 1.1: Basis of preparation 60
Section 2 Operating profit 65
Note 2.1. Revenue 65
Note 2.2 Segment information 66
Note 2.3 Translation and operational currency risk 69
Note 2.4 Staff costs 69
Note 2.5. Other income and expenses, net 70
Section 3 Working capital 71
Note 3.1. Changes in working capital 71
Note 3.2. Trade receivables and related credit risk 71
Note 3.3 Other receivables 73
Note 3.4. Other liabilities 73
Section 4 Strategic investments and divestments 74
Note 4,1. Acquisition and divestment of businesses 74
Note 4.2. Assets held for sale 78
Note 4.3. Intangible assets 80
Note 4.4. Impairment tests 82
Note 4.5. Goodwill impairment 84
Section 5 Capital structure 85
Note 5,1 Share capital 86
Note 5,2. Loans and borrowings 87
Note 5,3 Liquidity risk 89
Note 5,4. Currency risk 91
Note 5,5 Interest rate risk 93
Note 56 Derivatives 94
Note 5.7. Financial income and financial expenses 95
Section 6 Governance 96
Note 6.1: Remuneration to the Board of Directors and the Group Management Board — 96
Note 6.2 Related parties 98
Note 6.3. Fees to auditors elected at the Annual General Meeting 99
Section7 Tax 100
Note 7.1. Income taxes 100
Note 7.2. Deferred tax 102
Section 8 Other required disclosures 104
Note 8.1 Property, plant and equipment 104
Note 8.2. Other financial assets 106
Note 8.3. Pensions and similar obligations 106
Note 8.4. Provisions 111
Note 8.5. Contingent liabilities 113
Note 86 Financial assets and liabilities 114
Note 8.7. Reconciliation of segment information 115
Note 8.8. Subsequent events 116
Note 8.9 New standards and interpretations not yet implemented 116
Note 8.10 Subsidiaries, associates, joint ventures and SPEs 117
1405014EogSN73952
Consolidated financial statements | Financial statements 54
Consolidated income statement
1 January — 31 December
DKK million Note 2013 2012
Revenue 2.1, 2.2 78,506 79,492
Staff costs 2.4 (50,882) (51,798)
Consumables (6,949) (7,009)
Other operating expenses 6.3 (15,156) (15,033)
Depreciation and amortisation ” 4.3,8.1 (762) (832)
Operating profit before other items ? 4,757 4,820
Other income and expenses, net 2.5 (163) (236)
Royalty (1,183) (1,223)
Operating profit ” 2.2 3,411 3,361
Share of result from equity-accounted investees 6 4
Financial income 5.7 325 270
Financial expenses 5.7 (2,076) (2,393)
Profit before tax and goodwill impairment/amortisation and impairment
of brands and customer contracts 1,666 1,242
Income taxes ? 7.1 (748) (771)
Profit before goodwill impairment/amortisation and impairment
of brands and customer contracts 918 471
Goodwill impairment 4.5 (866) (209)
Amortisation and impairment of brands and customer contracts 4.3 (269) (360)
Income tax effect ” 7.1,7.2 76 93
Net profit/(loss) for the year (141) (5)
Attributable to:
Owners of ISS Global A/S (143) (8)
Non-controlling interests 2 3
Net profit/(loss) for the year (141) (5)
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.
1405014EogSN73953
Consolidated financial statements I Financial statements 55
Consolidated statement of comprehensive income
1 January — 31 December
DKK million Note 2013 2012
Net profit/(loss) for the year (141) (5)
Other comprehensive income
Items not to be reclassified to the income statement in subsequent periods:
Actuarial gains/(losses) 8.3 410 (516)
Impact from asset ceiling regarding pensions 8.3 (63) 1
Tax 7.1 (76) 120
items to be reclassified to the income statement in subsequent periods:
Foreign exchange adjustments of subsidiaries and non-controlling interests (539) 23
Fair value adjustment of hedges, net 5.6 4 (94)
Fair value adjustment of hedges, net, transferred to Financial expenses 5.6 67 47
Limitation to interest deduction 7.1 - (12)
Tax 7.4 (18) 12
Total other comprehensive income/(loss) (215) (419)
Total comprehensive income/(loss) for the year (356) (424)
Attributable to:
Owners of ISS Global A/S (358) (427)
Non-controlling interests 2 3
Total comprehensive income/(loss) for the year (356) (424)
1405014EogSN73954
Consolidated financial statements | Financial statements 56
Consolidated statement of cash flows
1 January — 31 December
DKK million Note 2013 2012
Operating profit before other items 4,757 4,820
Depreciation and amortisation 4.3, 8.1 762 832
Changes in working capital 3,1 6 111
Changes in provisions, pensions and similar obligations (142) (281)
Other expenses paid (352) (310)
Income taxes paid (750) (690)
Payments related to royalties (1,238) (1,239)
Cash flow from operating activities 3,043 3,243
Acquisition of businesses 4.1 (14) (60)
Divestment of businesses 4.1 2,183 212
Acquisition of intangible assets and property, plant and equipment (854) (855)
Disposal of intangible assets and property, plant and equipment 98 119
(Acquisition)/disposal of financial assets (32) (137)
Cash flow from investing activities 1,381 (721)
Proceeds from borrowings 4,425 71
Repayment of borrowings (1,022) (5,180)
Interest received from companies within the ISS Group 155 52
Interest received, external 135 137
Interest paid to companies within the ISS Group (143) (138)
Interest paid, external (1,314) (1,753)
Proceeds from issuance of share capital - 3,696
Dividends paid (1,118) -
Payments (to)/from ISS Group companies, net (5,664) 65
Non-controlling interests (2) (4)
Cash flow from financing activities (4,548) (3,054)
Total cash flow (124) (532)
Cash and cash equivalents at 1 January 3,522 4,028
Total cash flow (124) (532)
Foreign exchange adjustments (138) 26
Cash and cash equivalents at 31 December 3,260 3,522
1405014EogSN73955
Consolidated financial statements | Financial statements 57
Consolidated statement of financial position
At 31 December
DKK million Note 2013 2012
Assets
Intangible assets 4.3, 4.4 20,543 23,379
Property, plant and equipment 8,1 1,683 1,874
Investments in equity-accounted investees 5 11
Deferred tax assets 7.2 627 551
Other financial assets 8.2 1,620 422
Non-current assets 24,478 26,237
Inventories 301 312
Trade receivables 3.2 10,299 11,433
Tax receivables 209 226
Receivables from companies within the ISS Group 3,874 1,465
Other receivables 3.3 1,534 1,306
Cash and cash equivalents 3,260 3,522
Assets classified as held for sale 4.2 1,962 2,331
Current assets 21,439 20,595
Total assets 45,917 46,832
DKK million Note 2013 2012
Equity and liabilities
Total equity attributable to owners of ISS Global A/S 2,171 3,646
Non-controlling interests 8 9
Total equity 5.1 2,179 3,655
Loans and borrowings 5.2 19,840 16,624
Pensions and similar obligations 8.3 838 1,433
Deferred tax liabilities 7.2 698 680
Provisions 8.4 470 352
Non-current liabilities 21,846 19,089
Loans and borrowings 5,2 6,880 8,822
Trade payables 3,363 3,628
Tax payables 350 227
Other liabilities 3.4 9,966 10,487
Provisions 8.4 317 225
Liabilities classified as held for sale 4.2 1,016 699
Current liabilities 21,892 24,088
Total liabilities 43,738 43,177
Total equity and liabilities 45,917 46,832
1405014EogSN73956
Consolidated financial statements I Financial statements 58
Consolidated statement of changes in equity
1 January — 31 December
Attributable to owners of ISS Global A/S
2013 Non-con-
Share Share Retained Translation Hedging trolling Total
DKK million capital premium earnings reserve reserve Total interests equity
Equity at 1 January 180 5,554 (2,317) 306 (77) 3,646 9 3,655
Comprehensive income for the year
Net profit/(loss) for the year - - (143) - - (143) 2 (141)
Other comprehensive income
Foreign exchange adjustments of subsidiaries
and non-controlling interests - - - (538) - (538) (1) (539)
Fair value adjustment of hedges, net - - - - 4 4 - 4
Fair value adjustment of hedges, net,
transferred to Financial expenses - - - - 67 67 - 67
Actuarial gains/(losses) - - 410 - - 410 - 410
Impact from asset ceiling regarding pensions - - (63) - - (63) - (63)
Tax - - (76) - (18) (94) - (94)
Total other comprehensive income/(loss) - " 271 (538) 53 (214) (1) (215)
Total comprehensive income/(loss)
for the year - - 128 (538) 53 (357) 1 (356)
Transactions with owners
Dividends paid - - (1,118) - -… (1,118) (2) (1,120)
Total transactions with owners - - (1,118) - -… (1,118) (2) (1,120)
Total changes in equity - - (990) (538) 53 (1,475) (1) (1,476)
Equity at 31 December 180 5,554 (3,307) (232) (24) 2,171 8 2,179
Dividends
During the year total dividends of DKK 1,118 million was proposed and approved on two extraordinary General meetings. No
additional dividends have been proposed or declared before the Annual Report was issued.
1405014EogSN73957
Consolidated financial statements I Financial statements 59
Consolidated statement of changes in equity
1 January — 31 December
Attributable to owners of ISS Global A/S
2012 Non-con-
Share Share Retained Translation Hedging trolling Total
DKK million capital premium earnings reserve reserve Total interests equity
Equity at 1 January 160 1,881 (1,969) 281 (30) 323 11 334
Change in accounting policy due to
implementation of IAS 19 (2011) - - 55 2 - 57 - 57
Adjusted equity at 1 January 160 1,881 (1,914) 283 (30) 380 11 391
Comprehensive income for the year
Net profit/(loss) for the year - - (8) - - (8) 3 (5)
Other comprehensive income
Foreign exchange adjustments of subsidiaries
and non-controlling interests - - - 23 - 23 0 23
Fair value adjustment of hedges, net - - - - (94) (94) - (94)
Fair value adjustment of hedges, net,
transferred to Financial expenses - - - - 47 47 - 47
Actuarial gains/(losses) - - (516) - - (516) - (516)
Impact from asset ceiling regarding pensions - - 1 - - 1 - 1
Limitation to interest deduction - - - - (12) (12) - (12)
Tax - - 120 - 12 132 - 132
Total other comprehensive incomel(loss) ” - (395) 23 (47) (419) 0 (419)
Total comprehensive incomel(loss)
for the year - " (403) 23 (47) (427) 3 (424)
Transactions with owners
Share issue 20 3,701 - - - 3,721 - 3,721
Costs related to the share issue - (28) - - - (28) - (28)
Impact from acquired and divested
companies, net - - - - - - (1) (1)
Dividends paid - - - - - - (4) (4)
Total transactions with owners 20 3,673 - - -… 3,693 (5) 3,688
Total changes in equity 20 3,673 (403) 23 (47) 3,266 (2) 3,264
Equity at 31 December 180 5,554 (2,317) 306 (77) 3,646 9 3,655
Dividends
No dividends have been proposed or declared before the Annual Report was issued.
1405014EogSN73958
Consolidated financial statements I Financial statements 60
Section 1
Basis of preparation
In 2013, significant changes to the structure of the consolidated financial statements have been implemented with the
aim to ensure a more readable report with a logical structure taking the characteristics of ISS's business into account.
The notes have been grouped into eight sections based on theme rather than in consecutive order based on line items
in the primary statements. Furthermore, compared to prior years a number of notes have been excluded from the
consolidated financial statements based on a reassessment of materiality as described below in "Defining materiality".
