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Group Annual Report 2014

Published by developmentlanguage, 2016-08-12 11:42:13

Description: Group Annual Report 2014


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Selected keyevents 2014ISS extended global ISS successfully listed ISS named the world’sIFS contract with HP its shares on Nasdaq best outsourcinguntil 2018 Copenhagen service providerPage 16 Page 78 Page 53 ISS divested the ISS UK ranked three ISS named new landscaping activities stars in Business in the integrated facility in France Community Corporate services provider for Responsibility Index Swisscom Page 46 Page 50 Page 333 February 28 February 13 March 29 April 3 June 16 JuneFront page photo:BARCLAYS, ONE CHURCHILL PLACE, LONDONMonika Uchmone, Welcome team assistant, ISS United Kingdom

BASF appointed ISS ISS won nine awards ISS won IFS contractas strategic partner at the 2014 Australian with Vattenfall inin five European Service Excellence Germanycountries Awards Page 18Page 41 Page 57 ISS Czech Republic New IFS partnership ISS issued new won IFS contract with with Molson Coors EUR bonds for Philip Morris EUR 1.2 billion Page 72 Page 56 Page 619 July 16 September 14 October 14 November 19 November 24 November

10 GROUP ANNUAL REPORT 2014Performancehighlights 201474,105 DKKm 2.5% COMMENTSRevenue Organic growth • Resilient organic growth of 2.5% (2013: 4.3%)4,150 DKKm 5.6% • Strong operating margin of 5.6% (2013: 5.5%)Operating profit before Operating margin • Solid cash conversion of 98% (2013: 102%) asother items a result of continued focus on cash flows1,816 DKKm 98% • Profit before goodwill impairment and amor- tisation/impairment of brands and customer Profit before goodwill impairment Cash conversion contracts increased to DKK 1,816 million (2013: and amortisation/impairment of DKK 1,026 million) brands and customer contracts • Strategic initiatives including customer segmen-3,177 DKKm 510,968 tation, organisational structure and excellence projects (referred to as our GREAT initiatives) are Cash flow from operating activities Number of employees progressing according to plans and supporting margin improvement“We generated resilient organic growth, while improving our • Revenue from IFS up 10% in local currency, and operating margin and ensuring represents 31% of Group revenue (2013: 26%) strong cash conversion, in spite of difficult macroeconomic conditions • Revenue from Global Corporate Clients, throughout the year.” representing 9% of Group revenue, increased 5% in local currency JEFF GRAVENHORST Group Chief Executive Officer • Our global IFS contract with HP was extended for another three years – one of the largest global facility services contracts in the industry • Significant IFS contract wins included Nestlé, Molton Coors in North America, BASF in five countries, Swisscom in Switzerland, Bankia in Spain and Vattenfall in Germany • Successful divestment of the landscaping activities in France, the commercial security activities in Australia and New Zealand and the Nordic temporary labour and staffing activities • The successful listing on Nasdaq Copenhagen on 13 March 2014 allowed us to refinance and repay an extensive part of our debt leading to a significantly improved capital structure • In November, ISS successfully priced an issuance of EUR bonds for EUR 1.2 billion

ContentsM anagement’s review Overview 4 ISS at a glance 6 Letter to our stakeholders 8 Key figures and financial ratios 9 OutlookO ur performance 13 Highlights of the year 17 Financial review 23 Regional performance 32 Q4 2014 O ur business 38 Strategy – The ISS Way 42 KPIs – Measuring our performance 45 Business development 49 Corporate responsibility 53 Our employeesG overnance 61 Corporate governance 66 Risk management 70 Internal controls relating to financial reporting 75 Remuneration report 80 Shareholder information 82 Group Management Board 84 Board of Directors Financial statements 89 Consolidated financial statements 150 Management statement 151 Independent auditors’ report 153 Definitions Additional company information 157 Country revenue and employees 158 Group COOs and regional CEOs 159 Heads of Group functions 1 60 Country managers

2 GROUP ANNUAL REPORT 2014In ISS, our objective is to create value for our customers by allowing them tofocus on what they do best – their core business. By taking over their non-core facility services we help customers improve efficiency, mitigate their risksand provide a better service experience for their stakeholders.ISS’s partnerships with customers are based on openness and transparency.In that respect our management information system [email protected] plays animportant role in providing the customer and ISS with real time data on theperformance of the customer’s facility via a web-based interface. This allowsISS to offer customers completely new insight and opportunities to optimiseand improve the efficiency of their facilities.BARCLAYS, ONE CHURCHILL PLACE, LONDONDaiva Revuckaite, Welcome team assistant, ISS United Kingdom

OUR EMPLOYEES | OUROBVUESRIVNIESWS 3 Overview ISS at a glance 4 Letter to our stakeholders 6 Key figures and financial ratios 8 Outlook 9

4 GROUP ANNUAL REPORT 2014ISSat a glanceWHAT WE DO … OUR VALUE PROPOSITION Service performance OUR BUSINESS MODEL facilitating our customers’ purpose ISS’s business model is based on creating value for through people empowerment our customers by allowing them to focus on what they do best – their core business. We service INTEGRATED FACILITY SERVICES (IFS) and maintain their facilities, ensuring that they are safe, efficient and pleasant places for our customers to pursue their own purpose. Focusing on our selected customer segments, we offer a leading value proposition based on our philosophy of self-delivery of our chosen services. OUR SERVICE DELIVERY MODEL CLEANING 51% PROPERTY 17% CATERING 12% SUPPORT 8% SECURITY 7% FACILITY MANAGEMENT 5%

REVENUE BY CUSTISOSMATERA SGELGANMCEEN|T OVERVIEW 5 21% 51% Nordic Western Europe 2% Eastern Europe 10% Asia Latin America 5% North America 4% Paci c 7% REVENUE BY CUSTOMER SEGMENT 205,738 Western Europe ... WHERE ... Nordic 21% 61% Key accounts No 40,343 Nordic Western Europe 51% 26% Large & Medium W 192,544 Asia GLOBAL PRESENCE Eastern Europe 9% Small Ea 14,244 Paci c Asia 2% 4% Route based As 48,536 Latin America Latin America 10% La 14,324 North America North America No 17,662 Eastern Europe Paci c 5% Pa 4%210,000 7% 50% Western Europe 21% Nordic REVENUE BY CUSTOMER SEGMENT 11% Asia 6% Paci c 21% 5% LatinNAomrdeicrica 5% NortWh AesmteerrnicEaurope 51% Nordic 21% 2% EasteEranstEeurnroEpuerope 2% 61% Key accounts Western Europe 51% Asia 10% 26% Large & Medium 5% 9% Small Eastern Europe 2% 4% 4% Route based Latin America Asia 10% North America Latin America 5% 74DKK Paci c 7% 510,968 77North America 4% 29% Business Services & IT 7% 14% Industry & Manufacturing billion Paci c 13% Public Administration Group revenue employees countries1)11% Healthcare 7% Retail and Wholesale 7% Transportation & Infrastructure 1) 4%RefEenrertgoy p&aRgeeso1u6rc2es 4% Hotels, Leisure & Entertainment ... FOR WHOM AND HOW ... 4% Food & Beverage 3% Pharmaceuticals 4% Other CUSTOMER TYPE CUSTOMER SEGMENTS DELIVERY TYPE 61% Key accounts 29% Business Services & IT 53% Single-services 26% Large & Medium 14% Industry & Manufacturing 9% Small 13% Public Administration 16% Multi-services 4% Route based 11% Healthcare 7% Retail and Wholesale 31% Integrated facility 7% Transportation & services (IFS) Infrastructure 4% Energy & Resources 4% Hotels, Leisure & Entertainment 4% Food & Beverage 3% Pharmaceuticals 4% Other Focus on larger customers Diversified customer portfolio Increasing IFS share (31%) 53% Single-services 16% Multi-services 31% Integrated facility services (IFS) 29% Business Services & IT

6 GROUP ANNUAL REPORT 2014 Letter to our stakeholders ISS made significant progress in 2014. We demonstrated the resilience of our business model through robust financial results. We accelerated the implementation of our strategy, added many new customers and, through the successful listing on Nasdaq Copenhagen in March, welcomed thou- sands of new shareholders. For the second straight year, ISS was named the world’s best outsourcing provider by the International Association of Outsourcing Providers. We generated resilient organic growth, At the annual general meeting, we will while improving our operating margin propose a dividend for 2014 of DKK and ensuring strong cash conversion, 4.90 per share of DKK 1, equivalent to in spite of difficult macroeconomic a pay-out ratio of approximately 50% conditions throughout the year. We of Profit before goodwill impairment strengthened the focus on our core and amortisation/impairment of brands service offerings, on improving the and customer contracts. customer experience and employee engagement whilst also generating Engaged colleagues, significant benefits through a number valued customers of strategic initiatives. Our 510,968 colleagues and our Going public thousands of valued customers around the world continue to be the most The successful IPO in March was an important factors behind the success important step in our journey towards that we enjoy in the enormous USD 1 becoming the world’s greatest service trillion market in which we operate. organisation as it created a strong foundation for our future growth. The We express our gratitude to all our resilience and attractiveness of our busi- employees for their dedication and to ness model was a major factor in our our customers for the trust they have successful return to Nasdaq Copenha- put in ISS. gen, and we are determined to deliver on the trust that our investors have Our global customer and employee placed in us. surveys have shown further improve- ment over the year, and we recorded As planned, we used the proceeds our best ever scores for employee from the IPO to significantly reduce engagement as well as customer our leverage. This, along with a experience. Around 207,000 (61%) of successful refinancing, served to our surveyed employees and most of significantly strengthen our financial our major customers participated. Our position. We are now classified as an employee engagement improved in all investment grade company and, as a regions, on average from 4.3 to 4.4 result, we were able to issue bonds (on a scale of 5). Employees’ readiness of EUR 1.2 billion at very competitive to recommend ISS as an employer pricing. (known as the Net Promoter Score)

LETTER TO OUR STAKEHOLDERS | OVERVIEW 7increased significantly to 46 (from 31). ing 56% of our total revenue, whichIn an industry with inherently high em- has resulted in a sharpened customerployee turnover, the ability to attract focus in our organisational structure,the very best people is becoming in- performance excellence and costcreasingly important in order to win in leadership. As already demonstrated bythe marketplace. We continue to carry the positive effect on those countriesout a range of initiatives to strengthen furthest in this process, we expect thisthe relationship between employees increased focus to improve customerand ISS even further. experience, drive growth and internal efficiency gains in coming years.Similarly, the satisfaction of ourcustomers is crucial to our growth in Our procurement savings initiative hasall segments, from single services to already identified cost savings of DKKmulti-services and IFS. In 2014, we 350-450 million in the first two phases.managed to further develop the IFS of- It is the intention to launch phase III infering and grow the business through 2015 and we are targeting additionalseveral contract extensions, expansions savings from this phase. While some ofand wins with customers, including these cost savings will support increasedHP, Vattenfall, Molson Coors, Bankia margins, we will also reinvest part ofand the Norwegian Defence Forces. the savings to maintain and strengthenIFS grew by 10% and now represents competitiveness.31% of our total revenue. Looking ahead, we expect the challeng-Strategic initiatives ing economic climate to continue in 2015, but with our engaged employees,We also made notable progress on our loyal customers and proven strategy wecustomer segmentation and procure- have confidence in our ability to con-ment savings initiative during the year. tinue delivering strong, resilient resultsWe carried out extensive analysis of across our business.our operations in countries represent-Yours faithfullyLord Allen Jeff Gravenhorstof Kensington Kt CBE Group Chief Executive OfficerChairman