Finally, the Group's accounting policies as well as critical accounting estimates and judgements (in prior years note 1
and note 2) are included in the beginning of each relevant section or note.
Included in this section are required disclosures relevant for the understanding of the basis of preparation of the
consolidated financial statements, i.e.:
+ Reporting entity
" Statement of compliance
+» Functional and presentation currency
+ Basis of measurement
+ Defining materiality
+ Changes in accounting policies
+ Going concern
+ Basis of consolidation
+ Foreign currency
+ Accounting policies, i.e. policies not relevant for a specific section
+ Equity
+ Use of critical accounting estimates and judgements
+ Financial risk management
NOTE 1.1 Basis of preparation
Reporting entity
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 2013 comprise ISS Global A/S and its subsidiaries (together referred to as "ISS" or "the Group") and the
Group's interests in equity-accounted investees.
A group chart is included in note 8.10, Subsidiaries, associates, joint ventures and SPEs.
Statement of compliance
The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and 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 Annual Report for ISS Global A/S for 2013 was discussed and approved by the Executive Group Management Board (the EGM)
and the Board of Directors (the Board) on 30 April 2014 and issued for approval at the subsequent Annual General Meeting on 30
April 2014.
Functional and presentation currency
The consolidated financial statements are presented in Danish kroner (DKK), which is ISS Global A/S's functional currency. All
amounts have been rounded to nearest DKK million, unless otherwise indicated.
Basis of measurement
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.
1405014EogSN73959
EST BE
Consolidated financial statements | Financial statements 61
NOTE 1.1 Basis of preparation (continued)
Defining materiality
The income statement and the statement of financial position separately present items that are considered individually significant, or
are required under the minimum presentation requirements of IAS 1.
In determining whether an item is individually significant ISS considers both quantitative and qualitative factors. if the presentation or
disclosure of an item does not increase the value of information to users, the information is considered insignificant.
Explanatory disclosure notes related to the income statement, the statement of financial position and the statement of cash flows are
presented for individually significant items. Where separate presentation of a line item is made solely due to the minimum
presentation requirements in JAS 1, no further disclosures are provided in respect of that line item.
Changes in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies set out below to all periods presented in
these consolidated financial statements. However, based on new information minor adjustments to comparative figures in primary
statements and notes have been implemented.
With effect from 1 January 2013, the Group has implemented:
- Amendments to IAS 1 "Presentation of Items of Other Comprehensive Income";
+ Amendmenits to IFRS 7 "Financial Instrument Disclosure”;
+ IFRS 10 "Consolidated Financial Statements”;
+» IFRS 11 "Joint Arrangements”;
+» IFRS 12 "Disclosure of Interests in Other Entities";
- IAS 27 (2011) "Separate Financial Statements";
+ Amendments to IAS 27 (2011) "Separate Financial Statements";
-» JAS 28 (2011) "Investments in Associates and Joint Ventures";
+ IFRS 13 "Fair Value Measurement”;
- JAS 19 (2011) "Employee Benefits”;
«- Amendments to IAS 36 "Impairment of assets"; and
+ Annual improvemenits to IFRSs 2009-2011 cycle.
Ås a result of the amendments to IAS 1, the Group has modified the presentation of items of Other comprehensive income to present
separately items that would be reclassified to the income statement from those that would never be. Comparative figures have been
restated accordingly.
Ås a result of IFRS 10 the Group changed the accounting policy for determining whether it has control over and consequently
whether it consolidates its investees. The new standard introduces a new control model that focuses on whether the Group has
power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to
affect those returns.
In accordance with the transitional provision of IFRS 10 the Group reassessed the control conclusion for its investees in 2013. The
reassessment had no quantitative impact on the Group's consolidated financial statements.
IERS 11 removes the option to account for jointliy controlled entities using proportionate consolidation. Instead jointly controlled
entities that meet the definition of a joint venture must be accounted for using the equity method. The application of this new
standard impacted the Group by replacing proportionate consolidation of the Group's joint ventures with the equity method of
accounting. The implementation did not have a material impact on the Group's consolidated financial statements.
IFRS 13 changes the principles for calculation of fair value of financial and non-financial assets and liabilities and introduces a
number of new disclosure requirements. The Group already complies with the fair value calculation principles. Consequentily, the
new standard only affects disclosure requirements for the Group.
The amendments to iAS 19 results in interest income no longer being calculated and recognised in the income statement on the
basis of the expected return on plan assets, but instead by using the applied liability discount rate. Furthermore, risk sharing between
the Group and the plan participants has been changed. Comparative figures have been restated and the impact on Equity is shown
in the statement of changes in equity. The impact on the income statement was an increase in financial expenses of DKK 8 million in
2012. Net of tax the implementation increased Net loss for the year from DKK 444 million to DKK 450 million in 2012.
Except for IFRS 11 and IAS 19, the adoption of these standards and interpretations did not affect recognition and measurement in
the consolidated financial statements for 2013.
1405014EogSN73960
Consolidated financial statements I Financial statements 62
NOTE 1.1 Basis of preparation (continued)
Going concern
The Board and the EGM have during the preparation of the consolidated financial statements of the Group assessed the going
concern assumption. The Board and the EGM believe that no events or conditions give rise to doubt about the ability of the Group to
continue in operation within the next reporting period. The conclusion is made based on knowledge of the Group, the estimated
economic outlook and identified risks and uncertainties in relation thereto. Further, the conclusion is based on review of budgets,
including expected development in liquidity and capital etc., current credit facilities available including contractual and expected
maturities and covenants. Consequently, it has been concluded that it is reasonable to apply the going concern concept as
underlying assumption for the consolidated financial statements of the Group.
Basis of consolidation
Subsidiaries are entities controlled by ISS Global A/S. ISS Global A/S controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial! statements from the date on which control commences
until the date on which control ceases.
Changes in the Group's interest in a subsidiary that do not result in loss of control are accounted for as equity transactions.
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.
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. 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.
Written put options 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
meagsured at the present value of the exercise price of the option.
Subsequent fair value adjustments of put options held by non-controlling interests relating to business combinations effected on or
after 1 January 2010 are recognised directly in equity. Subsequent fair value adjustments of put options held by non-controlling
interests related to business combinations effected prior to 1 January 2010 are recognised in goodwill. The effect of unwind of
discount is recognised under Financial expenses.
Upon 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 resulting gain or loss is recognised in the income statement. Any interest
retained in the former subsidiary 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.
The Group's interests in equity-accounted investees comprise interests in associates and joint ventures.
Associates are entities in which the Group has significant influence, but not contro! or joint control, over the financial and operating
policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which
includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the
profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint
control cCeases.
Transactions eliminated on consolidation On consolidation, intra-group income and expenses, shareholdings, intra-group
balances and dividends and realised and unrealised gains and losses arising from intra-group transactions are eliminated.
Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the
Group's interest in the investment. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
Foreign currency
Transactions denominated in currencies other than the functional currency of the respective Group companies are considered
transactions denominated in foreign currencies.
1405014EogSN73961
Consolidated financial statements | Financial statements 63
NOTE 1.1 Basis of preparation (continued)
On initial recognition, transactions denominated in foreign currencies are translated to the respective functional currencies of the
Group companies 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 of transaction 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 Group companies with a functional currency other than 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.
However, if the foreign entity is a non-wholly owned subsidiary, the relevant proportion of the translation difference is allocated to the
non-controlling interest.
Foreign exchange gains and losses on the part of lcans and derivative financial instruments which are designated as hedges of
investments in foreign entities with a functional currency other than DKK 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.
Accounting policies
The Group's significant accounting policies and accounting policies related to IAS 1 minimum presentation items are described in the
relevant individual notes to the consolidated financial statements or otherwise stated below. A list of the notes is shown in the
overview on page 53.
Presentation of income statement 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.
Presentation of statement of cash flows The consolidated statement of cash flows shows the Group's cash flows from operating,
investing and financing activities for the year. Interest paid and received is included in cash flow from financing activities as this is
considered to most appropriately reflect the distinction between operating and financing activities.
Royalty comprises royalty and management fee invoiced by ISS World Services A/S (the parent of ISS Global A/S).
Inventories are measured at the lower of cost under the FIFO principle and net realisable value. Net realisable value of inventories
is calculated as the estimated selling price less costs of completion and costs necessary to complete the sale and is determined
taking into account marketability, obsolescence and development in expected sales price.
Share-based payments The value of services received in exchange for granted warrants is measured at fair value. The fair value of
equity-settled programmes is measured at grant date and recognised over the vesting period.
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.
Other long-term employee benefits The Group's net obligation in respect of long-term employee benefits is the amount of future
benefit that employees have earned in return for their service in current and prior periods. That benefit is discounted to determine its
present value. Gains and losses on remeasurement are recognised in the income statement in the period in which they arise.
Equity
Share premium comprises amounts above the nominal share capital paid by shareholders when shares are issued by ISS Global
A/S. The share premium is part of the Group's free reserves.
Translation reserve comprises all foreign exchange differences arising from the translation of financial statements of foreign entities
with a functional currency other than DKK as well as from the translation of non-current balances which are considered part of the
investment in foreign entities.
On full or partial realisation of a foreign entity where control is lost the foreign exchange adjustments are transferred to the income
statement under the same line item as the gain or loss.
1405014EogSN73962
Consolidated financial statements | Financial statements 64
NOTE 1.1 Basis of preparation (continued)
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.
Use of critical accounting estimates and judgements
In preparing these consolidated financial statements, management has made various judgements, estimates and assumptions
concerning future events that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis and have been prepared taking the financial market situation 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.
Information about judgement, assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment is included in the following notes:
+ Revenue (note 2.1)
- Other income and expenses, net (note 2.5)
- Trade receivables and related credit risk (note 3.2)
+ Acquisition and divestment of businesses (note 4.1)
+ Assets held for sale (note 4.2)
+ Impairment tests (note 4.4)
» Deferred tax (note 7.2)
+ Pensions and similar obligations (note 8.3)
- Provisions (note 8.4)
Financial risk management
The Group is exposed to a number of financial risks arising from its operating and financing activities, mainly currency risk, interest
rate risk, liquidity risk and credit risk. These financial risks are managed centrally by Group Treasury based on the treasury policy.
The treasury policy is reviewed annually and approved by the Board. Additionally, the treasury policy complies with current loan
documentation, e.g. the Senior Facility Agreement and the Intercreditor Agreement.
It is not the Group's policy to take speculative positions in the financial markets. The Group's financial risk management is focused
on managing risks arising from the Group's operating and financing activities, mainly by use of interest rate instruments and currency
instruments with the purpose of managing volatility in the Group's results.
The areas involving the most significant financial risks are trade receivables, loans and borrowings and financial income and
expenses. Information about the Group's objectives, policies and processes for measuring and managing the risk exposure related
to these items is included in these notes:
- Trade receivables and related credit risk (note 3.2)
+ Liquidity risk (note 5.3)
+ Currency risk (note 5.4)
+ Interest rate risk (note 5.5)
The Group has not identified additional financial risk exposures in 2013 compared to 2012, and the approach to capital management
and risk management activities is unchanged compared with 2012.
The Group is exposed to risk in relation to translation into DKK of income statements and net assets of foreign subsidiaries, including
intercompany items such as loans, royalties, management fees and interest payments between entities with different functional
currencies, since a significant portion of the Group's revenue and operating profit is generated in foreign entities. This risk is
described in the following note:
- Translation and operational currency risk (note 2.3)
To limit the exposure to credit risk related to securities, cash and cash equivalents it is Group policy only to enter into transactions
with financial institutions carrying a minimum required short-term credit rating assigned by Standard & Poor's (S&P) (A-1 rating) or
Moody's (P-1 rating). Other banks may be approved separately by Group Treasury. Group Treasury monitors credit ratings and given
that the Group generally enters into transactions only with financial institutions with high credit ratings, management assesses that
sufficient steps are taken in order to mitigate potential counterparties failing to meet contractual obligations.
1405014EogSN73963
Consolidated financial statements | Financial statements 65
Section 2
Operating profit
This section comprise notes which provide specifications and explanations related to the composition of the Group's
operating profit for the year, including disclosures on revenue and operating segments. Segment information is
presented in three ways: reportable segments, service types, and geographical information.
In this section, the following notes are presented:
2.1 Revenue
2.2 Segment information
2.3 Translation and operational currency risk
2.4 Staff costs
2.5 Other income and expenses, net
NOTE 2.1 Revenue
Accounting policy
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 recovery of the consideration is probable and when, the amount of revenue, the
stage of completion, the costs incurred for the transaction, and the costs to complete the transaction can be measured reliably.
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 all
significant risks and rewards of ownership have been transferred to the customer, and that the amount 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.
Critical accounting estimates and judgements
Management makes estimates and judgement in relation to presentation of revenue as gross or net as well as in relation to treatment
of significant contracts.
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, which
requires judgement in the evaluation of relevant facts and circumstances.
The Group has entered into certain significant contracts with complex revenue and cost structures. Accounting for these contracts
requires management's judgement in terms of recognition of the individual items of revenue and costs, including recognition in the
correct periods over the term of the contract.
Specification of revenue
DKK million 2013 2012
Rendering of services 76,152 71,025
Sale of goods 2,354 2,467
Revenue 78,506 79,492
1405014EogSN73964
Consolidated financial statements | Financial statements 66
NOTE 2.2 Segment information
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.
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 activities managed by the Global Corporate Clients organisation are excluded from the geographical segments and combined in
a separate segment called "Other countries".
Accounting policy
The accounting policies of the reportable segments are the same as the Group's accounting policies described throughout the notes.
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 the purpose of segment reporting, 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.
Reportable segments
The segment reporting is prepared in a manner consistent with the Group's internal management and reporting structure. A
reconciliation of total reportable segments to the income statement and statement of financial position is provided in note 8.7,
Reconciliation of segment information.
Transactions between reportable segments are made on market terms.
2013 Other Total
Western Latin North Eastern coun- reportable
DKK million Europe Nordic Asia Pacific America America Europe tries segments
Revenue ” 39,704 16,853 8,019 5,105 3,708 3,459 1,657 38 78,543
Depreciation and amortisation ? (381) (170) (67) — (64) (45) (17) (17) - (761)
Operating profit before other items I 2,388 1,246 608 253 145 101 109 (1) 4,849
Other income and expenses, net (145) 54 (45) 355 (175) (173) (5) - (134)
Royalty (579) (257) (122) — (77) (60) (58) (30) (0) (1,183)
Operating profit 2 1,664 1,043 — 441 531 (90) — (130) 74 (1) 3,532
Goodwill impairment (703) - - (133) - (30) - - (866)
Amortisation and impairment
of brands and customer contracts (117) (29) (37) (38) (8) (32) (8) - (269)
Total assets 24,827 11,075. 3,869 2,611 1,523 1,792 1,157 8 46,862
Hereof assets classified as held for sale 1,373 315 122 152 - - - - 1,962
Additions to non-current assets ” 485 180 87 91 30 13 11 - 897
Total liabilities 18,473 8,460 1,765. 1,632 1,787 1,085 509 8 33,719
Hereotf liabilities classified as held for sale 800 131 16 69 - - - - 1,016
1) Including internal revenue which due to the nature of the business 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.
1405014EogSN73965
Consolidated financial statements I Financial statements 67
NOTE 2.2 Segment information (continued)
2012 Other Total
Western Latin North Eastern coun- reportable
DKK million Europe Nordic Asia Pacific America America Europe tries segments
Revenue ” 39,414. 17,736. 7,367 6,007 3,820 3,539 1,605 36 79,524
Depreciation and amortisation 2) (391) (206) (80) (62) (51) (20) (19) - (829)
Operating profit before other items ? 2,407 1,190 — 564 311 91 151 102 (1) 4,815
Other income and expenses, net (48) 27 (23) (2) (128) (62) - - (236)
Royalty (584) (276) (117) (91) (65) (62) (28) (0) (1,223)
Operating profit ? 1,775 941 424 218 (102) 27 74 (1) 3,356
Goodwill impairment (196) - (13) - - - - - (209)
Amortisation and impairment
of brands and customer contracts (188) (38) (45) (38) (10) (32) (9) - (360)
Total assets 26,156 11,459 4,065 3,782 1,779 1,838 1,138 9 50,226
Hereof assets classified as held for sale 860 856 145 470 - - - - 2,331
Additions to non-current assets ” 519 195 107 96 45 8 12 - 982
Total liabilities 20,316 9,287 1,974 2,784 1,782 876 515 8 37,542
Hereof liabilities classified as held for sale 170 414 20 95 - - - - 699
14) Refer to the segment reporting for 2013.
Grouping of countries into regions
Western Europe: Austria, Belgium & Luxembourg, France, Germany, Greece, Ireland, |srael, Italy, the Netherlands, Portugal,
Spain, Switzerland, Turkey and the United Kingdom
Nordic: Denmark, Finland, Greenland, Iceland, Norway and Sweden
Asia: Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, Taiwan and
Thailand
Pacific: Australia and New Zealand
Latin America: Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama, Peru, Puerto Rico, Uruguay and
Venezuela
North America: Canada and the USA
Eastern Europe: Croatia, the Czech Republic, Estonia, Hungary, Poland, Romania, Russia, Slovakia and Slovenia
Other countries: Bahrain, Cayman Islands, Cyprus, Egypt, Morocco, Nigeria, Pakistan, Qatar, Saudi Arabia, South Africa,
South Korea, Ukraine and the United Arab Emirates
1405014EogSN73966
Consolidated financial statements I Financial statements 68
NOTE 2.2 Segment information (continued)
Service types
The Group's revenue derives from the following service types:
DKK million 2013 2012
Cleaning services 38,541 39,552
Property services 15,307 14,987
Catering services 8,535 8,558
Support services 6,514 6,607
Security services 6,316 6,418
Facility management 3,293 3,370
Revenue 78,506 79,492
Geographical information
Revenue and non-current assets (excluding deferred tax assets) is specified below for each of the Group's significant countries”:
2013 2012
Non-current Non-current
DKK million Revenue assets Revenue assets
United Kingdom 9,322 1,950 8,792 1,931
France 7,122 3,240 7,248 4,310
Norway 5,762 789 6,080 855
Australia 4,572 1,576 5,476 2,034
Spain 4,173 1,384 4,410 1,316
Switzerland 4,005 1,250 3,471 1,263
Finland 3,986 2,048 4,131 2,086
Sweden 3,948 1,598 4,047 1,668
Denmark (country of domicile) 2,965 986 3,293 1,059
Other countries ? 32,651 9,029 32,544 9,164
Total 78,506 23,850 79,492 25,686
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 in 2013 (2012: none).
1405014EogSN73967
Consolidated financial statements | Financial statements 69
NOTE 2.3 Translation and operational currency risk
The Group is exposed to a low level of currency risk on transaction level, since the services are produced, delivered and invoiced in
the same local currency with minimal exposure from imported components. The Group is, however, exposed to risk in relation to
translation into DKK of income statements and net assets of foreign subsidiaries, including intercompany items such as loans,
royalties, management fees and interest payments between entities with different functional currencies, since a significant portion of
the Group's revenue and operating profit is generated in foreign entities.
In 2013, the currencies in which the Group's revenue was denominated decreased with an average of 3.3% (2012: increased with
2.4%) relative to DKK, decreasing the Group's revenue by DKK 2,094 million (2012: an increase of DKK 1,966 million). Currency
movements decreased the Group's operating profit before other items by DKK 126 million (2012: an increase of DKK 127 million).
The effect of the translation of net assets in foreign subsidiaries decreased other comprehensive income by DKK 539 million (2012:
an increase of DKK 23 million).
Sensitivity analysis It is estimated that a change in foreign exchange rates of the Group's main currencies would have impacted
revenue, operating profit before other items and other comprehensive income by the amounts shown below. The analysis is based
on foreign exchange rate variances that the Group considered to be reasonably possible at the reporting date. The analysis assumes
that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases. The
analysis is prepared on the same basis for 2012.
2013 2012
Change Operating Operating
in foreign profit Change in profit
ex- before Netassets foreign ex- before Net assets
change other in foreign change other in foreign
DKK million rates Revenue items Royalty subsidiaries rates Revenue items Royalty subsidiaries
GBP 10% 929 66 15 186 10% 877 60 14 161
AUD 10% 457 23 7 92 10% 548 29 8 88
CHF 5% 200 17 3 58 10% 347 38 6 74
USD 10% 337 10 6 78 10% 347 16 6 98
NOK 5% 288 21 4 2 5% 304 22 5 (11)
EUR 1% 266 14 4 34 1% 278 15 4 31
TRY 10% 241 18 4 28 10% 221 16 4 43
SEK 5% 197 15 3 36 5% 202 14 3 31
Other 10% 1,548 94 24 304 10% 1,480 81 24 327
Total - 4,463 278 70 818 - 4,604 291 74 842
NOTE 2.4 Staff costs
DKK million 2013 2012
Wages and salaries 40,485 41,318
Defined benefit plans 139 64
Defined contribution plans 1,830 1,868
Social security costs 5,923 6,070
Other employee benefits 2,505 2,478
Staff costs 50,882 51,798
Average number of employees 533,678 536,610
The Group received government grants in the form of wage subventions, which have been recognised 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.
1405014EogSN73968
Consolidated financial statements I Financial statements 70
NOTE 2.5 Other income and expenses, net
Accounting policy
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 items such as subsequent adjustments to 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.
Critical accounting estimates and judgements
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.
Specification of other income and expenses, net
DKK million 2013 2012
Gain on divestments 710 107
Other 5 19
Other income 715 126
Restructuring projects (349) (156)
Onerous contracts (228) -
Labour related claims (100) -
Loss on divestments (72) (42)
Build-up of IFS capabilities in North America (50) (62)
Misstatement of accounts - (98)
Other (79) (4)
Other expenses (878) (362)
Other income and expenses, net (163) (236)
Gain on divestments in 2013 related to a number of divestments, most significantly the pest control activities in 12 countries and the
Nordic damage control activities. In 2012, the gain mainly related to the sale of Reaktorskolen AS, the governmental outplacing
services in Norway, and the washroom activities in the Netherlands and Belgium & Luxembourg.
Restructuring projects in 2013 related to structural adjustments in a number of countries, mainly the United Kingdom, Greece,
France, Brazil, Denmark and the USA. The restructuring projects include cost reductions to make ISS more efficient going forward
and primarily comprise redundancy payments, termination of leaseholds, relocation costs, exceptional provisions for impairment
losses on receivables as well! as redundancy and severance payments relating to senior management changes. In 2012, costs mainly
related to structural adjustments in France, Norway, Brazil and the Netherlands, consolidation of office locations and other efficiency
improvements in Norway as well as redundancy and severance payments relating to senior management changes.