8 GROUP ANNUAL REPORT 2014Key figures and financial ratiosDKK million (unless otherwise stated) 2014 2013 2012 2011 2010Income statement 74,105 78,459 79,454 77,644 74,073Revenue 4,150 4,315 4,411 4,388 4,310Operating profit before other items 1) 5.6% 5.5% 5.6% 5.7% 5.8%Operating margin 2) 4,722 5,002 4,956 5,020 5,042EBITDA 4,882 5,102 5,264 5,243 5,160Adjusted EBITDA 2) 3,990 4,215 4,103 4,165 4,192Operating profit 3) 303 176 222 198 208Financial income (1,599) (2,446) (2,943) (2,999) (2,609)Financial expensesProfit before goodwill impairment and amortisation/ 1,816 1,026 421 475 1,031 1,014 (397) (450) (503) (532) impairment of brands and customer contractsNet profit for the year 3,177 3,715 3,855 3,676 4,036Cash flow (783) (803) (762) (1,010) (886)Cash flow from operating activities 98% 102% 103% 93% 98%Acquisition of intangible assets and property, plant 46,734 48,566 53,888 54,980 55,455 and equipment, net 22,796 23,155 25,841 27,170 27,747Cash conversion 2) 692 772 789 938 861Financial position 12,910 4,213 5,097 2,127 2,626Total assets 27.6% 8.7% 9.5% 3.9% 4.7%GoodwillAdditions to property, plant and equipment 510,968 533,544 534,273 534,519 522,677Total equity (attributable to owners of ISS A/S) 73% 74% 73% 73% 73%Equity ratio 2.5 % 4.3 % 1.7 % 6.3 % 3.5 %Employees (6)% (2)% (2)% (2)% (1)%Number of employees at 31 December (2)% (3)% 2% 1% 4%Full-time employees (6)% (1)% 2% 5% 7%Growth 4,792 4,979 5,253 5,146 5,111Organic growth 12,647 22,651 25,955 29,905 30,623DivestmentsCurrency adjustments 4) 2.6x 4.5x 4.9x 5.8x 6.0xTotal revenue growth 5.8 (2.9) (4.0) (5.1) (5.5)Financial leverage 5.8 (2.9) (4.0) (5.1) (5.5)Pro forma adjusted EBITDA 10.3 7.6 3.8 4.7 10.3Net debt 4.90Net debt / Pro forma adjusted EBITDA 185,668 - - - - 1,000 135,443 135,443 100,000 100,000Stock market ratios 175,049Basic earnings per share (EPS), DKK 175,847 - - - -Diluted earnings per share, DKK 135,443 112,008 100,000 100,000Adjusted earnings per share, DKK 135,443 112,008 100,000 100,000Proposed dividend per share, DKKNumber of shares issued (in thousands)Number of treasury shares (in thousands)Average number of shares (basic) (in thousands)Average number of shares (diluted) (in thousands)See page 153 for definitions. 1) Excluding Other income and expenses, net, Goodwill impairment and Amortisation/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 do not form part of the Group’s normal ordinary operations, such as gains and losses arising from divestments, the winding up of operations, disposals of property and restructurings. Some of these items are recurring and some are non-recurring in nature.3) Excluding Goodwill impairment and Amortisation/impairment of brands and customer contracts.4) Calculated as total revenue growth less organic growth and less net acquisition/divestment growth. Currency adjustments thereby includes the effect stemming from exclusion of currency effects from the calculation of organic growth and net acquisition/divestment growth.

KEY FIGURES AND FINANCIAL RATIOS / OUTLOOK | OVERVIEW 9OutlookOutlook 2015 OUTLOOK 2015 2%-4% > 5.6%In 2015, we will continue to focus Organic growth > 90%on the implementation of the ISS Operating marginWay strategy, including the roll out of Cash conversionspecific strategic initiatives focusing onleadership, IFS, excellence (including OUTLOOK 2014 Annual report 2013 August 2014 Realised 2014procurement), customer segmentationand organisational structure (our GREAT Organic growth 3%-4% Around 2.4% 2.5%initiatives). Through these efforts we Operating margin > 5.5% > 5.5% 5.6%expect to realise tangible operational Cash conversion > 90% > 90% 98%and financial improvements, in boththe short and medium term. We remain Cash conversion will continue to be a Follow up on outlook for 2014focused on delivering: priority in 2015, as it has been histori- cally, and we expect cash conversion to For our three key financial objectives,1. resilient organic growth; remain above 90%. organic growth, operating margin and2. i mproving operating margin; and cash conversion, ISS ended 2014 in line3. strong cash conversion. The outlook should be read in with the outlook published in August conjunction with “Forward-looking 2014.For 2015 specifically: statements” (see page 153) and our exposure to risk (see Risk managementOrganic growth is expected to be on pages 66-69).2%-4%. This reflects our expectationof continued growth in the existing Impact from divestments,portfolio, combined with the launch of acquisition and foreignnew contracts won in recent months, exchange rates in 2015especially within IFS. We anticipateonly a very modest pick-up in eco- We expect the divestments andnomic growth across our markets and acquisition completed by 28 Februarybelieve that conditions in Europe will 2015 (including in 2014) to negativelyremain challenging. As such, we remain impact the revenue growth in 2015 bycautious on the likelihood of a pick-up approximately 1 percentage point. Wein non-portfolio services. Our emerging expect a positive impact on revenuemarkets activities should continue to be growth in 2015 from the developmenta source of healthy growth. in foreign exchange rates of approxi- mately 4 percentage points based onOperating margin is expected to be the forecasted average exchange ratesabove the 5.6% realised in 2014, there- for the year 20151). Consequently, weby maintaining our focus on sustainable expect total revenue growth in 2015 tomargin improvement. This development be positive by 5-7 percentage points.will be supported by ongoing strate-gic initiatives around procurement,customer segmentation, organisationalstructure and Business Process Out-sourcing (BPO).1) The forecasted average exchange rates for the financial year 2015 are calculated using the realised average exchange rates for the first two months of 2015 and the forecasted average exchange rates for the last ten months of 2015.

10 GROUP ANNUAL REPORT 2014In response to international market demands for large and highly complexfacility service contracts, ISS established a Global Corporate Clients function in2007. This provides overall governance, contract management and businesstransformation for regional, cross-regional and global customers. The estab-lishment of Global Corporate Clients has helped ISS to be recognised as a trueglobal outsourcing provider.The business has grown exponentially to cover the full range of facility ser-vices from soft through to hard services and facility management, which alsoincludes energy management and workplace solutions.HP, PALO ALTOElijio Arechiga, Landscaper, ISS USA

OUR PERFORMANCE 11 Our performance Highlights of the year 13 Financial review 17 Regional performance 23 Q4 2014 32

12 GROUP ANNUAL REPORT 2014 “ Good nutrition helps patients to a faster recovery” EMMA DAVIES Hostess, ISS United KingdomAt the ROYAL LIVERPOOL HOSPITAL, Emma Davies does herpart in making sure patients get on their feet again. Helpingpatients with their nutritional needs on their way to recoveryis an important part of Emma’s workday. She loves interactingwith the patients and helping them recover.

HIGHLIGHTS OF THE YEAR | OUR PERFORMANCE 13Highlights ofthe yearWe delivered resilient organ- Operating profit before other items REVENUE AND ORGANIC GROWTHic growth and an improved amounted to DKK 4,150 million inoperating margin in 2014. 2014 for an operating margin of 5.6% DKK billion %We made notable progress (2013: 5.5%). The higher operating 85 7in our customer segmen- margin was driven by a strong perfor- %tation, organisational mance overall. Several regions delivered DKK billion 67structure and procurement improved margins, especially the West- 8805savings initiatives which ern Europe and the Nordic regions, 56supported increased mar- driven mainly by the implementation of 7850gins. The successful listing our strategic initiatives. However, this 45of our shares allowed us to was partly offset by the impact of oper- 7705 34reduce our leverage leading ational challenges in certain Europeanto significantly lower financ- countries and the divestment of the 6750 23ing costs. margin-accretive pest control activities in 2013. Corporate costs amounted to 6605 12Operating results and 0.7% of revenue, the same level as inperformance 2013. 5650 1 2010 2011 2012 2013 2014Group revenue decreased DKK 4 billion We define emerging markets asto DKK 74.1 billion in 2014. Organic comprising Asia, Eastern Europe, 55growth was 2.5% which was more Latin America, Israel, South Africa Reven2u0e1, 0DKK b2i0llio1n1 2012 2013 2014than offset by the impact from the and Turkey. These markets delivered ORregvaennicueg,roDwKtKh,b%illionsuccessful divestment of non-core organic growth of 9% and representedactivities of 6% and the negative cur- 24% of Group revenue. In addition Organic growth, %rency effect of 2%. to significantly contributing to the Group’s organic growth, emerging OPERATING PROFIT AND MARGIN % 6Organic growth was driven by a con- markets delivered an operating margin 6 5tinued strong performance in emerg- of 6.3% in 2014 (2013: 6.3%). We aim DKK billion % 4ing markets and the Pacific region as to capitalise on the attractive market 4.D5KK billion 6well as in the integrated facility services characteristics in emerging markets and 4.5(IFS) business in general. All regions, continue to grow our footprint in these 4.0apart from Eastern Europe, delivered countries in a balanced and controlledpositive organic growth rates with manner. 4.0Latin America and Pacific reporting 3.5 5double-digit growth performances. On Profit before goodwill impairment andthe other hand, the persistently chal- amortisation/impairment of brands and 3.5 5lenging macroeconomic environment customer contracts was DKK 1,816 3.0in Europe and difficult market con- million (2013: DKK 1,026 million), sup-ditions in certain European countries ported by significantly lower financial 3.0 4reduced organic growth. Furthermore, expenses following the Initial Public 2.5 4the timing and scope of new Global Offering (IPO) and the subsequentCorporate Clients contracts adversely refinancing of our pre-IPO debt. 2010 2011 2012 2013 2014impacted organic growth relative to 2.5original expectations. Net profit for the year was up by DKK 1,411 million to DKK 1,014 million from Oper2at0in1g0pro 2t 0be1f1ore o2th0e1r i2tems,2D0K1K3billio2n014 a loss of DKK 397 million in 2013. The OOppeeraratitninggmparorgitnb, %efore other items, DKK billion significant improvement was caused by Operating margin, % % PROFIT BEFORE GOODWILL IMPAIRMENT 11%0 93 103 102 98 11010D0KK billi9o8n 103 102 98 2.0 93 19000 98 8190.05 7800 1.0 6700 5060.05 2010 2011 2012 2013 2014 50 0.0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Pro t before goodwill impairment and amortisation/ impairment of brands and customer contracts, DKK billion

3.5 5 514 GROUP ANNUAL REPORT 20143.02.5 4 4 2010 2011 2012 2013 2014 Operating pro t before other items, DKK billion Operating margin, %CASH CONVERSION the organisational setup for our key driven by IFS contract launches as accounts. The implementation phase well as the successful conversion of% has been initiated in several countries traditional single service contracts to and is progressing as planned. IFS contracts.110 103 102 The initiatives implemented have re- Significant IFS contracts won by ISS100 98 98 sulted in a more efficient structure as in 2014 included a contract within well as a lower cost base. the remote site resource segment in 93 Australia, BASF in five European coun- We expect to achieve savings from the tries, Swisscom in Switzerland, Bankia90 procurement excellence programme in in Spain, Aller in the Nordic region, phases and the programme continues Vattenfall in Germany and a contract80 to progress according to plan. We within the Business Services & IT seg- have now completed phase I and II of ment in the Netherlands. In 2014, ISS70 the programme and the total identi- UK lost a large local IFS contract within fied savings amount to DKK 350-450 the healthcare sector which expired on60 million to be achieved during 2014- 1 November 2014. Furthermore, ISS 2018. It is the intention to launch Norway lost a large local contract with50 phase III in 2015 and we are targeting Statoil which expired 1 June 2014. 2010 2011 2012 2013 2014 additional savings from this phase. While some of these cost savings will Revenue generated from Global Cor-lower financial expenses as described increase margins, other savings will be porate Clients amounted to DKK 6.8above and lower impairment losses as re-invested in the business in order to billion in 2014, representing approxi-described in the Financial review on maintain and strengthen competitive- mately 9% of Group revenue (2013:page 18. ness. 8%). In local currencies, this was a 5% increase over 2013.Cash conversion for 2014 was 98%, We successfully launched a BPOdriven by a general strong cash perfor- project covering certain Finance & In 2014, Global Corporate Clientsmance across the Group. Ensuring a Accounting processes and targeting extended the contract with HP, whichstrong cash performance continues to improved financial processes and cost is one of the largest global facilitybe a key priority, and the result reflects savings in the Nordic region. Plans services contracts in the industry. Theour consistent efforts to ensure timely are to launch the project in additional three-year extension means that ISSpayment for work performed. European countries in 2015. will continue to deliver integrated facil- ity services to more than 500 HP sitesCash flow from operating activities Historically, the portfolio business has in 58 countries across five continentswas an inflow of DKK 3,177 mil- accounted for 75%-80% of Group until the end of 2018. Global Corpo-lion (2013: DKK 3,715 million). The revenue. As a result of the divestment rate Clients also won an IFS frameworkreduction was primarily due to a lower of certain non-portfolio based busi- contract with Nestlé that could poten-operating profit before other items nesses such as pest control, damage tially cover several countries in Europeresulting from divestments, an increase control and landscaping our portfolio and Asia, with delivery of services inin cash outflow from working capital business’ share of Group revenue is Switzerland which commenced on 1as well as an increase in tax paid. currently in the range of 80%-85%. August. In addition, Global Corporate Due to a challenging macroeconomic Clients won a contract with the brew-Strategy update environment in Europe, among other ing company Molson Coors in North things, we continue to see relative- America and the Czech Republic.In 2014, we made substantial progress ly weak demand for non-portfolioin our strategic initiatives (referred to services. Divestments and acquisitionsas GREAT) which include customersegmentation, organisational structure IFS and Global Corporate In 2014, we divested 14 businesses,and excellence projects such as our Clients the most significant of which wereprocurement programme and Business the landscaping activities in France,Process Outsourcing (BPO). Revenue generated from IFS was up the commercial security activities in 10% in 2014, adjusted for currency Australia and New Zealand and theWe have implemented a process of effects, to DKK 22.7 billion, which Nordic temporary labour and staffingcustomer segmentation by size to corresponds to 31% (2013: 26%) of activities in Norway, Sweden and Fin-establish a more detailed understand- Group revenue. Growth was mainly land. The divestments were a result ofing of our customer base as well asadditional profitability transparency. Bythe end of 2014, we had mapped ourcustomer segments in countries repre-senting 56% of Group revenue, whichhas resulted in a sharpened focus on