Onerous contracts related to the expected losses on a few large specific contracts which were entered into in previous years.
Following recent development in assumptions it is not considered probable that the contracts will be profitable over the lifetime.
Labour related claims consisted of claims related to previous years on specific contracts.
Loss on divestments in 2013 related to a number of divestments, mainly occupational health and safety (Arbo) activities in the
Netherlands and building services and hardware services in Belgium as well as the remeasurement of net assets of the security
activities in Israel in connection with the classification as held for sale as per 31 December 2013. In 2012, the loss mainly related to
the landscaping activities in the Netherlands and the mailroom services in France.
Build-up of IFS capabilities in North America comprised costs incurred in relation to the strategic build-up of the IFS platform to
support and deliver on major contracts in the USA. The build-up of the IFS platform was completed in 2013.
Misstatement of accounts in 2012, related to Uruguay, India and Mexico. The loss was a result of the expansion of the businesses
in these high-growth markets not being sufficiently supported by a satisfactory control environment.
1405014EogSN73969
Consolidated financial statements I Financial statements 71
Section 3
Working capital
Cash flows and in particular working capital is given high priority at ISS. Our approach to managing working capital is
structured and well proven through continued delivery of steady cash flows reflected in cash conversion of 100% in
2013 which is consistent with performance in prior years with cash conversion realised in the range of 94% to 103% in
the period from 2008 to 2012.
The approach to improving capital efficiency consists primarily of the following tools: i) working capital projects which
focus on the order-to-cash process and in particular sharing of best practices within the Group, creating awareness of
the different components influencing working capital and strengthening internal training to continue anchoring the
cash flow culture across various functions (sales, operations, finance etc.); ii) particular focus on trade receivables,
especially overdue receivables and unbilled receivables; iii) standardised reporting of cash flow forecasts and ongoing
follow-up in order to monitor the cash performance on a regular basis; and iv) inclusion of cash conversion in the
Group's incentive structure.
This section comprises notes to understand the development in working capital:
3.1 Changes in working capital
3.2 Trade receivables and related credit risk
3.3 Other receivables
3.4 Other liabilities
NOTE 3.1 Changes in working capital
DKK million 2013 2012
Changes in inventories (31) (15)
Changes in receivables (568) (67)
Changes in payables 605 193
Changes in working capital 6 111
NOTE 3.2 Trade receivables and related credit risk
Trade receivables are exposed to credit risk which might result in impairment losses. This note includes general information about
trade receivables as well as specifications and explanations of the related credit risk.
Accounting policy
Trade 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.
Impairment losses are recognised when objective evidence indicates that an individual receivable or a portfolio of receivables with
similar risk Characteristics is impaired. This is based on an individual review for impairment due to customer insolvency, past due
amounts and mathematically computed impairment losses based on classification of debtors, maturity and historical information.
Impairment losses, both individual and collective, are recognised in a separate account unless the Group is satisfied that no recovery
of the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the receivable directly.
When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through
the income statement.
Critical accounting estimates and judgements
Impairment losses are based on management's assessment of the customer's ability to make the required payments. Following the
global economic downturn in recent years particularly in Western Europe the general credit risk has increased for groups of
customers in certain countries in this region. Furthermore, in 2013 and 2012 a slight increase in the ageing of trade receivables and
debtor days was seen most significantly in some Mediterranean countries and Latin America. Such developments and the economic
downturn may have an adverse effect on the earnings in the industry in general and are taken into consideration in the assessment
of impairment losses.
1405014EogSN73970
Consolidated financial statements I Financial statements 72
NOTE 3.2 Trade receivables and related credit risk (continued)
Trade receivables and related credit risk
The carrying amount of trade receivables of DKK 10,299 million (2012: DKK 11,433 million) recognised in the statement of financial
position represents the maximum credit exposure.
Exposure to credit risk on trade receivables is managed locally in the operating entities and credit limits set as deemed appropriate
for the customer taking into account the customer's financial position and the current market conditions. Generally, the Group does
not hold collateral as security for trade receivables.
credit risk related to significant individual customers. In some geographies, mainly the Mediterranean countries and Latin America,
the general credit risk has increased for groups of customers, which has led to an increase in the level of impairment losses
recognised in 2013. However, historically amounts written off as uncollectible have been relatively low, which is also the case in
2013.
The maximum credit risk exposure for trade receivables at the reporting date, i.e. the carrying amount, by geography was:
2013 2012
Impair- Carrying Impair- Carrying
DKK million Gross ment amount Gross ment amount
Western Europe 6,117 (195) 5,922 6,683 (124) 6,559
Nordic 1,511 (24) 1,487 1,728 (22) 1,706
Asia 1,112 (21) 1,091 1,134 (22) 1,112
Pacific 575 (7) 568 687 (8) 679
Latin America 583 (48) 535 657 (14) 643
North America 390 (7) 383 441 (10) 431
Eastern Europe 318 (8) 310 306 (8) 298
Other countries 3 - 3 5 - 5
Total 10,609 (310) 10,299 11,641 (208) 11,433
Impairment losses
The ageing of trade receivables at the reporting date was:
2013 2012
Impair- Carrying Impair- Carrying
DKK million Gross ment amount Gross ment amount
Not past due 8,204 - 8,204 8,860 (0) 8,860
Past due 1 to 60 days 1,594 (0) 1,594 1,911 (0) 1,911
Past due 61 to 180 days 322 (19) 303 434 (13) 421
Past due 181 to 360 199 (33) 166 151 (34) 117
More than 360 days 290 (258) 32 285 (161) 124
Total 10,609 (310) 10,299 11,641 (208) 11,433
The Group believes that the unimpaired amount at 31 December 2013 is still collectible based on historical behaviour and analysis
of the underlying customers' financial position and credit ratings.
The movement in the allowance for impairment losses during the year was as follows:
DKK million 2013 2012
Impairment losses at 1 January (208) (233)
Impairment losses recognised (162) (75)
Impairment losses reversed 8 21
Amounts written off as uncollectible 38 67
Reclassification to Assets held for sale 14 12
Impairment losses at 31 December (310) (208)
1405014EogSN73971
Consolidated financial statements I Financial statements 73
NOTE 3.2 Trade receivables and related credit risk (continued)
Securitisation
Certain countries participate in the Group's securitisation programme where securitised trade receivables 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 2013, trade receivables of DKK 4,535 million (2012: DKK 4,818 million) recognised in the statement of financial
position were provided as security for securitisation debt with a face value of DKK 2,773 million (2012: DKK 2,635 million).
NOTE 3.3 Other receivables
Accounting policy
Other receivables are recognised initially at cost and subsequently at amortised cost. Prepayments are measured at cost. Costs
relating to sales work and securing contracts are recognised in the income statement as incurred.
Specification of other receivables
DKK million 2013 2012
Prepayments 607 610
Loan to FS Invest S.å r.l 98 -
Currency swaps 21 48
Other 808 648
Other receivables 1,534 1,306
Prepayments comprise mainly prepayments to suppliers and sign-on fees related to customer contracts.
Other comprise various receivables such as supplier rebates and bonuses, refunds from customers and other recoverable amounts,
contract work in progress, refunds and recoverable amounts related to employees, outlay for customers, costs related to PPP/PFI
contracts, loans to customers, accrued interest, VAT, etc.
NOTE 3.4. Other liabilities
Accounting policy
Other liabilities are recognised initially at cost.
Specification of other liabilities
DKK million 2013 2012
Accrued wages, pensions and holiday allowances 4,597 5,000
Tax withholdings, VAT etc. 2,847 3,103
Prepayments from customers 407 463
Other 2,115 1,921
Other liabilities 9,966 10,487
Other comprise supplier expenses, utilities such as rent, telephone, electricity etc., contingent consideration and deferred payments,
accrued interests, fees to advisors and auditors, customer discounts and insurance, etc.
1405014FogSN73972
Consolidated financial statements | Financial statements 74
Section 4
Strategic investments and divestments
In 2013, the Group continued to review the strategic rationale and fit of business units, which led to identification of
activities that were non-core to the strategy. As a result ISS has divested 14 businesses in 2013 including the pest
control activities in 12 countries and the damage contro! activities in the Nordics as the most significant. Further, as a
result of this on-going review of our business platform, sales processes have been initiated for six businesses, and
these have been classified as held for sale as per 31 December 2013.
In terms of acquisitions, in recent years the number of acquisitions have been few, and we expect to continue the
disciplined and focused acquisition strategy going forward. In 2013, ISS acquired one minor business in Spain, which
added an expanded service offering within the hotel segment.
Our acquisition strategy in previous years added more than 600 businesses to the Group in the period 2000 to 2010,
which resulted in a significant amount of acquisition-related intangibles in addition to the significant amount of
intangibles being recognised in May 2005 when ISS World Services A/S was acquired. This continues to make the
Group exposed to possible impairment losses, both due to impairment tests and due to divestments. In 2013,
intangibles have been reduced by both categories of impairment losses.
In this section, the following notes are presented:
4.1 Acquisition and divestment of businesses
4.2 Assets held for sale
4.3 Intangible assets
4.4 Impairment tests
4.5 Goodwill impairment
NOTE 4.1 Acquisition and divestment of businesses
Accounting policy
Business combinations Acquired businesses or entities formed during the year are recognised in the consolidated financial
statements from the acquisition date, which is the date when the Group effectively obtains control of the acquired business, 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. Assets held for sale
are presented separately, refer to the description below.
Før 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.
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. 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 the income statement 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 in Other income and expenses, net.
lf 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 subseguently 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, and changes in estimates of
contingent consideration relating to business combinations are recognised in the income statement under Other income and
expenses, net.
1405014EogSN73973
Consolidated financial statements | Financial statements 75
NOTE 4.1. Acquisition and divestment of businesses (continued)
Accounting policy (continued)
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.
Critical accounting estimates and judgements
The most significant assets acquired generally comprise goodwill, customer contracts and trade receivables. 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. The methods applied are based on the present value of future cash flows calculated
based on after-tax royalty payments, churn rates or other expected cash flows related to the specific asset. Estimates of fair value
may be associated with uncertainty and possibly adjusted subseguently.
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. 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 estimates the Weighted Average Cost of Capital
(WACC) and a risk premium for the assumed risk inherent in customer contracts.
Acquisition of businesses
The Group made one acquisition during 2013 (2012: one). The acquisition and adjustments to prior years' acquisitions had the
following effect on the Group's consolidated financial statements at the reporting date:
2013 2012
Lloyd Adj. to Total Adj. to Total
Outsour- prior acqui= SBA Co. prior acqui-
DKK million cing, S.L. years sitions Ltd. years sitions
Total identifiable net assets (1) ” (1) 10 (5) 5
Goodwill 4 (6) (2) 18 6 24
Consideration transferred 3 (6) (3) 28 1 29
Cash and cash equivalents
in acquired businesses 0 - 0 (8) - (8)
Cash consideration transferred 3 (6) (3) 20 1 21
Contingent and deferred consideration (3) 20 17 (10) 49 39
Total payments regarding
acquisition of businesses 0 14 14 10 50 60
Lloyd Outsourcing, S.L.
On 30 June 2013, the Group acquired 100% of the shares in the Spanish cleaning company Lloyd Outsourcing, S.L. The acquisition
added an expanded service offering to ISS Spain for cleaning activities within the hotel sector.