HIGHLIGHTS OF THE YEAR | OUR PERFORMANCE 15our continuous review of the strategic REVENUE AND GROWTHrationale and fit of business activitiesand they support a better strategic Revenue Growth componentsalignment in the affected countries. DKK million 2014 2013 Growth Organic Div. CurrencyWith the divestments completed in2014, we have completed most of Western Europe 37,318 39,704 (6)% 0% (7)% 1%the targeted significant divestments. Nordic 15,449 16,853 (8)% 2% (7)% (3)%Nonetheless, we will continue to re- Asia 3% 8% (1)% (4)%view our existing business for potential Pacific 8,221 8,019 (13)% 10 % (15)% (8)%divestments of non-core activities Latin America 4,444 5,105 (3)% 10 % (13)%and likewise will consider making North America 3,597 3,708 1% 1% - 1%acquisitions which enhance our core Eastern Europe 3,477 3,459 (4)% (0)% (1)% (4)%competencies subject to tight strategic Other countries 1,597 1,657 129 % 146 % (0)% (17)%and financial filters. Corporate / eliminations 1% 87 38 - - -ISS did not acquire any businesses in (85) (84) -2014, but announced in January 2015the acquisition of GS Hall plc, a leading Group 74,105 78,459 (6)% 2.5% (6)% (2)%technical services company focused onmechanical and electrical engineering, Emerging markets 17,779 17,732 0% 9% (2)% (7)%energy management and compliance.The company has activities in the United OPERATING RESULTS Operating profit Operating marginKingdom, Ireland and continental before other itemsEurope. The estimated annual revenue is DKK millionDKK 698 million and a total of 780 em- 2014 2013 Change 2014 2013ployees, primarily engineers and techni- Western Europecians, will transfer to ISS. The acquisition Nordic 2,310 2,388 (3)% 6.2 % 6.0 %supports ISS’s strategy by expanding our Asia 1,153 1,246 (7)% 7.5 % 7.4 %technical services self-delivery capabili- Pacific (1)% 7.3 % 7.6 %ties and in particular it supports the IFS Latin America 603 608 (13)% 5.0 % 5.0 %offering in the United Kingdom. North America 220 253 19 % 4.8 % 3.9 % Eastern Europe 173 145 24 % 3.6 % 2.9 %Capital structure and financing Other countries 125 101 6.8 % 6.6 % Corporate / eliminations 109 109 - (1.4)% (3.2)%The equity ratio at the end of 2014 - (0.7)% (0.7)%was 27.6% (2013: 8.7%). The im- Group (1) (1) 1%provement was mainly the result of the (542) (534)successful listing of ISS A/S on Nasdaq Emerging marketsCopenhagen. 4,150 4,315 (4)% 5.6% 5.5%At the annual general meeting to be 1,123 1,115 1% 6.3% 6.3%held on 15 April 2015, the Board ofDirectors will propose a dividend for entire pre-IPO financing eliminating increased flexibility to pursue refi-2014 of DKK 4.90 per share of DKK approximately DKK 1.1 billion in inter- nancings in the bond market when1, equivalent to a pay-out ratio of est expenses on an annualised basis considered relevant. The EUR 2 billionapproximately 50% of Profit before compared with 2013. Hence, the IPO EMTN programme was listed on thegoodwill impairment and amortisation/ together with the significantly lower Luxembourg Stock Exchange with ISSimpairment of brands and customer interest expenses as well as underly- Global A/S as the issuing entity. Undercontracts. ing operational performance made it the programme, ISS issued two EUR possible to deleverage the company bonds for a principal amount of EURIn March 2014, we entered into a new significantly during 2014. 1.2 billion to address the shortest partunsecured senior facility agreement in of the maturity profile of the newconnection with the listing of ISS A/S. In November 2014, a new EMTN senior facilities (Term Loan A maturingProceeds from the IPO and the new programme was established to ensure in February 2017).senior facilities were used to repay ISS’s

16 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 The refinancings leave ISS with a diver- lence Awards, and was named the sified funding through the combina- 2014 Integrated Facilities Management3 February tion of bank and bond debt, and rates Company of the Year. ISS in the United on a significant proportion of our debt Kingdom was presented with severalISS extended global have been locked at attractive levels. awards including Foodservice Cateys,IFS contract with HP Furthermore, we have no short-term Educatering and BIFM Awards, the lat-until 2018 maturities. ter including the prestigious Profound Impact Award. ISS United KingdomISS announced a three-year extension Following the IPO, ISS was upgraded also won the respected Corporateof its global IFS contract with HP to the to investment grade by both Standard Social Responsibility (CSR) Team awardend of 2018. As part of the agreement, and Poor’s and Moody’s, which as- at the Business Charity Awards.ISS continues to deliver IFS services to signed corporate ratings of BBB-/Stablemore than 500 HP sites in 58 countries (S&P) and Baa3/Stable (Moody’s). These ISS received the Global Outsourcingacross five continents. The new contract ratings also apply to ISS Global A/S and Social Responsibility Impact Award,is one of the largest global facility services the newly issued EMTNs. In line with and ISS Estonia won the Corporatecontracts in the industry. our Financial Policy, our objective Social Responsibility Initiative of the is to maintain an investment grade Year Award at the Swedish BusinessJeff Gravenhorst, Group CEO, said: financial profile, and the target is to Awards 2014. ISS Greece took home“We are proud and honoured about our reduce our financial leverage to below six awards at the Greek Facilities Man-extended agreement with HP, which is 2.5x pro forma adjusted EBITDA. At 31 agement Awards 2014.a very special customer to ISS. In 2010, December 2014 the financial leverageHP became our first major global IFS was 2.6x. A full list of the awards received incustomer. We have worked hard to build 2014 is available on our corporateand extend the relationship to deliver The refinancings are described in detail services and to add value to in the Financial review under CapitalHP’s core business activities.“ structure and in section 5 of the con- Subsequent events solidated financial statements. On 20 January 2015, ISS announced ISS ranked number one the acquisition of GS Hall plc, a leading outsourcing provider technical services company with activi- ties in the United Kingdom Ireland and In June 2014, ISS was for the second continental Europe. year in a row ranked the global num- ber one outsourcing services provider Other than as set out above or else- by an independent jury for The Interna- where in this Group Annual Report, we tional Association of Outsourcing Pro- are not aware of events subsequent to fessionals (IAOP) in competition with 31 December 2014, which are expect- other global outsourcing companies ed to have a material impact on the such as Accenture, Johnson Controls, Group’s financial position. CBRE and Aramark. ISS received highest possible scores from all jury members on the following parameters: size and growth; customer referenc- es; organisational competencies; and management capabilities. During 2014, ISS received numerous industry awards. ISS was named the Best Facility Management Company of The Year in Asia Pacific, for the second consecutive year, and also received this year’s Growth Excellence Leadership Award by Frost & Sullivan. ISS Australia won a record-breaking nine awards at the Customer Service Institute of Australia’s (CSIA) 2014 Service Excel-

FINANCIAL REVIEW | OUR PERFORMANCE 17FinancialreviewWe delivered profitable STRUCTURE OF THE FINANCIAL REVIEWorganic growth, solidcash conversion and The commentary in the Financial review is structured according to themes to provide commen-strong net profit in 2014. tary to the sections in the consolidated financial statements. No comments are made to sectionFollowing the IPO, we also 6, Governance, as this is covered by the Remuneration report on pages 75-79. Furthermore, nosignificantly reduced our comments are made to section 1, Basis of preparation, and section 8, Other required disclosures,net debt. as this is deemed immaterial.Operating profit Changes in working capital was an This was partly offset by investments outflow of DKK 71 million, which re- in intangible assets and property,The Group’s revenue and operating sulted in a cash conversion of 98% in plant and equipment, net, of DKKprofit before other items is reviewed 2014 compared with 102% in 2013. 783 million (2013: DKK 803 million),in Highlights of the year on page 13 which represented 1.1% of revenueand in Regional performance on page Cash flow from operating (2013: 1.0%).23. activities In 2014, cash inflow from operating activities was DKK 3,177 Cash flow from financing activitiesNet profit was up by DKK 1,411 million (2013: DKK 3,715 million). The Cash flow from financing activitiesmillion to DKK 1,014 million from decrease was due to operating profit was a net cash outflow of DKK 3,535a loss of DKK 397 million in 2013. before other items being DKK 165 million (2013: cash outflow of DKKThe significant improvement was million lower than in 2013 mainly due 5,159 million) reflecting transactionsmainly due to financial expenses, to divestments, changes in working relating to the completed IPO andnet decreasing DKK 974 million and capital of DKK 151 million and a DKK the subsequent refinancings carriednon-cash expenses related to goodwill 149 million increase in cash outflows out during the year, see Capitalimpairment being DKK 537 million from income taxes paid. The increase structure on page 18. Repayment oflower than in 2013. The decrease in in tax paid was mainly related to tax borrowings of DKK 33,862 millionfinancial expenses was a result of the payable on the sale of the pest control mainly related to the repayment ofrefinancing of the pre-IPO debt and activities in the Pacific region in 2013. the pre-IPO senior secured facilities,a lower average net debt during the the redemption of the remainingyear. Other expenses paid of DKK 402 outstanding Senior Subordinated million mainly involved costs relating Notes due 2016, the repayment ofWorking capital and to the IPO and restructuring projects the Securitisation programme, as wellcash flows initiated and expensed in 2013 and as the 4.5% EMTNs. Finally, the part 2014. of the new unsecured senior facilitiesEnsuring a strong cash performance with the shortest maturity (Term Loanthrough efforts to ensure timely pay- Cash flow from investing activities A expiring in February 2017) wasments for work performed continued Cash flow from investing activities repaid end be a key priority in 2014. These was a net cash inflow of DKK 552efforts were once again reflected in million (2013: DKK 1,331 million). Proceeds from borrowings of DKKour cash flows for the year. The cash inflow relating to acquisi- 23,483 million mainly related to the new tions and divestments, net, was DKK unsecured senior facilities and the twoTrade receivables amounted to DKK 1,316 million and related mainly to bonds (EUR 1.2 billion in total) issued10,446 million (2013: DKK 10,299 the divestment of the landscaping under the new EMTN programme.million). The slight increase compared activities in France, the Nordic tem- Proceeds from issuance of share capitalto 2013 was mainly the result of porary labour and staffing activities of DKK 7,788 million reflected the netcontracts won in 2014 and quarterly and the pest control activities in India. proceeds from the completed IPO.timing differences, partly offset by theimpact from divestments.

18 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 Strategic divestments 22,035 million related to goodwill, and investments was recognised in ISS’s statement19 November of financial position. Furthermore, Divestments and assets held a significant number of acquisitionsISS won IFS contract with for sale made in subsequent years have addedVattenfall in Germany In 2014, we divested 14 non-core intangible assets. businesses (2013: 14 divestments).ISS agreed to a new major IFS strategic The most significant of these were At 31 December 2014, goodwill waspartnership with Vattenfall in Germany. the landscaping activities in France, DKK 22,796 million, DKK 359 millionThe new contract is the largest win ever the commercial security activities in less than at 31 December 2013,for ISS in Germany. It covers a wide range Australia and New Zealand and the the difference mainly being due toof services, including facility services, Nordic temporary labour and staffing impairment losses of DKK 448 millionwork space management, cleaning, activities in Norway, Sweden and and transfer of assets classified assecurity, support services, catering, fleet Finland. held for sale of DKK 198 million,management and maintenance. As part which amounts were partly offset byof the contract, ISS will deliver services to Cash consideration received, net of foreign exchange adjustments of DKKapproximately 500 Vattenfall sites across costs, amounted to DKK 1.3 billion. 298 million. Of the total impairmentGermany and more than 500 Vattenfall The proceeds from the divestments losses, DKK 420 million derived fromemployees will transfer to ISS. were used to repay part of our pre- impairment tests in the Netherlands IPO debt. due to an update of business plan as-The strategic partnership will commence sumptions and DKK 28 million derivedon 1 January 2015 and run for five years Our continued strategic focus led to from completed divestments, mainlywith an option for a two-year extension. three businesses being classified as in Western and Eastern Europe.The strategic partnership between ISS and held for sale at 31 December 2014,Vattenfall in Germany builds on shared including businesses in the Western Of the total goodwill impairment andvalues of continuously developing services Europe and Nordic regions. At 31 amortisation and impairment of brandsand respect for employees and local December 2014, assets and liabilities and customer contracts, DKK 172 mil-communities. held for sale amounted to DKK 472 lion (2013: DKK 517 million) resulted million (2013: DKK 1,950 million) and from fair value adjustments from theJacob Götzsche, Regional CEO Central DKK 176 million (2013: DKK 1,016 acquisition of ISS World Services A/SEurope, said: “This is a very important new million), respectively. in May 2005. See Acquisition of ISScontract to ISS within IFS and especially to World Services A/S on page 20.our German business”. Divestments completed in 2014 and revaluation of net assets of businesses Capital structure classified as held for sale resulted in a net gain of DKK 70 million (2013: Following the completion of the IPO DKK 216 million), which comprised in March 2014, ISS entered into a new a net gain of DKK 100 million unsecured senior facility agreement. recognised in Other income and The new senior facilities consisted of expenses, net and impairment losses a term facility of EUR 1.2 billion with on goodwill and customer contracts a three-year maturity (Term Loan A), a of DKK 28 million and DKK 2 million, term facility of EUR 800 million with respectively. a five-year maturity (Term Loan B) and a Revolving Credit Facility of EUR 850 Intangible assets, goodwill and million with a five-year maturity. goodwill impairment Intangible assets at 31 December Proceeds from the IPO and the new 2014 amounted to DKK 27,465 mil- unsecured senior facilities were used lion and comprised mainly goodwill, to repay the senior secured facilities, customer contracts and brands. A sig- redeem the remaining outstand- nificant part of these intangible assets ing Senior Subordinated Notes due relates to the acquisition of ISS World 2016 and repay the securitisation Services A/S in May 2005, when a car- programme. Furthermore, the 4.5% rying amount of DKK 31,844 million EMTNs due December 2014 were of intangible assets, of which DKK repaid at maturity.

80 6 75 5 FINANCIAL REVIEW | OUR PERFORMANCE 19 4 70 65 3 60 2 55 1 2010 2011 2012 2013 2014In November 2014, a new EMTN million. The significant decrease Revenue, DKK billionprogramme of EUR 2 billion was was the result of a DKK 826 million Organic growth, %established and proceeds of EUR 1.2 reduction in interest expenses, netbillion from the two bonds issued was mainly due to the refinancing of EQUITY AND EQUITY RATIOused to repay the part of the new the pre-IPO debt combined with theunsecured senior facilities with the lower average net debt in 2014. In DKK billion %shortest maturity (Term Loan A matur- 2014, financial income and expenses, 30ing in 2017). net, included a non-cash expense of 15 % unamortised financing fees of DKK 274As a result, the new financing consists 242 million caused by the repayment DKK billionof the unsecured senior facilities of the pre-IPO senior secured facilities, 1825 168and the two bonds issued under the the securitisation programme, thenew EMTN programme. The IPO and redemption of the outstanding Senior 890 152subsequent refinancings leave ISS with Subordinated Notes as well as the re- 4a net debt of DKK 12,647 million and payment of the part of the new unse- 765 6no short-term maturities. cured senior facilities with the shortest 3 maturity (Term Loan A). Furthermore, 70 0Equity financial income and expenses, net 3 2Total equity was DKK 12,920 million included a DKK 79 million net loss on 65at the end of 2014 equivalent to an foreign exchange. 0 1equity ratio of 27.6% (2013: 8.7%). 60 2010 2011 2012 2013 2014The DKK 8,698 million increase was Taxmainly the result of the share issue 55 Equity (attributable to owners of ISS A/S) 2014in connection with the IPO of DKK Effective tax rate 2010 2011 2012 20137,788 million net of costs of DKK The effective tax rate for 2014 was248 million. In addition, net profit 32.6% (2013: 47.3%) calculated Equity ratioof DKK 1,014 million and currency as Income taxes of DKK 878 millionadjustments relating to investments in divided by Profit before tax and good- Revenue, DKK billionforeign subsidiaries of DKK 472 mil- will impairment and amortisation/lion increased equity. This was partly impairment of brands and customer Organic growth, %offset by actuarial losses of DKK 469 contracts of DKK 2,694 million. Ad-million, net of tax and the purchase justed for the impact of non-deduct- FINANCIAL LEVERAGEof treasury shares of DKK 160 million. ible IPO costs of DKK 48 million andThe positive currency adjustments the impact of rules on limitation on DKK billion xwere mainly due to appreciation of the deductibility of financial expenses 10USD, GBP and HKD against DKK. in Denmark, the effective tax rate 4%0 amounted to approximately 30%. 8Net debt 110 30.6 29.9 103 102 100 6Net debt was DKK 12,647 million, a 10300 98 26.0 22.7decrease of DKK 10,004 million com- 4.5 12.7 4pared with 2013. The significant drop 9200 93 2.6 2was a result of the IPO, which allowed 80 2013 2014us to reduce our debt, and to a lesser 6,0 2013 2014degree divestment of businesses. The 5.8refinancing is described above and in 4.9note 5.2, Loans and borrowings, tothe consolidated financial statements. 7100At 31 December the Net debt / Proforma adjusted EBITDA was 2.6x 600(2013: 4.5x). 50 2010 2011 2012Financial income and expenses, Net2d0e1bt0, carr2yi0ng11amou2n0t 12net Financial income and expenses,net decreased by DKK 974 million or Financial leverage (x pro forma adjusted EBITDA)1)43% to a net expense of DKK 1,296 1) Pro forma adjusted EBITDA is calculated as Adjusted EBITDA adjusted as if all acquisitions and divestments had occurred on 1 January of the respective year. At 31 December 2014, the Pro forma adjusted EBITDA was estimated at approximately DKK 4,792 million (2013: DKK 4,979 million) % 110 103 102 100 100 98 93 90 80 70 60 50 2010 2011 2012 2013 2014

20 GROUP ANNUAL REPORT 2014ACQUISITION OF ISS WORLD SERVICES A/S IN MAY 2005In May 2005, ISS World Services A/S was Fair value adjustments Fair value adjustmentacquired for a purchase price of approximate- following acquisition remaining atly DKK 22 billion. The acquisition resulted DKK million in May 2005 31 December 2014in a significant step-up of carrying amountsand thus a significant impact on the Group’s Goodwill 6,443 4,504consolidated financial statements in the Brands 1,657 1,589subsequent years. Compared to companies in Customer contracts 6,665 1,501our industry, this is a significant difference. Other non-current and current assets Pensions (156) -In accordance with IFRS the purchase price Deferred tax liabilities (30) -was allocated to identifiable assets, liabilities Non-current loans and borrowings (694)and contingent liabilities (net assets) with Non-controlling interests and other (2,960) -the residual being recognised as goodwill. As 1,811the carrying amount of the net assets was non-current and current liabilities -approximately DKK 9 billion at the acquisition (299)date, the purchase price allocation (PPA) Total identifiable net assetsresulted in significantly higher carrying including goodwill 13,131 6,900amounts of goodwill, brands and custom-er contracts and as a result deferred tax The PPA was performed at country level negative developments in certain countriesliabilities also increased. On the other hand, (ISS’s relevant CGU level) resulting in the have been more than offset by positivethe fair value of non-current loans and bor- net assets of each country being adjusted developments in other countries. However,rowings was lower than the carrying amount to fair value based on our best estimate at according to IFRS, these can not be offset indue to a decrease in the market value of the acquisition date of each country’s future the impairment test.the Medium Term Notes expiring in 2014 performance (estimated NPV). Impairmentfollowing the announcement of the intended tests are performed based on these higher The impact on the Group’s results of the fairacquisition of ISS World Services A/S. values. As a result, impairment tests have led value adjustments made in May 2005 are to recognition of impairment losses in certain presented below.The aggregate fair value adjustments follow- countries despite the fact that a test of theing the acquisition and such fair value adjust- aggregate values at Group level would notments remaining at 31 December 2014, are have led to impairment. This illustrates thatshown in the table to the right.DKK million 2014 Actual 2013 Actual Fair excl. adj. Fair excl. adj.Operating profit before other items Actual value adj.Other income and expenses, net Actual value adj.Operating profit 4,150 - 4,150 4,315 - 4,315Financial income and financial expenses, net (160) 12 (172) (100) 97 (197)Profit before tax, goodwill impairment and amortisation/ 3,990 12 3,978 4,215 97 4,118impairment of brands and customer contracts (1,296) (20) (1,276) (2,270) (22) (2,248)Income taxes 2,694 (8) 2,702 1,945 75 1,870Profit before goodwill impairment and amortisation/ (878) 5 (924)impairment of brands and customer contracts 5 (883) (919)Goodwill impairmentAmortisation/impairment of brands and customer contracts 1,816 (3) 1,819 1,026 80 946Income tax effect (448) 160 (608) (985) (119) (866) (588) (332) (256) (667) (398) (269)Net profit for the year 234 167 67 229 153 76 1,014 (8) 1,022 (397) (284) (113)

FINANCIAL REVIEW | OUR PERFORMANCE 21“ Peacekeeping begins with treating people with respect” MICHAEL ANDERSEN Handyman, ISS Denmark THE DANISH ARMED FORCES have a key role to play in promoting peace and security. Michael Andersen is well aware of this task and he does what he can to make sure the premises are well-functioning and up to the task. His workday consists of various different projects and he enjoys this diversity.

22 GROUP ANNUAL REPORT 2014“ My calling is to make people feel safe and sound ” OLGA SEVEREVA Security guard, ISS Finland At the MICROSOFT MOBILE headquarters in Espoo, Finland, Olga Severeva is in place to make the offices safe and secure. It takes the skills of a dedicated employee like Olga to keep up with the pace around the busy headquarters. She’s always ready to help people and believes that treating people with respect is one of the most important aspects of her job.