The total annual revenue of Lioyd Outsourcing, S.L. was estimated at DKK 8 million (approximate figures extracted from unaudited
financial information) based on expectations at the time of the acquisition. In the period from the acquisition date to 31 December
2013, Lloyd Outsourcing, S.L. contributed revenue of DKK 3 million and operating profit before other items of DKK 0 million to the
Group. The total number of employees taken over was 34.
Shanghai B&A Property Management Co. Ltd.
On 30 June 2012, the Group acquired 100% of the shares in the Chinese security company Shanghai B&A Property Management
Co. itd. (SBA Co. Ltd.). The acquisition added licensed security and property management services to the service offerings of ISS
The total annual revenue of SBA Co. Ltd. was estimated at DKK 49 million (approximate figures extracted from unaudited financial
information) based on expectations at the time of the acquisition. In the period from the acquisition date to 31 December 2012, SBA
Co. Ltd. contributed revenue of DKK 29 million and operating profit before other items of DKK 2 million to tne Group. The total
number of employees taken over was 929.
Adjustments to prior years" acquisitions
Adjustments to prior years' acquisitions mainly related to revised estimates relating to earn-outs as well as a number of other minor
adjustments to various acquisitions.
1405014EogSN73974
Consolidated financial statements | Financial statements 76
NOTE 4.1 Acquisition and divestment of businesses (continued)
Divestment of businesses
The Group made 14 divestments during 2013 (2012: 8 divestments). The total sales price amounted to DKK 2,459 million (2012:
DKK 291 million). The total annual revenue of the divested businesses (approximate figures extracted from unaudited financial
information) is estimated at DKK 2,934 million (2012: DKK 872 million) based on expectations at the time of divestment.
The divestments had the following impact on the Group's consolidated financial statements at the reporting date:
DKK million 2013 2012
Goodwill 1,209 93
Customer contracts 86 18
Other non-current assets 193 63
Trade receivables 395 125
Other current assets 48 27
Provisions (57) (2)
Pensions, deferred tax liabilities and non-controlling interests (47) (10)
Non-current loans and borrowings (13) (27)
Current loans and borrowings (8) -
Other current liabilities (325) (148)
Total identifiable net assets 1,481 139
Gain/(loss) on divestment of businesses, net 662 65
Divestment costs, net of tax 316 87
Consideration received 2,459 291
Cash and cash equivalents in divested businesses 3 (5)
Cash consideration received 2,462 286
Contingent and deferred consideration (33) (5)
Divestment costs paid, net of tax (246) (69)
Net proceeds regarding divestment of businesses 2,183 212
1405014EogSN73975
Consolidated financial statements I Financial statements 77
NOTE 4.1 Acquisition and divestment of businesses (continued)
Divestment of businesses (continued)
The 14 divestments completed by the Group before or at 31 December 2013 are listed below:
Excluded
from the Annual
income — Percentage revenue ” … Number of
Company/activity Country Service type statement interest (DKK million) employees ”
COOLIT, HVAC Austria Property services April 100% 25 11
ISS Document A/S Denmark Support services May 100% 19 31
Pest Control Global ? Property services June 100%/Activities 1,042 1,440
Hygiene and Experience — Belgium Property services June 100% 5 6
ISS Security Services Netherlands Security services July Activities 294 804
VWashroom Services Austria Cleaning services July Activities 15 -
ISS Landscaping Services USA Property services August Activities 78 137
Damage Control Nordic ? Support services August 100%/Activities 853 1,073
Reception single Security and
services Denmark Support services September Activities 27 66
Hardware Services Belgium Support services September Activities 70 76
Karmak Italy Cleaning services September Activities 96 192
ISS Arbo Plus BV Netherlands Support services September 100% - 14
ISS Building Services Belgium Support services October Activities 12 11
Landscaping Norway Property services November Activities 398 206
Total 2,934 4,067
1) Approximate figures based on information available at the time of divestment extracted from unaudited financial information.
2) Comprise pest control activities in Australia, Austria, Belgium, Denmark, Germany, Italy, the Netherlands, New Zealand, Norway, Portugal, Spain and
Switzerland as well as washroom activities in Australia, Italy and New Zealand.
I Damage Control! activities have been sold in Denmark, Norway and Finland.
Acquisitions and divestments subsequent to 31 December 2013
Divestments made by the Group in the period from 1 January to 31 March 2014 are listed below. No acquisitions were completed in
the period.
Excluded
from the Annual
income Percentage revenue” Number of
Companylactivity Country Service type statement interest (DKK million) employees ”
HiCare India Property Services January 100% 60 1,337
HVAC Belgium Property Services January Activities 29 18
Security Israel Security Services February 100% 232 1,800
Landscaping France Property Services March 100% 2,071 2,372
Security Australia/New Zeeland Security Services March Activities/100% 832 2,149
Total 3,224 7,676
n Approximate figures based on information available at the time of divestment extracted from unaudited financial information.
1405014EogSN73976
Consolidated financial statements | Financial statements 78
NOTE 4.1 Acquisition and divestment of businesses (continued)
Pro forma revenue and operating profit before other items
For the purpose of estimating pro forma revenue and operating profit before other items, adjustments relating to acquisitions and
divestments are based on estimates made by local ISS management in the respective jurisdictions in which the acquisitions and
divestments occurred at the time of acquisition and divestment or actual results where available. Synergies from acquisitions are not
included for periods in which the 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 on a pro forma basis are presented
for informational purposes only. This information does not represent the results the Group would have achieved had the acquisitions
and divestments during the year occurred on 1 January. In addition, the information should not be used as the basis for or prediction
of any annualised calculation.
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 2013 2012
Pro forma revenue
Revenue recognised in the income statement 78,506 79,492
Acquisitions 3 20
Revenue adjusted for acquisitions 78,509 79,512
Divestments (1,515) (467)
Pro forma revenue 76,994 79,045
DKK million 2013 2012
Pro forma operating profit before other items
Operating profit before other items recognised in the income statement 4,757 4,820
Acquisitions 0 2
Operating profit before other items adjusted for acquisitions 4,757 4,822
Divestments (102) (11)
Pro forma operating profit before other items 4,655 4,811
NOTE 4.2 Assets held for sale
Accounting policy
Assets held for sale comprises non-current assets and disposal groups held for sale. 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 dispøsal 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 to the consolidated financial statements.
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. Comparative figures are not adjusted.
1405014EogSN73977
Consolidated financial statements I Financial statements 79
NOTE 4.2 Assets held for sale (continued)
Critical accounting estimates and judgements
sales price and expected costs to sell). Depending on the nature of the non-current assets and disposal group's activity, assets and
liabilities, the estimated fair value may be associated with uncertainty and possibly adjusted subsequently. Measurement of the fair
value of disposal groups is categorised as Level 3 in the fair value hierarchy as measurement is not based on observable market
data.
Management considers intangible assets relating to the disposal groups, taking into consideration how to separate the net assets
(including intangible assets) relating to the disposal group from the Group's assets in the continuing business. Impairment of these
intangibles both on initial classification as held for sale and subsequently is considered. The estimation uncertainty relating to
impairment of intangibles in general is described below in note 4.4, Impairment tests.
Specification of disposal groups classified as held for sale
At 31 December disposal groups classified as held for sale comprised the following assets and liabilities:
DKK million 2013 2012
Goodwiill 845 1,416
Other intangibles 65 143
Property, plant and equipment 134 156
Other financial assets 73 15
Deferred tax assets 42 14
Inventories 15 23
Trade and other receivables 788 564
Assets classified as held for sale 1,962 2,331
Deferred tax liabilities 15 39
Tax payables 15 44
Pensions and similar obligations 54 23
Provisions 17 23
Loans and borrowings 2 21
Trade payables and other liabilities 913 549
Liabilities classified as held for sale 1,016 699
At 31 December 2013, assets held for sale comprised six businesses in Western Europe, Nordic, Asia and Pacific including the
landscaping activities in France, the security activities in Australia and New Zealand and the security activities in Israel. For the latter
three businesses the sales process was initiated during 2013. The remaining three were classified as held for sale at 31 December
2012. However, sales processes are still ongoing and the disposal groups continue to be classified as held for sale.
During 2013, three of the businesses classified as held for sale at 31 December 2012 have been sold. The divestments comprised
the pest control activities in 12 countries, the Nordic damage control activities and the landscaping activities in Norway resulting in a
total gain of DKK 692 million, which was recognised in Other income and expenses, net. Additionally, one activity has been
reclassified as held for use as the sales process was stalled. The impact of the reclassification on the consolidated financial
statements was insignificant.
Revaluation of businesses classified as held for sale at 31 December 2013 resulted in a loss in the income statement of DKK 385
million of which DKK 24 million was recognised in Other income and expenses, net, DKK 354 million in Goodwill impairment, DKK 12
million in Amortisation and impairment of brands and customer contracts and DKK 5 million (income) in Income taxes.
Cumulative income or expense recognised in other comprehensive income
In 2013 and 2012, no cumulative income or expenses were recognised in other comprehensive income related to assets held for
1405014EogSN73978
Consolidated financial statements I Financial statements 80
NOTE 4.3. Intangible assets
Accounting policy
Goodwill is initially recognised in the statement of financial position at cost as described under "Business combinations” in note 4.1,
Acquisition and divestments of businesses. Subsequently, goodwill is measured at cost less accumulated impairment losses.
Goodwill is not amortised.
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.
Acaquisition-related customer 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. The churn rate is calculated on a contract by contract basis and has historically
averaged approximately 13% to 14% annually. In exceptional cases the value of customer contracts is amortised on a straight line
basis, e.g. based on the legal duration of the acquired contract or other relevant period, if deemed more appropriate.
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.
Please refer to note 4.4, Impairment test, for a description of impairment of intangible assets.
1405014EogSN73979
Consolidated financial statements I Financial statements 81
NOTE 4.3 Intangible assets (continued)
2013 Software and
Customer other intan-
DKK million Goodwill Brands contracts gible assets Total
Cost at 1 January 22,407 3 4,633 1,187 28,230
Foreign exchange adjustments (796) (0) (236) (53) (1,085)
Additions and acquisitions through business combinations (2) - 2 150 150
Disposals through divestment of businesses (311) - (121) (46) (478)
Disposals - - - (53) (53)
Reclassification from/(to) Property, plant and equipment - - - (4) (4)
Reclassification to Assets classified as held for sale (938) - (92) (39) (1,069)
Cost at 31 December 20,360 3 4,186 1,142 25,691
Amortisation and impairment losses at 1 January (1,190) (3) (2,901) (757) (4,851)
Foreign exchange adjustments (21) 0 141 33 153
Amortisation - - (236) (128) (364)
Impairment losses n (866) - (33) - (899)
Disposals through divestment of businesses 186 - 97 31 314
Disposals - - - 42 42
Reclassification (fromy/to Property, plant and equipment - - - 2 2
Reclassification to Assets classified as held for sale 344 - 76 35 455
Amortisation and impairment losses at 31 December (1,547) (3) (2,856) (742) (5,148)
Carrying amount at 31 December 18,813 0 1,330 400 20,543
2012 Software and
Customer other intan-
DKK million Goodwill Brands contracts gible assets Total
Cost at 1 January 23,900 3 4,897 1,066 29,866
Foreign exchange adjustments 218 (0) 39 17 274
Additions and acquisitions through business combinations 24 - 11 168 203
Disposals through divestment of businesses (246) - (78) (6) (330)
Disposals - - - (8) (8)
Reclassification from/(to) Property, plant and equipment - - - 35 35
Reclassification to Assets classified as held for sale (1,489) - (236) (85) (1,810)
Cost at 31 December 22,407 3 4,633 1,187 28,230
Amortisation and impairment losses at 1 January (1,226) (3) (2,710) (673) (4,612)
Foreign exchange adjustments (6) 0 (21) (11) (38)
Amorfisation - - (312) (133) (445)
Impairment losses ” (209) - (42) - (251)
Disposals through divestment of businesses 173 - 59 5 237
Disposals - - - 2 2
Reclassification to Assets classified as held for sale 78 - 125 53 256
Amortisation and impairment losses at 31 December (1,190) (3) (2,901) (757) (4,851)
Carrying amount at 31 December 21,217 0 1,732 430 23,379
1) For a breakdown of impairment losses on goodwill, see note 4.5, Goodwill impairment, Impairment losses on customer contracts in 2013 related to
divestments and reclassification as held for sale of non-core activities in certain countries. In 2012, impairment losses on customer contracts mainly related
to Greece of DKK 35 million. ”
1405014EogSN73980
Consolidated financial statements I Financial statements 82
NOTE 4.4. Impairment tests
Accounting policy
Intangible assets with an indefinite useful life, i.e. goodwill and brands, are subject to impairment testing at least annually or when
circumstances indicate that the carrying amount may be impaired. The carrying amount of other non-current assets is tested annually
for indications of impairment.
lf an indication of impairment 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. The carrying amount of goodwill is
tested før impairment together with the other non-current assets in the cash-generating unit to which goodwill is allocated.