REGIONAL PERFORMANCE | OUR PERFORMANCE 23RegionalperformanceWestern EuropeNordicAsiaPacificLatin AmericaNorth AmericaEastern EuropeISS is all about creating ever growing demand from multina- segmentation, organisational structurevalue for our customers tional corporations for the delivery of and excellence projects including ourthrough consistent service IFS across borders. Our IFS revenue procurement programme and Busi-delivery and by assisting share has grown significantly and our ness Process Outsourcing, supported athem in living up to their ability to deliver IFS is key to serving strong operating margin performance,specific purpose. We have a global customers and grasping new especially in the Western Europe andunique and leading market local market opportunities. Nordic regions.position, which supportslocal, regional and global In 2014, we delivered a robust per- We are well-positioned in emergingcustomers across the ISS formance as we continued to grow markets, where we generate 24% ofworld map. profitably on the attractive global facility our total revenue (2013: 23%). Emerg- services market. Against a softer global ing markets represent a large growthOur business characteristics and region- macroeconomic backdrop, we delivered potential and an opportunity to serveal presence have changed consider- resilient organic growth supported by our many regional and global customersably over the past decade. We have strong performance in emerging mar- operating there. Our emerging marketstransformed ISS from primarily being a kets and the Pacific and Nordic regions generated solid operating margin ofEuropean-based company to becom- as well as an increasing share of IFS 6.3% in 2014 (2013: 6.3%). Goinging a true global player with a leading revenue, which now accounts for 31% forward, emerging markets will contin-market position. We are leveraging our of Group revenue (2013: 26%). ue to support our top-line growth andglobal presence in order to meet the will make up an ever-bigger part of our Our focus on profitable growth, global footprint. along with the progress made in our strategic initiatives, such as customer

24 GROUP ANNUAL REPORT 2014Western Europe Revenue by country 37,318 DKKm United Kingdom 27% Revenue France 14% 50% Spain 11% of Group revenue Switzerland 11% 6.2% Belgium & Luxembourg 7% Operating margin Turkey 7% 0% Netherlands 5% Organic growth Germany 5% Israel 5% Austria 4% Ireland 1% Portugal 1% Greece 1% Italy 1% % of total Western Europe revenue Integrated facility services 195,139 38% 2014: 34% 2006: 14% 036 Employees of Group employees DKK billion 9 12 15The market and our focus ment spend within Western Europe, 7% and currency effects lifted revenueThe markets of the Western Europe caught real momentum. Our margins by 1%. Operating profit before otherregion are generally characterised as were supported by significant realised items decreased by 3% to DKK 2,310developed markets but with significant cost savings. Further cost savings are million (2013: DKK 2,388 million) equaldifferences from country to country in expected in 2015 and subsequent years to an operating margin of 6.2%, whichterms of IFS market maturity and mac- as customer demand for contract cost was 0.2 percentage point higher thanroeconomic environment. In addition, savings continues. last year.our market positions vary considerably,as we hold leading market positions in Safeguarding future growth and prof- Several countries delivered positivethe United Kingdom, Spain, Switzerland itability requires an increased focus on organic growth rates, with Turkey,and Turkey. Key segments for the region IFS customers and hence a strong focus Israel, the United Kingdom and Austriaare Business Services & IT, Public Ad- on the strategic initiative – IFS strategy as the most significant. The challengingministration, Industry & Manufacturing, as part of GREAT. Across the Group, macroeconomic conditions in certainHealthcare as well as the Hotels, Leisure and not least in Western Europe, Global European countries had a negative im-& Entertainment segment. Corporate Clients will act as the incuba- pact on the overall organic growth rate. tor for future growth supporting large2014 was an important year for the IFS contracts. We enter 2015 with a The operating margin for the regionregion. We continued to make signifi- strong sales pipeline across most coun- was driven by a strong performance incant wins of complex IFS contracts such tries, and coupled with new contract the United Kingdom, Switzerland, andas Bankia and Nestlé, which enabled wins (notably in the United Kingdom, Turkey as well as by our strategic initia-several countries within the region to Spain, Switzerland and Germany) tives. However, the operating margindeliver positive organic growth rates already secured for start-up early in was negatively impacted by operationalon top of the strong organic growth in the year, we remain positive about the challenges in the Netherlands and Israel2013, a year impacted by large contract future organic growth rates and sound as well as by the divestments of thewins with Barclays and Novartis. On the profitability of the region. margin-accretive pest control activitiesother hand, we also lost a large local IFS in 2013, which had an adverse impactcontract in the United Kingdom within Financials on the margin compared with 2013.the healthcare sector. Revenue was DKK 37,318 million in 2014 (2013: DKK 39,704 million).2014 was also the year when the pro- Organic growth was 0% while the suc-curement programme initiatives, based cessful divestment of non-core activitieson leveraging the significant procure- in 2013 and 2014 reduced revenue by

REGIONAL PERFORMANCE | OUR PERFORMANCE 25Nordic Revenue by country 15,449 DKKm Norway 30% Revenue Finland 25% Sweden 24% 21% Denmark 20% Iceland of Group revenue Greenland 1% 0% 7.5% % of total Nordic revenue Operating margin 2% Organic growth Integrated facility services 35,329 7% 2014: 23% 2006: 12% Employees of Group employees 0 1 2345 DKK billionThe market and our focus for small customers with separate value ganic growth was 2%. The divestmentThe markets of the Nordic region are propositions. This will lead to improved of non-core activities reduced revenuemature, developed and with a high out- service performance, better customer by 7% while currency adjustments re-sourcing level, and ISS holds a relatively experience and higher employee en- duced revenue by 3%. Operating profitlarge market share in all countries of gagement with a competitive cost base. before other items amounted to DKKthe region. The strategic focus remains 1,153 million (2013: DKK 1,246 million),to leverage the strong market position Another element of implementing reflecting an improved operating marginmainly through our strategy implemen- GREAT is the Business Process Out- of 7.5% compared with 7.4% in 2013.tation, cost leadership, sharing best sourcing (BPO) project whereby certainpractices and utilising our footprint to Finance & Accounting processes in all The organic growth of 2% reflected adevelop solutions and concepts tailored Nordic countries were outsourced during strong performance in Denmark andto specific customer segments. The Nor- 2014 as part of a strategic partnership Norway driven by contract start-ups anddic key customer segments are Business with an international BPO provider. higher demand for non-portfolio ser-Services & IT and Industry & Manufactur- Furthermore, in 2014 we completed the vices. This was partly offset by negativeing as well as country-specific segments divestment of two significant non-core organic growth in Finland due to thesuch as Transportation & Infrastructure, activities comprising the Nordic tem- impact from exiting contracts in 2013Healthcare and Public Administration. porary labour and staffing activities in and 2014 as well as a weakened de- Norway, Sweden and Finland as well as mand for non-portfolio services acrossThe Nordic region is a front-runner certain service activities related to asylum the region. Furthermore, ISS Norwayin the development and deployment centres in Norway. The implementation lost a large local contract with Statoilof GREAT – our primary vehicle for of GREAT in the Nordic region resulted which expired 1 June 2014.accelerating our strategy implemen- in improvements in 2014 across severaltation. Equipped with the knowledge KPIs as well as in the cost structures. The The increase in the operating mar-gained from the process of detailed implementation efforts will continue in gin to 7.5% was primarily the resultcustomer segmentation carried out in 2015 across the region with the focus on of a margin increase in Norway andall Nordic countries in 2013, we aligned empowering people through leadership, Denmark due to the effect from theour organisational structures in each delivering IFS, service excellence and strategic initiatives implemented incountry at the beginning of 2014. The nurturing a commercial focus. 2014 regarding customer segmenta-aligned business platforms are tailored tion and the organisational structure asto strengthen our focus on key accounts Financials well as a generally strong operationaland large customers as well as estab- Revenue in 2014 was DKK 15,449 mil- performance across the region.lishing separate operating structures lion (2013: DKK 16,853 million) and or-

26 GROUP ANNUAL REPORT 2014Asia Revenue by country 8,221 DKKm Hong Kong 22% Revenue Singapore 17% Indonesia 15% 11% India 14% Thailand 13% of Group revenue China 10% Taiwan 7.3% Philippines 4% Japan 2% Operating margin Malaysia 1% Brunei 1% 8% 1% % of total Asia revenue Organic growth Integrated facility services 186,009 36% 2014: 29% 2006: 31% 0 0.5 1.0 1.5 2.0 2.5 Employees of Group employees DKK billionThe market and our focus in a highly fragmented market with to DKK 603 million for an operatingThe Asia region consists of large and strong competition, largely due to our margin of 7.3% (2013: 7.6%).more established markets, such as Hong self-delivery model.Kong and Singapore, as well as devel- Double-digit organic growth rates wereoping markets, such as China, India, Going forward, focus will be on ser- seen in certain countries with IndonesiaIndonesia, Thailand and the Philippines. vice excellence and on the transition as the largest nominal contributor in theThe key customer segments for the re- from input-based contracts to true region partly due to a successful salesgion are Business Services & IT, Industry output-based contracts. In line with effort directed at public institutions.& Manufacturing, Transportation and GREAT, further efforts will be on the India, Singapore, China and ThailandRetail & Wholesale. continuous development of our IFS also continued the positive trends driven readiness and developing skills to im- by multinational and national contractWhile in 2014 we felt the impact of prove our delivery capabilities to local wins, price increases as well as strongcertain Asian economies softening, the and global IFS customers. Investing retention of existing customers.ambition for the region is to remain in people and leadership develop-one of the Group’s growth engines. In ment to further strengthen the local The operating margin decreased fromaddition, focus is to maintain a high organisations is an important factor in 7.6% in 2013 to 7.3% in 2014. Severallevel of profitability, expand our self-de- managing current and future growth countries continued to deliver highlivery capabilities, further sharpen the in a controlled manner. The focus on operating margins including Indonesia,business platform as well as to continue investing in people and leadership which was more than offset by marginimproving the commercial focus and development is essential especially reductions in India, mainly a result ofstrategy towards our selected key cus- as Asia is the region with the highest the divestment of the margin-accretivetomer segments. number of ISS employees relative to pest control activities in 2014 and in- revenue. vestments in operational improvementsIn 2014, ISS was named the Best Facility as well as in Thailand mainly within theManagement Company of The Year in Financials office support division.Asia Pacific, for the second straight year, In 2014, revenue was DKK 8,221 mil-and also received the Growth Excellence lion (2013: DKK 8,019 million) drivenLeadership Award at the annual Frost & by strong organic growth of 8% whileSullivan Best Practices Awards in Singa- the adverse impact from currency andpore. In its motivation for the awards, divestments reduced revenue by 4%Frost & Sullivan highlighted ISS’s ability and 1%, respectively. Operating profitto be a leader in the industry and grow before other items was down 1%

REGIONAL PERFORMANCE | OUR PERFORMANCE 27Pacific Revenue by country 4,444 DKKm Australia 93% Revenue New Zealand 7% 6% % of total Pacific revenue of Group revenue 5.0% Operating margin 10% Organic growth Integrated facility services 13,937 3% 2014: 33% 2006: 8% Employees of Group employees 0 0.5 1.0 1.5 2.0 2.5 DKK billionThe market and our focus resource segment through several con- The operating margin remainedISS Australia generates more than tract wins and retenders in 2014. This unchanged compared with last year90% of this region’s revenue. The was reflected in the strong organic supported by the strong performancemain strategic focus in Australia has growth and operating margin in 2014. in the IFS business in Australia andbeen to further develop and refine the divestment of the margin-dilutivethe IFS value proposition to selected Going forward, we remain focused commercial security activities in Aus-customer segments, including Energy on further developing the value tralia and New Zealand. These positive& Resources (mainly the remote proposition to the selected customer effects were offset by the divestmentsite resource segment), Healthcare, segments and the overall efficiency of of the margin-accretive pest controlTransportation & Infrastructure (mainly the business in the region. activities in 2013.airports) and Public Administration.Furthermore, ISS Australia has focused Financialson implementing tools for improved Revenue for 2014 was DKK 4,444 mil-control and increased operational effi- lion (2013: DKK 5,105 million). Organ-ciency in resource planning and supply ic growth was 10%, which was morechain as well as sales efficiency. This than offset by divestments (15%)focus led to strong organic growth for and negative currency effects (8%).the year. Operating profit before other items was DKK 220 million (2013: DKK 253We continue the work on creating a million) equal to an operating marginstronger and more aligned business of 5.0% (2013: 5.0%).platform, as this will allow us to focuson our core activities. These efforts An organic growth rate of 10% iswere supported by the divestment of one of the highest to be reportedthe pest control activities in Australia in the Pacific region in recent years.and New Zealand in 2013 as well as The organic growth was driven bythe divestment of the commercial contract wins and expansions withinsecurity activities in the region in early the remote site resource segment in2014. Furthermore, ISS Australia has Australia as a direct result of our stra-successfully established themselves tegic focus on this customer segmentas a market leader in the delivery of as well as an overall strong customersupport services to the remote site retention rate.