An impairment loss is recognised in the income statement in a separate line if the carrying amount of an asset or its Cash-generating
unit exceeds its estimated recoverable amount.
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.
Critical accounting estimates and judgements
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.
This assessment is based on estimates of expected future cash flows (value-in-use) made on the basis of financial budgets for the
following financial year. In addition to these the key assumptions used to estimate expected future cash flows are discount rates and
growth. During recent years increased volatility in risk free interest rates has been experienced which generally has increased the
estimation uncertainty. For further information please refer to "Estimates used to measure recoverable amount" below.
Impairment test procedure
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 allocation and monitoring of
intangibles should be seen in the light of the Group's strategy to integrate acquired companies as quickly as possible in order to
benefit from synergies.
Acquired companies are typically organisationally integrated and merged with (or activities transferred to) existing Group companies
shortly after the completion of the acquisition. Furthermore, synergies and other effects resulting from cooperation with existing Group
companies in their geographical or business area normally influence the financial performance of an acquired company.
Consequently, after a short period of time, it is generally not possible to track and measure the value of intangibles of the individual
acquired companies (or activities) with any reasonable certainty.
Estimates used to measure recoverable amount
The recoverable amount of each CGU is determined on the basis of its value-in-use. The value-in-use is established using certain key
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 country 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. An interest premium is added to adjust for the inconsistency of applying government bonds with a short-term
maturity when discounting the estimated future cash flows with infinite maturity. In the PIIGS countries, including Greece, Ireland,
Italy, Portugal and Spain, the country specific discount rates are 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. This is due to the continued
increased volatility and uncertainty related to interest rates on government bonds in these countries.
Following the investment by Ontario Teachers' Pension Plan Board through 2337323 Ontario Limited and KIRKBI Invest A/S in 2012
the capital structure was reassessed and a target ratio of 30/70 (2012: 30/70) between the market value of debt and equity value has
been applied in the calculation. As a company based in Europe, the Group assumes the long-term market equity risk premium to be
5.5% (2012: 6.0%). 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.
1405014EogSN73981
Consolidated financial statements I Financial statements 83
NOTE 4.4. Impairment tests (continued)
Impairment test results 2013
The impairment test as per 31 December 2013 resulted in recognition of an impairment loss of DKK 170 million in France in addition
to a loss of DKK 140 million recognised as per 30 September 2013. The total impairment loss recognised in 2013 for France was
DKK 310 million due to an update in the assumptions in the business plan.
Carrying amounts and key assumptions
The carrying amount of intangibles and the key assumptions” used in the impairment testing as per 31 December are presented
below for each CGU representing more than 5% of the carrying amount of the Group's intangibles.
Carrying amount
Applied key assumptions
2013
Customer Total in- Long-term Discount rate, Discount rate,
DKK million Goodwill Brands contracts tangibles growth net of tax pre tax
France ? 2,835 - 70 2,905 2.5% 8.7% 14.3%
Finland 1,854 - 92 1,946 2.0% 8.4% 10.1%
United Kingdom 1,475 - 141 1,616 2.5% 9.5% 11.4%
Netherlands 1,579 - 6 1,585 2.0% 9.2% 11.6%
Australia 1,282 - 140 1,422 3.0% 10.8% 14.2%
Spain 1,024 - 137 1,161 2.5% 9.4% 12.7%
Switzerland 1,075 - 24 1,099 2.0% 6.8% 8.2%
USA 925 - 171 1,096 3.0% 9.5% 13.2%
Other countries 6,764 0 549 7,313 - - -
Total carrying amount 18,813 0 1,330 20,143
2012 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
France ? 3,880 - 89 3,969 2.5% 8.8% 14,3%
Finland 1,877 - 105 1,982 2.0% 8.5% 10.8%
Australia 1,655 - 208 1,863 3.0% 10.6% 14.0%
United Kingdom 1,510 - 164 1,674 2.5% 8.8% 10.9%
Netherlands 1,664 - 24 1,688 2.0% 9.0% 11.3%
USA 997 - 212 1,209 3.0% 9.0% 12.6%
Spain 1,020 - 159 1,179 2.5% 10.0% 13.5%
Other countries 8,614 0 771 9,385 - - -
Total carrying amount 21,217 0 1,732 22,949
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 simitar laws in other countries regarding expectations to the future
development.
2) The growth is expected to be in the range 0.3% to 7.7% over the next five years (2012: 0.5% to 5.0% over the next six years). The recoverable amount
of the CGU is estimated at DKK 2.4 billion at 31 December 2013, which equals the carrying amount of the CGU's net assets. Net assets comprise total
intangible assets reduced by other net assets, which are negative at 31 December 2013.
1405014EogSN73982
Consolidated financial statements I Financial statements 84
NOTE 4.4. 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 CGU's recoverable amount equals its carrying amount.
Growth Discount rate, net of tax
Applied
expected Allowed Applied Allowed
2013 long-term rate decrease rate increase
France 2.5% 0.0% 8.7% 0.0%
Finland 2.0% >2.0% 8.4% >3.0%
United Kingdom 2.5% >2.5% 9.5% >3.0%
Netherlands 2.0% 0.0% 9.2% 0.0%
Australia 3.0% 1.0% 10.8% 0.6%
Spain 2,5% 1.2% 9.4% 0.8%
Switzerland 2.0% >2.0% 6.8% >3.0%
USA 3.0% >3.0% 9.5% >3.0%
Growth Discount rate, net of tax
Applied
expected Allowed Applied Allowed
2012 long-term rate decrease rate increase
France 2.5% 0.0% 8.8% 0.0%
Finland 2.0% >2.0% 8.5% >3.0%
Australia 3.0% 1.3% 10.6% 0.8%
United Kingdom 2.5% >2.5% 8.8% >3.0%
Netherlands 2.0% 1.5% 9.0% 1.0%
USA 3.0% >3.0% 9.0% >3.0%
Spain 2.5% 1.1% 10.0% 0.7%
NOTE 4.5 Goodwill impairment
DKK million 2013 2012
Impairment losses identified in impairment tests 310 -
Impairment losses derived from divestment of businesses 556 209
Goodwill impairment 866 209
Impairment losses identified in impairment tests in 2013 related to France, as described in note 4.4, Impairment test.
Impairment losses derived from divestment of businesses mainly related to the divestment of the security activities in the
Netherlands of DKK 81 million, the industrial cleaning services in Italy of DKK 41 million and certain landscaping activities in the USA
of DKK 30 million. Furthermore, remeasurement of businesses classified as held for sale resulted in impairment losses amounting to
DKK 354 million stemming from the security activities in Australia and New Zealand, DKK 133 million, the landscaping activities in
France, DKK 163 million, and the security activities in Israel, DKK 58 million. In 2012, impairment losses mainly related to the
divestment of the office support services in France.
1405014EogSN73983
Consolidated financial statements I Financial statements 85
Section 5
Capital structure
The ISS Global Group is indirectly wholly owned by ISS A/S and is therefore part of the ISS A/S Group. Group
Treasury manages financing activities and capital structure centrally for the ISS A/S Group as a whole, The ISS Global
Group's financing activities and capital structure are not assessed independently of the ISS A/S Group.
In 2013, the ISS A/S Group continued the deleveraging and further simplified the capital structure, which also impacted
the ISS Global Group. The Group divested a number of businesses including the pest control activities and damage
control activities as described in section 4. With the proceeds from the divestments ISS A/S partially redeemed the
8.875% Senior Subordinated Notes, thereby addressing 56% of the most expensive part of the debt, leading to a
significant reduction in net debt and interest cost savings going forward.
The deleveraging in recent years has resulted in improved credit ratings of ISS. Following the announced IPO of ISS
AIS in 2014 ISS was upgraded by rating agencies who currently assign corporate ratings of ISS A/S of BBB-/Stable
Outlook (S&P) and Baa3/Stable Outlook (Moody's).
in this section, the following notes are presented:
5,1 Share capital
5.2 Loans and borrowings
5,3 Liquidity risk
5.4 Currency risk
5,5 Interest rate risk
5.6 Derivatives
5.7 Financial income and financial expenses
1405014EogSN73984
Consolidated financial statements I Financial statements 86
NOTE 5.1 Share capital
ISS Global A/S's share capital is indirectly owned by funds advised by EQT Partners (EQT), funds advised by affiliates of The
Goldman Sachs Group, Inc. (GSCP), as well as Ontario Teachers” Pension Plan Board through 2337323 Ontario Limited (OTPP) and
KIRKBI Invest A/S (KIRKBI). EQT and GSCP indirectly hold approximately 40% and 33% of the share capital, respectively. OTPP and
KIRKBI indirectly hold approximately 18% and 8% of the share capital, respectively. The remaining approximately 1% is indirectly held
by certain current and former members of the Board of Directors, current and former members of the Executive Group Management
Board as well as a number of current and former senior officers of the Group through Directors' and Management Participation
Programmes. At 31 December 2013, the carrying amount of Shareholders' equity (including non-controlling interests) was DKK 2,179
million (2012: DKK 3,655 million).
2013 2012
Nominal Number of Nominal Number of
value shares (in value shares (in
(DKK million) thousands) (DKK million) thousands)
Share capital at 1 January 180 180 160 160
Issued for cash - - 20 20
Share capital at 31 December - fully paid 180 180 180 180
At 31 December 2013, a total of 180,000 shares with a nominal value of DKK 1.000 per share were issued and fully paid (2012:
180,000 shares). No shares carry special rights and are freely transferable.
Capital management
The Group monitors the capital structure and evaluates the need for adjustments on an ongoing basis. The Group's objectives for
managing capital and what is managed as capital are described in note 5.3, Liquidity risk. The dividend policy and payment of
dividends is made subject to the necessary consolidation of equity and the Group's continuing expansion.
ISS Global A/S (the Group's parent) is a holding company, and its primary assets are shares in its subsidiaries, receivables from its
subsidiaries and cash in its bank accounts. ISS Global A/S has no revenue generating operations of its own, and therefore ISS Global
A/S's cash flow and ability to service its indebtedness, will primarily depend on the operating performance and financial condition of its
operating subsidiaries, and the receipt by ISS Global A/S of funds from its subsidiaries in the form of dividends and otherwise.