28 GROUP ANNUAL REPORT 2014Latin America Revenue by country 3,597 DKKm Brazil 44% Revenue Chile 22% Mexico 19% 5% Argentina 11% Uruguay of Group revenue Other countries 3% 1% 4.8% % of total Latin America revenue Operating margin 10% Organic growth Integrated facility services 48,160 9% 2014: 24% 2006: 24% Employees of Group employees 0 0.5 1.0 1.5 2.0 DKK billionThe market and our focus and for Latin America to remain one especially in Chile, Argentina andWe have built a unique position in Lat- of the growth drivers of the Group. Mexico. This is a direct impact of ain America with a strong geographical This will be done through a segment- more customer-segmented approachpresence and a developed service of- ed approach to the market with a in these countries.fering highly focused on IFS. ISS is one thorough assessment of the potentialof the leading facility service providers customer base. In addition, we will The increase in operating margin wasin the region with the ability to self-de- remain strongly focused on having the result of improved margins in theliver services all key countries where the right organisational structures and majority of the countries in the regionwe offer IFS solutions. Focus continues management teams in place to sup- with Chile, Mexico and Argentina asto be on selectively expanding the geo- port our goals. The focus on improving the main contributors. The improvedgraphical platform as markets mature. the operational efficiencies, especially margins were mainly driven by wins ofKey segments within Latin America are in Brazil, will continue in 2015. margin-accretive contracts, a customer-Industry & Manufacturing and Business segmented approach as well as theServices & IT. The region supports Financials efforts initiated in 2013 to improvea number of our multinational IFS Revenue was DKK 3,597 million operational efficiencies, includingcontracts and maintaining a presence (2013: DKK 3,708 million), down 3% amending or exiting certain customerin the region is an important means of compared with 2013. Organic growth contracts.targeting these customers. was 10%, which was more than offset by negative currency effects of 13%.The main focus in 2014 for the region Operating profit before other itemshas been to return to strong profitable was up 19% to DKK 173 million, re-growth rates and improve the opera- flecting an operating margin of 4.8%,tional efficiencies, especially in Brazil. which was 0.9 percentage pointFurthermore, we continued to increase higher than last year.the predictability and transparency ofthe region by strengthening systems, Latin America delivered double-digitprocesses and organisations. These organic growth with the majority ofefforts have assisted in improving the the countries in the region report-financial results for the region. ing strong organic growth rates. The organic growth was driven byGoing forward, we remain focused on a sustained high level of new salesdelivering profitable organic growth and increases from existing contracts,

REGIONAL PERFORMANCE | OUR PERFORMANCE 29North America Revenue by country 3,477 DKKm USA 97% Revenue Canada 3% 5% % of total North America revenue of Group revenue 3.6% Operating margin 1% Organic growth Integrated facility services 14,426 3% 2014: 36% 2006: N/A Employees of Group employees 0 0.5 1.0 1.5 2.0 DKK billionThe market and our focus continue the transformation of the wins in 2014 as well as a greaterISS has strong geographical coverage North America region, which includes demand for non-portfolio services,in several parts of the USA experi- building capabilities to deliver larger especially in the IFS division.encing economic growth, and we IFS solutions across the region.continue to focus on enhancing our The increase in operating margin ofgeographical footprint in specific Our focus going forward is to further 0.7 percentage point was mainly duemetropolitan areas. Key segments develop our IFS capabilities whilst to the impact of stronger operationalare Business Services & IT, Industry & maintaining single service excellence management controls, a higher de-Manufacturing and Transportation & in cleaning and technical services. mand for non-portfolio services, winsInfrastructure. The continued focus on The region will in 2015 continue the of margin-accretive contracts as well asdeveloping segments such as Aviation implementation of GREAT, focusing local procurement savings.produced significant contract wins that on the customer segmentation andcontributed positively to the growth organisational structure, which is ex-performance. We continue to develop pected to accelerate the transforma-our focus on customer segmentation tion of the region towards more focusacross the business and our self-deliv- on IFS and targeting large customers.ery capabilities within IFS solutions. FinancialsFollowing the investments made in Revenue in the region was DKK 3,477previous years, we are now seeing million (2013: DKK 3,459 million).growth within IFS, as illustrated by Organic growth was 1%, while thecontract wins with CPS Energy, Molson adverse impact from divestmentsCoors and Avago. The extension of reduced revenue by 1% and currencythe Global Corporate Clients contract effects lifted revenue by 1%. Operat-with HP has allowed the region to ing profit before other items was DKKstrengthen the self-delivery capabilities 125 million (2013: DKK 101 million)within technical services and thereby for an operating margin of 3.6%deliver increased value to HP and other (2013: 2.9%).customers. During the year, we furtherstrengthened the management team in The organic growth of 1% was pri-North America with the appointment marily driven by the start-up of airportof a new country manager and we contract wins from Q4 2013, contract

30 GROUP ANNUAL REPORT 2014Eastern Europe Revenue by country 1,597 DKKm Czech Republic 24% Revenue Poland 14% Slovakia 14% 2% Slovenia 11% Romania of Group revenue Hungary 9% Estonia 9% 6.8% Russia 9% Croatia 9% Operating margin 1% (0)% % of total Eastern Europe revenue Organic growth Integrated facility services 17,808 3% 2014: 36% 2006: 8% Employees of Group employees 0 0.5 1.0 1.5 2.0 DKK billionThe market and our focus and meeting our customers’ require- equal to an operating margin of 6.8%ISS has a wide geographical reach and ments. Through these international compared with 6.6% last year.a unique service platform in Eastern contracts the countries in the regionEurope with the capability to self-de- gain knowledge and experience, which Organic growth was supported byliver a full range of facility services. can be applied when targeting new strong double-digit organic growth inThe strategic goal is to provide ser- customers as well as benefit existing Russia from Global Corporate Clientsvices to multinational blue chip com- customers. Furthermore, in 2014 we contracts as well as contract winspanies. Key segments for the region completed the divestments of the with other multinational companies,are Business Services & IT, Healthcare activities in Croatia, Bosnia and Herze- which was offset by our terminationand Industry & Manufacturing. In govina (country exits). of less profitable contracts, as well asrecent years, we have deliberately contract losses in Slovenia.reduced the proportion of customers The efforts to strengthen the manage-in the public sector while at the same ment teams and leadership capabilities The increase in operating margin wastime increasing business relations with throughout the region as well as devel- a result of improved margins in themultinational companies. oping the sales organisations remained Czech Republic, Slovakia, Poland and a priority in 2014. This included Romania, which were mainly dueIn 2014, we added several contracts establishing joint country management to the termination of less profitablewith multinational companies, includ- teams in the region and sharing re- contracts and a continued focusing Mondelez, Philip Morris Interna- sources on HR, Procurement, Finance, on operational efficiencies and costtional, Sokolow - Danish Crown and Sales and Key Account Management savings.Molson Coors. Complex skills and across the region. In addition, we ini-competencies are required to manage tiated a shared business developmentthese contracts and through our con- function across the region in ordertinued focus on IFS capabilities and by to service customers with a regionalsharing knowledge and best practice set-up.across the region, we successfullystarted up these contracts in 2014 Financialsand they are currently in operation. Revenue was DKK 1,597 million (2013:We have thereby turned our local DKK 1,657 million). Organic growthservice offering into a full IFS offering was flat, while currency adjustmentsin several countries, hence both reduced revenue by 4%. Operatingstrengthening our regional capabilities profit before other items was DKK 109 million (2013: DKK 109 million)

REGIONAL PERFORMANCE | OUR PERFORMANCE 31“ I offer every visitor guidance and a smile” AHSINATUL KHILDA Receptionist, ISS Indonesia At the large PONDOK INDAH MALL in South Jarkarta, Indonesia, Ahsinatul Khilda welcomes the many visitors with a smile. She enjoys the many different experiences each day in this mall brings. Providing visitors with helpful information and guidance is what Ahsinatul finds the most rewarding.

32 GROUP ANNUAL REPORT 2014Q4 2014Our focus on profitable Q4 2014contracts and the progresswe achieved in our strate- Revenue Growth componentsgic initiatives produced aquarter of strong operating DKK million Q4 2014 Q4 2013 Growth Organic Div. Currencymargins. Western Europe 9,511 10,148 (6)% 0% (8)% 2%Group revenue in Q4 was DKK 19.0 Nordic 3,868 4,118 (6)% 3% (6)% (3)%billion (Q4 2013: DKK 19.7 billion). Asia 2,237 2,027 10 % 7% (1)% 4% Pacific 1,139 1,202 (5)% 13% (16)% (2)%Organic growth in Q4 was 2.7% (Q4 Latin America 916 0% 6% (6)%2013: 5.0%), the divestment of non- North America 918 847 11 % 2% - 9%core activities reduced the total reve- Eastern Europe 938 422 (1)% 3% - (4)%nue growth by 6 percentage points. Other countries 416 13 115 % 122% (0)% (7)% Corporate / eliminations (19) (58)% -Organic growth was driven by con- 28 - - -tinued growth in IFS and emerging (8)markets, with strong performances inTurkey, India, Singapore, Chile and Group 19,047 19,674 (3)% 2.7% (6)% 0%Argentina. In the Pacific region, dou-ble-digit growth was mainly driven by Emerging markets 4,691 4,484 5% 7% (2)% 0%contract wins within the remote siteresource segment in Australia. Partly Q4 2014 Operating profit Operating marginoffsetting these developments was before other items Q4 2014 Q4 2013the persistently challenging macroe- DKK millionconomic environment in Europe and Q4 2014 Q4 2013 Growthdifficult market conditions in certain Western EuropeEuropean countries. Nordic 736 796 (8)% 7.7 % 7.8 % Asia 311 342 (9)% 8.0 % 8.3 %Operating profit before other Pacific 172 156 10 % 7.7 % 7.7 %items was up 1% to DKK 1,230 mil- Latin America (13)% 5.7 % 6.3 %lion (Q4 2013: DKK 1,218 million) for North America 65 75 35 % 5.0 % 3.7 %an operating margin of 6.5% in Q4 Eastern Europe 46 34 75 % 5.2 % 3.3 %(Q4 2013: 6.2%). In line with previous Other countries 49 28 8.2 % 8.0 %years, operating profit before other Corporate / eliminations 34 34 - (0.7)% (2.7)%items is influenced by seasonality and - (1.0)% (1.3)%is typically higher in the third and Group 0 0 (26)%fourth quarters than in the first and (183) (247)second quarters. Emerging markets 1,230 1,218 1% 6.5% 6.2%The Q4 operating margin was thehighest since Q3 2010, supported 329 304 8% 7.0% 6.8%by the continued roll-out of stra-tegic initiatives as well as a robust North America and Eastern Europe. 2013 as a percentage of revenue atperformance in Western Europe and Furthermore, corporate costs were 0.7%-point. In Western Europe, themargin increases in Latin America, lower in Q4 2014 compared with Q4 margin was supported by operational 2013, primarily as a result of quarterly efficiencies including cost savings and timing differences in 2014. Corporate procurement initiatives, including the costs for 2014 ended on level with United Kingdom and Switzerland.