1405014EogSN73985
Consolidated financial statements I Financial statements 87
NOTE 5.2 Loans and borrowings
Accounting policy
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.
Terms and maturity of the Group's interest-bearing loans and borrowings and net debt
2013 2012
Average
Nominal effective
interest interest Year of Face Amount
DKK million rate rate Currency maturity value hedged Carrying amount
Issued bonds (fixed interest rate):
EMTNs 4.50% 4.49% EUR 2014 824 - 824 824
Interest rate swaps - - — - - or. . 1 2
Total issued bonds 824 - 825 826
Bank loans (floating interest rate):
Senior Facilities:
Term Facility A Euribor + 3,50% 3.72% EUR 2018 2,448 2,239 2,435 -
Term Facility B Libor + 2.00% 2.27% EUR, GBP 2013 - - - 467
Term Facility B Libor + 3,50% 3,74% EUR, GBP 2015 1,040 - 1,035 12,110
Term Facility B Libor + 4.00% 4.33% EUR, GBP 2018 11,032 9,325 10,918 -
Term Facility B Libor+2.75%” —— 3.81% USD 2018 1,885 - 1,866 -
Acquisition Facility B Euribor + 2.25% 2.38% EUR 2013 - - - 56
Acauisition Facility B Euribor + 3.75% 3.93% EUR 2015 - -— - 1,839
Acquisition Facility B Euribor + 4.00% 4.17% EUR 2018 1,839 - 1,830 -
Revolving Credit Facility Libor + 3.75% - Multi currency 2014 243 - 243 1,815
Revolving Credit Facility Libor + 4.00% - Multi currency 2017 1,257 - 1,257 -
Letter of Credit Facility Libor + 3.75% - Multi currency 2014/17 74 - 74 161
Bank loans and overdrafts - 7 Multi currency …— … 728 - … 728 754
Total bank loans 20,546 11,564 20,386 17,202
Securitisation Libor + 2,50% 2.77% Multi currency 2015 2,773 - 2,760 2,617
Debt to companies
within the ISS Group - 5.54% Multi currency 2016 2,543 " 2,543 4,562
Derivatives:
Interest rate swaps - - - - - - 43 93
Currency swaps | ou. TT TT, LT LT LT,
Total derivatives 56 93
Finance lease liabilities - - - - 150 - 150 146
Loans and borrowings - 4.14% - - 26,836 11,564 26,720 25,446
Non-current liabilities 19,840 16,624
Current liabilities 6,880 8,822
Loans and borrowings 26,720 25,446
Cash and cash equivalents and other financial items ? (8,629) (5,149)
Net debt 18,091 20,297
The fair value of loans and borrowings is disclosed in note 8.6, Financial assets and liabilities.
In 2013, financing fees amounting to DKK 193 million (2012: DKK 8 million) have been recognised in loans and borrowings while
accumulated financing fees recognised in loans and borrowings on 31 December 2013 amounted to DKK 173 million (2012: DKK
111 million).
1) For the Term Facility B USD facility maturing in 2018, Libor has a floor of 1%, i,e. the base rate is the higher of Libor or 1%.
2) Includes the positive fair value of currency swaps of DKK 21 million (2012: DKK 48 million), the loan to FS Invest S.å r.l of DKK 98 million (2012: DKK
71 million), securities of DKK 17 million (2012: DKK 16 million) and receivables from companies within the ISS Group of DKK 5,233 million (2012: DKK
1,492 million). The average effective interest rate related to receivables from companies within the ISS Group was 5.04%.
1405014EogSN73986
Consolidated financial statements | Financial statements 88
NOTE 5.2 Loans and borrowings (continued)
Refinancing
The ISS Global Group is indirectly wholly owned by ISS A/S and is therefore part of the ISS A/S Group. Group Treasury manages
financing activities and capital structure centrally for the ISS A/S Group as a whole. The ISS Global Group's financ-ing activities and
capital structure are not as-sessed independently of the ISS A/S Group.
In April 2013, ISS A/S refinanced its EUR 600 million Second Lien Facility and received support from lenders consenting to a three-
year extension of the predominant part of the Senior Credit Facilities to either December 2017 or April 2018. The new tranches
refinancing ISS A/S's Second Lien Facility were split between two tranches at ISS Global A/S of EUR 330 million and USD 350
million, respectively, which resulted in a new consortium of lenders consisting of both existing and new lenders.
The refinancing resulted in a margin increase of 50 bps on Term Facility B and 25 bps on the Revolving Credit Facility, the Letter of
Credit Facility as well as the Acquisition Facility B leaving all extended tranches at an initial margin of 400 bps, but with step-downs
applying following a leverage ratchet. On the new term facilities refinancing the Second Lien Facility margins applying to the EUR and
USD tranches are initially 350 bps and 275 bps, respectively.
The impact on the income statement of the refinancing is shown in note 5.7, Financial income and financial expenses.
Furthermore, in August 2013, the securitisation programme was extended with one year to September 2015. The size of the credit
facility was kept unchanged at DKK 3.0 billion (EUR 400 million) and the pricing of the programme was reduced by 25 bps on the
interest margin.
Bonds
EMTNSs ISS Global has issued EUR 110.4 million of 4.50% senior unsecured Medium Term Notes maturing on 8 December 2014.
The notes are listed on the Luxembourg Stock Exchange and traded on the regulated market of the Luxembourg Stock Exchange.
Bank loans
Senior Facilities
ISS Global A/S and its subsidiaries are borrowers under the Senior Facility consisting of Term Loans, Acquisition Facilities, a
Revolving Credit Facility and a Letter of Credit Facility. The Senior Facilities mature between 2013 and 2018 and include customary
loan covenant clauses. The senior lenders comprise a syndicate of international banks and institutional investors. At 31 December
2013, ISS had Senior Facilities of DKK 23.0 billion under which DKK 19.8 billion was drawn and DKK 0.7 billion was allocated to
support performance bonds issued by operating subsidiaries.
Borrowings under the Revolving Credit Facility are primarily provided by local lenders to certain subsidiaries.
The letter of Credit Facility is used for issuing letters of credit primarily in support of borrowings, other than borrowings under the
Revolving Credit Facility or the Secured Local Facilities.
Other credit facilities
ISS had DKK 1.0 billion of other credit facilities as of 31 December 2013. Such facilities comprise mainly other local credit facilities
and finance leases, which are not part of the Senior Facilities.
Securitisation
ISS has established a securitisation programme with a credit facility of DKK 3.0 billion of which DKK 2.8 billion had been utilised at 31
December 2013. The programme includes Austria, Belgium, Denmark, France, Germany, the Netherlands, Norway, Spain, Sweden
and the United Kingdom.
In August 2013, the maturity of the securitisation programme was extended for the third time by one year from September 2014 to
September 2015. The securitisation programme can be extended for an additional year at a time, and since it is structured according
to S&P's methodology this can be done either with the existing banks (HSBC and Nordea) or a third party, should this become
relevant.
1405014EogSN73987
Consolidated financial statements I Financial statements 89
Vore rn
Liquidity risk results from the Group's potential inability or difficulty in meeting the contractual obligations associated with its financial
liabilities due to insufficient liquidity. Raising capital is managed centrally in Group Treasury. The purpose is to ensure efficient liquidity
management, which mainly comprise ensuring that adequate liquidity is available to the Group. Group Treasury mitigates liquidity risk
by obtaining borrowing facilities with highly rated financial institutions, via issued bonds, bank loans and securitisation and via effective
working capital management.
For day-to-day liquidity management cash pools have been established in several local entities. As a result excess liquidity is
transferred to and from ISS Global A/S, which operates as the internal bank of the Group.
The Group's liquid reserves mainly consist of liquid funds (cash and cash equivalents less not readily available or restricted cash) and
unused credit facilities. As at 31 December 2013, the Group's liquid reserves consisted of readily available liquid funds of DKK 3,096
million (2012: DKK 3,347 million) and unused revolving credit facilities of DKK 2,970 million (2012: DKK 2,140 million) where the
majority is available for drawing until 31 December 2017. It is the Group's policy to maintain an appropriate level of liquid reserves.
Cash in the Group's consolidated SPEs under the securitisation programme amounts to DKK 1,532 million (2012: DKK 1,311 million),
of which DKK 133 million (2012: DKK 110 million) are excluded from the liquid reserves as they are not considered readily available
for general use by the parent company or other subsidiaries at 31 December 2013. In addition DKK 31 million (2012: DKK 65 million)
of the total cash position at 31 December 2013 was placed on blocked or restricted bank accounts due to legal circumstances.
The bank loans are subject to customary undertakings, covenants (including financial covenants) and other restrictions. Financial
covenants comprise: i) Debt cover ii) Senior debt cover, iii) Cash flow cover, iv) Interest cover and v) Limitation on Capex spending.
The financial covenants are calculated on a last-twelve-months basis and reported quarterly, except for ii) and v), which are only
reported at year-end. In the event of a default under those agreements, the debt incurred including accrued interest could be declared
immediately due and payable. In 2013 and 2012, all covenants have been complied with.
Contractual maturities of financial liabilities
The contractual maturities of financial liabilities, based on undiscounted contractual cash flows, are shown below. The undiscounted
contractual cash flows include expected interest payments, estimated based on market expectations at the reporting date.
The risk implied from the values in the maturity table below reflects the one-sided scenario of cash outflows only. Finance lease
liabilities, trade payables, contingent considerations and deferred payments mainly originate from the financing of assets such as
property, plant and equipment and investments in working capital, e.g. trade and other receivables.
2013
Carrying Contractual
DKK million amount Scashflows <lyear 1-2years 2-3 years 3-4 years 4-5 years > 5 years
Issued bonds 825 858 858 - - - - -
Bank loans 20,386 24,313 2,883 2,389 1,363 1,452 16,226 0
Securitisation 2,760 2,773 2,773 - - - - -
Finance lease liability 150 166 56 45 35 21 6 3
Debt to companies within the ISS Group 2,543 2,801 1,322 110 1,369 - -
Trade payables 3,363 3,363 3,363 - - - - -
Contingent considerations and
deferred payments 108 131 17 24 87 3 - -
Liabilities classified as held for sale 247 247 247 - - - - -
Total non-derivative financial liabilities 30,382 34,652 11,519 2,568 2,854 1,476 16,232 3
Hereof estimated interest payments - 4,098 1,026 909 898 943 322 0
interest rate swaps 43 43 37 6 - - - -
Currency swaps 13 13 13 - - - - -
Total derivative financial liabilities 56 56 50 6 ” - ” -
1405014EogSN73988
]
Consolidated financial statements I Financial statements 90
NOTE 5.3. Liquidity risk (continued)
2012
Carrying Contractual
DKK million amount Scashflows <lyear 1-2years 2-3 years 3-4 years 4-5 years > 5 years
Issued bonds 826 895 37 858 - - - -
Bank loans 17,202 18,689 3,587 558 14,535 1 1 7
Securitisation 2,617 2,637 2,637 - - - - -
Finance lease liability 146 165 55 40 28 22 20 0
Debt to companies within the ISS Group 4,562 5,046 3,337 121 121 1,467 -
Trade payables 3,628 3,628 3,628 - - - - -
Contingent considerations and
deferred payments 128 178 23 28 2 125 - -
Liabilities classified as held for sale 126 126 126 - - - - -
Total non-derivative financial liabilities 29,235 31,364 13,430 1,605 14,686 1,615 21 7
Hereof estimated interest payments - 1,970 811 716 319 123 1 -
Interest rate swaps 93 94 51 39 4 - - -
Total derivative financial liabilities 93 94 51 39 4 - - -
The maturity profile of credit facilities, i.e. issued bonds, bank loans and securitisation, is illustrated below. Compared to the
specification of contractual maturities of financial liabilities in the table on page 89, the basis of the presentation in the chart below is
different in three ways:
1) expected interest payments are not included;
2) the amounts shown are principal values including any undrawn amounts; and
3) securitisation debt is presented with maturity in September 2015 as the facility is committed until then. This is contrary to the
recognition in the statement of financial position, where securitisation debt is classified as current due to the terms of the agreement.
The presentation of the contractual maturity of credit facilities above is based on the assumption that the amount of trade receivables
entered into the securitisation programme continue to be at the same level as at 31 December 2013.
Maturity of the credit facilities
RER Semor Faghtes
2018 13,904 CM Secunitisation
TEMINS
206 NH 500
2015 i: 1,288
1
2014 Bu 1,204
0 2,000 4.000 6,000 8,000 10,009 17,000 14,000 16,010 18,000 70,000
DKK milone
1405014EogSN73989
Consolidated financial statements | Financial statements 91
NOTE 5.4 Currency risk
Currency risk is the risk that arises from changes in exchange rates and affects the Group's result or value of financial instruments.
To a limited extent the Group is exposed to currency risk on løoans and borrowings (external) that are denominated in currencies other
than the functional currency of the reporting entities as well as intercompany loans from the parent company to foreign subsidiaries as
these are typically denominated in the functional currency of the subsidiary.
The Group's overall policy is to fully hedge any foreign exchange exposure towards DKK or towards EUR to the extent that the net
exposure exceeds DKK 5 million. Correlation between certain currencies, e.g. USD and Asian or Latin American currencies, are taken
into account. However, some currencies cannot be hedged within a reasonable price range, e.g. IDR and ISK, and are therefore not
hedged. Based on a risk assessment Group Treasury may choose not to hedge the risk exposure towards EUR. It has been the
Group's policy not to hedge intercompany royalties until they become a monetary receivable.
The Group holds a number of investments in foreign subsidiaries where the translation of net assets to DKK is exposed to currency
risk. It is not Group policy to hedge the currency exposure on foreign investments. Consequently, no hedging transactions of net
investments in foreign subsidiaries were entered into in 2013 and 2012. However, the Group may choose to hedge the currency
exposure on foreign investments by funding such investments in local currencies.
The Group uses currency swaps to hedge the currency risk related to loans and borrowings as well as intercompany loans from the
parent company to foreign subsidiaries. Ali hedging is conducted at Group level. Group Treasury measures the Group's total currency
exposure of all loans and borrowings, intercompany balances and cash and cash equivalents in different currencies on a weekly basis
in order to evaluate the need for hedging currency positions. As fair value adjustments of both the hedged item and the derivative
financial instrument are recognised in the income statement, hedge accounting in accordance with IAS 39 is not applied.
The Group's loans and borrowings (external) are denominated in the following currencies (excluding impact from currency swaps). As
illustrated the Group is exposed primarily to EUR, secondly to USD and GBP.
2013 2012
EUR 71.6% 70.6%
USD 7.2% 0.0%
DKK 7.6% 14.9%
GBP 6.9% 7.0%
NOK 2.8% 3.1%
SEK 1.8% 1.7%
Others 2.1% 2.7%
Total 100.0% 100.0%
Impact on the consolidated financial statements Fluctuations in foreign exchange rates will affect the value of loans and
borrowings (external) as well as the income statement as funding is obtained in various currencies. In 2013, changes in foreign
exchange rates related to loans and borrowings resulted in a gain of DKK 137 million (2012: loss of DKK 119 million). The primary
impact is derived from loans and borrowings in GBP and USD which depreciated through 2013.
1405014EogSN73990
Consolidated financial statements I Financial statements 92
NOTE 5.4 Currency risk (continued)
Sensitivity analysis Based on the Group's internal monitoring processes, it is estimated that a change in relevant foreign exchange
rates would have increased/(decreased) profit for the year and other comprehensive income by the amounts shown below. The
analysis is based on foreign exchange rate variances that the Group considered to be reasonably possible at the reporting date and
that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases.
Face Carrying Contractual
value amount value Sensitivity
Derivative Derivative
financial financial Increase in
2013 instruments instruments foreign Other com-
Netdebt (cash flow (currency Total exchange Profitfor — prehensive
DKK million exposure hedges) swaps) exposure rates the year income
EUR/DKK (11,137) (43) 1,459 (9,721) 1% (97) (97)
GBP/DKK (2,079) - 2,069 (10) 10% (1) (1)
NOK/DKK (113) - 131 18 5% 1 1
SEK/DKK 112 - (109) 3 5% Q 0
CHF/DKK (254) - 259 5 5% 0 0
USD/DKK (1,504) - 583 (921) 10% (92) (92)
AUD/DKK 392 - (384) 8 10% 1 1
EUR/TRY (334) - - (334) 10% (33) (33)
Other/DKK 1,612 - (850) 762 10% 76 76
Total (13,305) (43) 3,158 (10,190)
Face Carrying Contractual
value amount value Sensitivity
Derivative Derivative
financial financial Increase in
2012 instruments instruments foreign Other com-
Net debt (cash flow (currency Total exchange Profitfor prehensive
DKK million exposure hedges) swaps) exposure rates the year income
EUR/DKK (9,160) (93) 4,122 (5,131) 1% (50) (51)
GBPIDKK (1,798) - 1,709 (89) 10% (9) (9)
NOK/DKK 358 - (455) (97) 5% (5) (5)
SEK/DKK 179 - (175) 4 5% 0 0
CHF/DKK (338) - 341 3 10% 0 0
AUDIDKK 1,543 - (1,534) 9 10% 1 1
EUR/TRY (344) - - (344) 10% (34) (34)
Other/DKK 2,339 - (2,185) 154 10% 15 15
Total (7,221) (93) 1,823 (5,491)
1405014EogSN73991
Consolidated financial statements | Financial statements 93
NOTE 5.5 Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial
instruments, primarily bank loans and issued bonds. The Group's exposure towards interest rates is illustrated in note 5.2, Loans and
borrowings, where a breakdown of the Group's loans and borrowings in floating and fixed rates is provided. The interest rate exposure
to floating interest rates is primarily in EUR.
It is Group policy to hedge the risk related to changes in interest rates to limit the negative economic effect of changes in interest
rates by converting variable interest rates to fixed interest rates. The Group will mitigate the net interest rate risk via interest rate
swaps. Additionally, it is the Group's policy to ensure a predefined amount of debt to fixed interest rates to avoid adverse movements
in floating rates and interest expenses.
According to the Group's treasury policy between 50% and 75% of the Group's total non-current bank loans and issued bonds must
carry fixed interest rates. At least on a monthly basis Group Treasury measures the balance between fixed and variable interest rates
to ensure compliance with the policy.
The Group uses cash flow hedge accounting in respect of interest rate derivatives. The interest rate contracts classified as hedge
transactions including the effect on other comprehensive income are disclosed in note 5.6, Derivatives.
Sensitivity analysis The interest rate risk is measured by the duration of the net debt (fixed-rate period). As at 31 December 2013,
the duration of net debt was approximately 0.8 years (2012: 1.2 years). A decrease in interest rates will increase the fair value of the
loans and borrowings with a fixed interest rate, but only part of this increase will be reflected in the income statement and other
comprehensive income as loans and borrowings are measured at amortised cost and therefore not adjusted to fair value.
It is estimated that a general increase in relevant interest rates of 1%-point would have increased/(decreased) profit for the year and
other comprehensive income by the amounts shown below. The estimate is based on net debt adjusted for the effect of hedging
instruments as at 31 December 2013. The analysis assumes that all other variables, in particular foreign currency rates, remain
constant. The analysis is performed on the same basis for 2012.
2013 2012
Other Other
Profitfor comprehen- Profitfor comprehen-
DKK million theyear sive income the year sive income
Loans and borrowings (46) (46) (68) (68)
Derivatives, interest rate swaps - 102 - 216
1405014EogSN73992
Consolidated financial statements I Financial statements 94
NOTE 5.6 Derivatives
The Group uses derivative financial instruments (interest rate swaps and currency swaps) for managing interest and currency risks
arising from the Group's operating and financing activities.
The Group uses interest rate swaps to hedge the exposure to variability in future cash flows due to changes in interest rates on the
Group's bank loans with a variable interest rate. The swaps convert a major part of the floating rates within the bank loans to fixed
interest rates.
The Group uses currency swaps to hedge the exposure to currency risk on the intercompany loans/receivables to/from foreign
subsidiaries as well as the currency risk on external borrowings denominated in a currency other than Danish Kroner. As fair value
adjustments of both the hedged item and the derivative financial instrument are recognised in the income statement, hedge
accounting in accordance with IAS 39 is not applied. Consequently, currency swaps are not presented in this or other notes to the
consolidated financial statements.
Accounting policy
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.
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.
Hedging of forecasted transactions (cash flow hedges)
Total cash flow hedges at the reporting date are presented below:
Expected
Positive fair Negative fair Fair value, net, Recognised in other recognition in
Contractual value at value at at 31 comprehensive the income
DKK million value 31 December 31 December December income for the year statement
31 December 2013 11,564 - (43) (43) 71 2014-2015
31 December 2012 11,564 - (93) (93) (47) 2014-2015
The fair value of cash flow hedges, net, recognised in other comprehensive income for the year, amounted to DKK 71 million (2012:
DKK (47) million) and included DKK 21 million (2012: DKK 6 million) related to interest rate adjustments following settlement of
interest rate swaps.
In 2013 and 2012, no ineffectiveness was recognised in the income statement.
1405014EogSN73993
Consolidated financial statements I Financial statements 95
NOTE 5.7 Financial income and financial expenses
DKK million 2013 2012
Interest income on financial assets measured at amortised cost 133 149
Interest income from companies within the ISS Group 156 52
Amortisation of gain from settlement of interest rate swaps 1 1
Foreign exchange gains 35 68
Financial income 325 270
Interest expenses on financial liabilities measured at amortised cost (1,480) (1,785)
Interest expenses to companies within the ISS Group (143) (138)
Foreign exchange losses (273) (228)
Amendment and extension of the Senior Facilities Agreement (80) -
Net change in fair value of cash flow hedges (67) (47)
Redemption of issued bonds - (174)
Net interest on defined benefit obligations (33) (21)
Financial expenses (2,076) (2,393)
Amendment and extension of the Senior Facilities Agreement in 2013 related to the amendment and extension of the Senior
Facilities Agreement which resulted in unamortised financing fees of DKK 80 million being expensed.
Redemption of issued bonds in 2012 related to the redemption of the 11% Senior Notes due 2014 which were fully redeemed via
proceeds from the capital increase in ISS Global A/S following the investment by OTPP and KIRKBI resulting in an expense of DKK
174 million being recognised due to a call premium of DKK 108 million and unamortised financing fees of DKK 66 million.
1405014EogSN73994
Consolidated financial statements I Financial statements 96
Section 6
Governance
In this section the Group's key management personnel is defined and remuneration to this group of employees is
described in detail. Furthermore, transactions with related parties are disclosed, comprising transactions with parent
and ultimate controlling party, transactions w