Q4 2014 | OUR PERFORMANCE 33ORGANIC GROWTH KEY EVENTS 2014 2014 2013 16 June Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 ISS named new integrated facility servicesWestern Europe 0% 1% (1)% 1% 5% 6% 5% 3% provider for SwisscomNordic 3% 1% 3% 1% 2% 1% 0% (1)%Asia 7% 5% 8% 13 % 15 % 16% 15 % 13 % ISS won a tender issued by Switzerland’sPacific 13% 11 % 9% 6% 3% 0% (3)% (2)% leading telecom provider, Swisscom, result-Latin America 6% 11 % 12 % 10 % 9% 5% 5% 7% ing in a new IFS contract. As part of theNorth America 2% 0% 2% 1% (3)% 2% 1% 7% agreement, ISS will take over infrastructureEastern Europe 3% (1)% (1)% (3)% 6% 7% 5% (0)% and technical facility management for Swisscom. The contract comprises ap-Group 2.7% 2.4% 2.0% 2.8% 5.0% 5.2% 4.4% 2.8% proximately 90 office buildings and 1,000 operational buildings covering a total ofEmerging markets 7% 9% 9% 12% 13% 12% 11% 9% 1.2 million square meters. With a view to strengthening our expertise in the informa-OPERATING MARGIN tion and communications technology (ICT) industry segment, ISS Switzerland has 2014 2013 taken over the 220 operational employees from this area, who worked for Swisscom Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 or its previous service provider.Western Europe 7.7% 6.7% 5.7% 4.6% 7.8% 6.1% 5.5% 4.6% By selecting ISS, which is well-establishedNordic 8.0% 10.3% 6.6% 5.0% 8.3% 10.1% 6.5% 4.9% in Switzerland, Swisscom is aiming to in-Asia 7.7% 7.0% 7.1% 7.7% 7.4% 7.3% crease its flexibility and freedom of choice,Pacific 5.7% 7.5% 4.1% 4.4% 6.3% 7.9% 4.4% 4.7% guarantee consistent quality for all theLatin America 5.0% 5.6% 4.7% 5.0% 3.7% 4.5% 4.1% 3.7% properties spread throughout SwitzerlandNorth America 5.2% 4.5% 3.2% 2.3% 3.3% 4.1% 1.4% 2.9% and improve economic efficiency.Eastern Europe 8.2% 3.4% 7.3% 4.0% 8.0% 4.1% 6.9% 3.8% 7.5% 7.5%Group 6.5% 6.4% 5.2% 4.3% 6.2% 6.3% 5.1% 4.4%Emerging markets 7.0% 6.1% 6.1% 6.0% 6.8% 6.3% 6.1% 6.0%

34 GROUP ANNUAL REPORT 2014The positive performance in North Cash conversion (LTM) in Q4 2014 ny, within the Business Services & ITAmerica was mainly a result of con- was 98% due to the strong cash segment in the Netherlands, withintract wins in the beginning of 2014 flow performance across the Group. the remote site resource segment inand higher demand for non-portfolio Ensuring a strong cash performance Australia and with the brewing com-services, especially from IFS contracts. continues to be a key priority, and the pany Molson Coors in North America. result reflects our efforts to ensure Furthermore, ISS Singapore won a sig-In Q4, profit before goodwill timely payment for work performed. nificant contract within the healthcareimpairment and amortisation/ sector to provide Cleaning and Supportimpairment of brands and cus- Cash flow from operating activities services and ISS Australia extended itstomer contracts increased to DKK in Q4 represented an inflow of DKK relationship with its largest aviation606 million from DKK 300 million in 2,458 million (2013: inflow of DKK customer, Melbourne Airport.Q4 2013, driven by significantly lower 2,466 million). The significant cashfinancial expenses following the IPO inflow in Q4 follows the usual pattern Revenue generated from Globaland subsequent refinancings. as cash flow from operating activities Corporate Clients in Q4 amounted to tends to become increasingly positive DKK 1.9 billion representing approx-In Q4, financial income and expenses, as the year progresses and usually imately 10% of Group revenue (Q4net, included a non-cash expense of peaks in the fourth quarter when 2013: 9%). In local currencies, this wasunamortised financing fees of DKK 69 revenue recognised in the third quarter a 9% increase over 2013.million caused by the refinancing of of the year is collected.the EUR 1.2 billion Term Loan A withthe two bonds issued under the new Revenue generated from integratedEMTN programme. facility services (IFS) was up 16% in Q4 when adjusted for currency de-Goodwill impairment in Q4 was velopments to DKK 6.1 billion, whichDKK 448 million, a decrease of DKK corresponds to approximately 32% of102 million compared to Q4 2013. Of Group revenue (2013: 27%). Growththe total impairment losses, DKK 420 was mainly driven by IFS contractmillion derived from impairment tests launches as well as the successfulin the Netherlands due to an update conversion of traditional single serviceof business plan assumptions and DKK contracts into IFS contracts.28 million derived from completedDivestments, mainly in Western and In Q4, ISS won significant IFS contracts,Eastern Europe. including with Vattenfall in Germa-SELECTED QUARTERLY KEY FIGURES AND FINANCIAL RATIOS 2014 2013DKK million (unless otherwise stated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1Revenue 19,047 18,410 18,397 18,251 19,674 19,143 20,097 19,545Operating profit before other items 1) 1,230 1,178 956 785 1,218 1,214 1,028 855Operating margin 2) 6.5 % 6.4 % 6.2 % 6.3 % 5.1 %Profit before goodwill impairment and amortisation/ 5.2 % 4.3 % 4.4 % 606 651 impairment of brands and customer contracts 124 545 486 73 300 326 166 234Net profit/(loss) 2,458 857 378 (33) (409) (119) 60 71Cash flow from operating activities 98 % 97 % 606 (744) 2,466 932Cash conversion (LTM) 2.7 % 2.4 % 98 % 98 % 102 % 109 % 780 (463)Organic growth (6)% (6)% 2.0 % 2.8 % 5.0 % 5.2 % 98 % 99 %Divestments (0)% (0)% (7)% (5)% (4)% (3)% 4.4 % 2.8 %Currency adjustments (3)% (4)% (3)% (5)% (5)% (6)% (1)% (1)%Total revenue growth (8)% (7)% (4)% (4)% (1)% (1)% 2% 1%See page 153 for definitions and page 8 for note 1) and 2).

Q4 2014 | OUR PERFORMANCE 35“ My experience and knowledge keep my customer’s business healthy” MOHAMED TEMSAMANI Contract manager, ISS Belgium Mohamed Temsamani is responsible for coordinating all the integrated facility services ISS delivers as a facility partner at UCB, a global biopharma company. He does this to benefit the ultimate end users - the patients using UCB products. Mohamed believes that knowing how facilities work is an essential cog in the wheel, and he is proud to be part of the professional ISS team at UCB.

36 GROUP ANNUAL REPORT 2014STeOxNt YheMreOBILE. DOUGLAS WILHELMSite manager, SverigeHere will be a text that describes how this site is a GREATsecsht(IoscSIioeioosFnantS.cmemuSv’eguh),niPlenprceeastlirogloutrgsespyimls,.ebtmuoeesm‘suptAei.nainisaorotlnsettvnunryttioeyahcrohdiefedtngfaisecfegl.XsofofxlTaeiXtbnabvhcreotaeeicsialeslnriointctinponnetyttlf,hsgisaasfmieaeestneartfrprdfsveloviluplinnriectflcemghtleamecIecasiinpefifsnllrbitrniicpodeotketyagmsveentirirsrdtedtcaeaewi,faetrcn/iwetcvruhtseusidlpiohcracsoeaifihFtrncnsorlahhygewimctann,irghevlseeptiieittvlrnirseyei.neoregavtSsprpdaeevoXerngirnoercXvtrtemlfaiyyfca,todieescre-laeltirnavuendlriynyseggall,fco-srdbuoeapslslpivcmoeurarst-naayndAn increasing demand among customers is risk management. In almost alllarger relationships today, ISS is managing risk on behalf of the customer.Having developed solutions for risk mitigation for many years, ISS has thesolutions to make customers less exposed in this area.BXAXR. CXLXAYS, ONE CHURCHILL PLACE, LONDONAXnXd, rXeXa Brotonova, General catering assistant, ISS United Kingdom

OUR BUSINESS 37 Our business Strategy – The ISS Way 38 KPIs – Measuring our performance 42 Business development 45 Corporate responsibility 49 Our employees 53

38 GROUP ANNUAL REPORT 2014Strategy– The ISS WayIn 2014, we made substan- How will we know when we have ACCELERATING THE ISS WAY – GREATtial progress in our five key reached our vision? When all ourvalue-driving initiatives, customers as well as our employees Our strategy, The ISS Way, is all aboutwhich capture the essence have become loyal ambassadors and focusing our organisation on the mostof The ISS Way. They are all active promoters of the ISS brand and significant levers ensuring that weabout directing our efforts the services we deliver. We measure can deliver successfully on our valuetowards what will have this through our globally deployed proposition.greatest positive impact on employee and customer net promoterthe delivery of our value score methodology. GREAT is our primary vehicle forproposition and thereby accelerating our strategy implementation,our value creation. Our marketplace hence constitute a principal driver moving us towards realising our visionOur vision The market for facility services has of becoming the world’s greatest service an estimated value of ~USD 1 trillion organisation. Within GREAT there are five“We are going (outsourced market). overall themes, and each entail criticalto be the world’s strategy implementation initiatives.greatest service The market includes services such asorganisation” cleaning, catering, property mainte- The five themes are: nance and security. Services are deliv- 1) Empowering people throughThis is an ambitious goal, not least ered on a recurring basis such as dailyconsidering that we are a team of cleaning of facilities or the running of leadership510,968 individuals, with millions of an in-house canteen. Services can be 2) Optimising our customer basecustomer interactions every day. To delivered as single services, multi-ser- 3) Fit for purpose organisationget there we will self-deliver a consist- vices and/or integrated facility services 4) IFS strategy; andent and excellent service performance, (IFS). Furthermore, the services can be 5) Striving for excellenceas defined in our value proposition, offered to customers as a self-deliv-enabling our customers to focus ered service or as a managed service, Further elaboration on the five themes100% on their core business. which means that the service is can be found on the following pages. managed by one party (the facilitiesOur vision gives us a clear sense of management firm) on behalf of the the customer, specifications for thepurpose and promotes pride in the customer and delivered by other par- result of our service delivery (the “out-role we play, individually and as an ties (subcontractors). Other services, put”), e.g. a certain measurable levelorganisation, and inspires us to drive such as hospitality events, can also be of cleanliness. Traditionally, the marketthe accelerated implementation of delivered on an ad-hoc basis. These has been dominated by input-basedour five strategic initiatives. It is the so-called once-only jobs are typically contracts, but output-based contractsresponsibility of our leaders to transfer delivered as single-services directly by are gaining ground.the vision into a shared ambition order of the end-user.among all our employees in order to There is also a geographical aspect tomake the difference between good The contractual relationship with the the market. Some markets are matureand great every day at every site. customer is either “input-based” or and have shown themselves to be “output-based”. Generally speaking, receptive to new developments, e.g. the former involves committing an output-based contracts and IFS, not agreed number of full-time employees least the markets in Europe, while to the delivery of the given service emerging markets are growing quickly at a set cost plus a margin to the from a base dominated by the more provider while the latter (also known traditional input-based contract struc- as a ”performance-based contract”) ture. There are also differences within involves establishing, together with the overall market types (mature and emerging). In the markets of northern Europe, IFS is a known quantity where

STRATEGY – THE ISS WAY | OUR BUSINESS 39a material part of the market is already Our focus is on the self-delivery of their services. We also face competi-receptive to service bundling and inte- on-site facility services within clean- tion from in-house providers of facilitygration while in the southern European ing, property services and catering, services and regional and local facilitymarkets service integration is at a more globally and locally. We deliver these service providers. However, compet-nascent stage. offerings as single services, multi-ser- itors differ from market to market vices or IFS. We further provide other depending on the particular service.In other words, there are many differ- support services, security and facilitiesent ways to address this market and it management principally as part of IFS Certain facility services providers arehas many different aspects to consider. contracts. Our core services share a strengthening their IFS capabilities,We therefore see it as paramount that number of traits. They are site-based, which is especially important whenour strategy clearly defines which part asset-light, personnel-intensive, and servicing large customers, as theseof the market we are targeting. suitable for self-delivery and integra- show a higher propensity to request tion with the other services we provide. IFS and centralised procurement. Still,Our market focus We also provide mainly services, which only a few competitors have the scale are delivered on a recurring basis and to deliver IFS on a multinational andOur market choices have naturally thus give us greater top-line transpar- global basis providing ISS with a clearfocused on identifying the market ency. Our intention is principally to competitive advantage. We have posi-segments where our value proposition provide non-portfolio services to our tioned ourselves with strong capabil-resonates and that have the greatest existing customers as an integral part ities to address the growing demandpotential to contribute to the value we of our overall offering. for bundled services and centralisedwant to generate for our stakeholders. procurement.In this vast and diverse market, ISS has Competitionchosen to focus on large and medi- How do we meet theum-sized Business-to-Business custom- In general, our main competitors in customer’s needs?ers such as banks, hospitals, the food each market are national or regionalmanufacturing industry or remote sites service providers, as well as large inter- Basically, our job is to take over on-sitewhere the need for our services makes national service companies. For large facility services that are non-core fora difference to their business and international facility services contracts our customers. Hence, we ensuremakes us a strategic partner helping to based on a provider’s self-delivery of that facilities are clean, that users arefulfil their objectives. We provide these services, competition is limited to a few courteously greeted and guided, thatcustomers with a value added offering players, all of which provide a more facilities have a consistently comfort-which, in addition to a cost-efficient limited service offering compared to able temperature and are properlysolution, delivers among other things ISS. There are also a limited number of maintained, that users can get coffeerisk management and a sustainable facility management companies which or a meal, that access is monitored andand transparent solution. mainly rely on subcontractors to deliver controlled and that the delivery of all this is orchestrated in an efficient man-THE ISS VALUE PROPOSITION IN A NUTSHELL ner. In some cases, we provide only one service, and in some cases many. Service performance In this way, we meet the basic needs of the customer by providing a service EFFECTIVENESS vital to ensure the proper and orderly operation of their facility.EASE ...facilitating EXPERIENCE our customers’ However, the actual delivery of the service only makes up part of the purpose... value we contribute. The elements of our value proposition actually assist...through people empowerment customers in living up to their specific purposes and priorities, e.g. when: • a customer in the natural resourc- es sector requires us to deliver reliable and consistent health and safety compliance given the hazardous environments in which they work;

40 GROUP ANNUAL REPORT 2014• a hospital demands our reliable to the delivery of our promise. We are ment programs at all levels of the delivery of specific and measured transitioning our commercial focus organisation. Furthermore, we actively levels of hygiene to minimise the towards a more specific approach to monitor leadership metrics such as risk of cross-infection and with the customer segments where our value staff turnover, sickness absence rates, overall purpose of healing patients; proposition clearly resonates. We are employee net promoter scores and or also looking to align our business be- customer net promoter scores. The hind optimising delivery to our chosen leadership focus is also being applied• a slaughterhouse needs us to customers. We are working to ensure to health and safety, a core part of help them meet certain regula- that the organisation is IFS ready, as our value proposition, where we have tory requirements for cleanliness this delivery type continues to grow increasingly focused on establishing levels and to minimise the risk of apace as customer demand contin- safer working environments that limit infections or food poisoning and ues to evolve. We furthermore seek work related injuries, manage lost for the overall purpose of ensuring to extract synergies such as through time in our operations and mitigate quality and avoid product recalls. implementing standard procurement risk for our customers. We also en- processes. courage our employees to take part inOur self-delivery model is a funda- our multiple talent management pro-mental component for successfully As a consequence of our strategy im- grammes. Finally, we have developeddelivering our value proposition to the plementation our customer segment a strong corporate culture within thecustomer. Without our own frontline mix will evolve and our IFS activities organisation supported by our globalemployees where we can establish will grow as a percentage of Group values – Honesty, Entrepreneurship,a common corporate culture, brand, revenue. Emerging markets will also Responsibility and Quality.values, processes and procedures, we be accretive to our top-line growthwould not be able to lead the way in and become an ever-bigger part of Optimising ourservice performance that facilitates our global footprint. customer baseour customers’ purposes. Our self-de-livery model allows us to address core Accelerating The ISS Way The ISS Way strategy has custom-customer needs such as risk transfer, – GREAT er segmentation as a key priority.brand protection, flexible delivery and Building on our existing extensiveintegration of services. In 2014, we continued to focus upon knowledge of the varying needs of our five strategic initiatives which customers, whether by industry orSelf-delivery also allows us to provide are the principal drivers moving us size, is a central strategic theme. Ourthe customer with a transparent towards realising our vision. goal is to establish the optimal matchand sustainable solution as we can between the value proposition weimpact the cost of delivery through Empowering people provide and customer needs.the implementation of our best through leadershippractices, processes and service We have implemented a process ofintegration. With our own frontline Given our self-delivery model, our customer segmentation by size to es-employees, we are also able to share employees are our core asset and tablish a more detailed understandingsite-level information with customers we dedicate significant resources to of our customer base. By the end ofto facilitate strategic and operational developing and managing them. We 2014 we had mapped our customerdecision-making by the customer with believe that strong leadership drives segments in countries representingrespect to the optimisation of their employee engagement which in turn 56% of the Group’s revenue. Thefacility portfolio. drives customer satisfaction and as a purpose of the mapping exercise is to result improves our financial results. establish how customers of variousWhat does this imply for our Where we have higher employee net sizes are serviced by business unitsstrategic direction? promoter scores (whether employees as well as undertaking a detailed would recommend ISS to others as a activitybased costing methodologyIn order for us to continue to deliver – good place to work) and customer net which provides additional transparen-and refine – this value proposition, we promoter scores (whether customers cy on the profitability of the variousmust continue to implement our strat- would recommend ISS to others as a customer segments. Evidence fromegy. We are aligning the organisation good partner to work with), we gen- selected countries indicates thatbehind our value proposition by in- erally also have higher operating mar- in some instances large and smallvesting in leadership and supplement- gins. Therefore, we focus on measur- customers are serviced by the sameing service and segment capabilities ing leadership performance through business unit and that this may have(excellence) where necessary. We are regular surveys and assessments as an adverse impact on customer expe-divesting businesses that are not core well as implementation of develop-

STRATEGY – THE ISS WAY | OUR BUSINESS 41rience, overhead cost efficiency and ing know-how and best practices to KEY EVENTS 2014transparency. each specific contract. As we provide the customers with one single point 9 July Fit for purpose of contact, we are also able to drive organisation synergies at the back office level with BASF appointed ISS as increased efficiency and simplicity of strategic partner in fiveEquipped with the knowledge provided contract administration. European countriesby the process of detailed customersegmentation, we are better able to Striving for BASF, the world’s leading chemicalschoose our target customers and align excellence company, chose ISS to provide IFS in fiveour organisational structure according- European countries effective from Julyly. Generally, we expect this to result In order to enhance our value propo- 2014: Spain, France, Portugal, Belgiumin organisational structures which are sition and to improve our profitability, and the Netherlands. The successful bid,more customer-oriented, efficient and we focus on innovations related to cus- headed by ISS Belgium, was based on afocused on managing and growing tomer segments, services, business sys- strong partnership with BASF at its majorprofitable relationships with our target tems and processes. These excellence Antwerp production site that has evolvedcustomer segments. This entails, for initiatives allow an enhanced customer over many years.example, establishing business units experience, greater control of our costsfocused on key accounts and large and the optimisation of our resources As part of the agreement, ISS tookcustomers, providing higher levels of and underpin steady margin levels. over the responsibility for onsite facilitysupport, service excellence and innova- management, building maintenance, mail-tion and establishing separate operating Excellence is also reflected in our pro- room, cleaning, landscaping and relatedstructures for small customers which are curement programme. In early 2013, services. The overall portfolio consists oftailored to meet their needs. We may we initiated an assessment of the 56 sites across the five countries.also divest certain customer segments in potential associated with coordinatingorder to focus on others. procurement across countries, starting Henrik Andersen, Group COO EMEA, with our Western Europe and Nordic said: “BASF is one of the world’s largestWhere we have completed this initiative operating countries. From this assess- and most sophisticated operations. Thisand established an optimised organisa- ment, we concluded that while there partnership shows the strengths of ourtional structure, which may differ from are significant differences across coun- value proposition and of our focus on sup-country to country, we see the benefits tries, coordination potential exists in porting our customers’ purpose throughof this strategy. We have a more effi- several categories within our signifi- scalable IFS solutions.”cient set-up with fewer layers between cant external procurement expenses,the country top management and the the majority of which are in Westerncontract and hence a lower cost base. Europe and the Nordic countries. We plan to expand the cost savings plan IFS to other purchasing categories to strategy generate additional costs savings. We also expect the cost savings plan toIFS is a key part of our unique value result in increased transparency andproposition as well as being a higher improved compliance monitoring ingrowth and margin accretive activity. local country operations.We aim to ensure that we can deliverIFS across our entire business, not least We are also working diligently withgiven the increased level of activity we other excellence and efficiency relatedsee in our international contracts. By initiatives, such as focus on our aboveoutsourcing two or more service areas unit costs and opportunities forto ISS with a single point of contact, Business Process Outsourcing withinour customers increase focus on their finance and accounting.core business areas and in turn we canrealise operational synergies throughwork sharing and on-site supervision.We are also able to generate synergiesbetween customers by leveraging ourscale and global presence by bring-

42 GROUP ANNUAL REPORT 2014KPIs – Measuringour performanceAchieving our vision of out the Group mainly in terms of our report on page 75. Furthermore, webecoming the world’s three primary financial KPIs: 1) organic are currently working on a GREAT KPIgreatest service organisation growth; 2) operating margin; and 3) dashboard as well as a detailed valueis an ambitious goal. To cash conversion. These KPIs are well- tracking model of GREAT that willensure that we are moving established and integrated in bonus enable us to benchmark performancein the right direction and plans throughout the organisation to across the Group.progressing in terms of our ensure that objectives are aligned at allfive strategic initiatives, we levels of the organisation. The following are examples of the mostmeasure our performance significant financial and non-financialusing a wide range of In addition to our three primary KPIs at Group level that we measurefinancial and non-financial financial KPIs, we measure a number and report on a regular basis. The list isKPIs. of non-financial KPIs at various levels of not exhaustive, as we measure a num- the organisation. In 2014, we defined ber of other KPIs at Group level as wellAt ISS, we have a long history of the KPIs, financial and non-financial, as at other levels of the organisation.measuring our financial performance most suitable for measuring andat all levels of the organisation – from reporting on a regular basis. These KPIs Most of the KPIs are relevant for all fiveGroup level and all the way down to are the key metrics we use to drive our strategic initiatives. The descriptions setthe individual contracts. We measure business forward. Consequently, bonus out below refer only to the initiative(s)our financial performance through- plans for the Group Management Board that are the most relevant for each KPI. were adjusted in 2014 to also include certain of these non-financial KPIs as also described in the RemunerationPRIMARY FINANCIAL KPIs DESCRIPTION OF MEASURE STRATEGIC INITIATIVEOrganic growthOperating margin Measures our ability to grow our business organically by increasing Optimising our customer base sales to existing and new customers. IFS strategyCash conversion Measures our ability to improve operational performance by Optimising our customer base managing costs and working more efficiently. F it for purpose organisation IFS strategy Striving for excellence Measures our ability to convert operating profit into cash. A Optimising our customer base strong cash conversion allows us to deleverage by repaying loans F it for purpose organisation and borrowings. Striving for excellence

KPIs – MEASURING OUR PERFORMANCE | OUR BUSINESS 43NON-FINANCIAL KPIs DESCRIPTION OF MEASURE STRATEGIC INITIATIVEEmployee engagement Measures the engagement of our employees on a scale from Empowering people through 1 to 5. The measure and the results of the survey for 2014 are leadership reviewed in “Our employees”.Employee Net Promoter Measures the loyalty of our employees through a direct question Empowering people throughScore (e-NPS) of how likely the employee is to recommend ISS to others as a leadership place to work.Employee turnover Measures the level of employees leaving the company versus the Empowering people throughSickness rate total number of employees. leadershipLost Time InjuryFrequency (LTIF) Ratio of total absence in hours due to sickness relative to total Empowering people through hours paid. leadership Measures the number of incidents classified as lost time injuries Empowering people through per millions of hours worked. leadershipCustomer Net Promoter Measures the loyalty of our customers through a direct question Optimising our customer baseScore (c-NPS) of how likely the customer is to recommend ISS to others as a Striving for excellence business partner.Revenue by segment Measures the revenue split between our identified customer Optimising our customer base segments.Revenue by service Measures the revenue split between our services. Optimising our customer baseRevenue by delivery Measures the revenue split between our delivery types. Optimising our customer baseShare of revenue Measures proportion of self-delivered revenue to total revenue. IFS strategyself-delivered Striving for excellencePortfolio value including Measures the revenue value of our recurring business (i.e. Optimising our customer basegrowth and loss rate non-portfolio services are not included) based on current base of Optimising our customer base customer contracts as well as the portfolio growth and loss rate.Non-portfolio value Measures the revenue value of once only jobs (i.e. revenue that is non-portfolio).Cost percentage Measures the level of variable and fixed costs per country for Optimising our customer basebenchmark benchmarking purposes. F it for purpose organisationIFS share of revenue Measures the relative share of IFS revenue to total revenue. IFS strategy Striving for excellence

44 GROUP ANNUAL REPORT 2014 BOND UNIVERSITY is one of the leading universities in Australia and Rebecca Ormsby and the rest of the ISS team make sure that the students can acquire new knowledge in a clean and safe environment. Rebecca likes to help out wherever she can and always with a big smile.“ Being clever about my job makes me a success” REBECCA ORMSBY Cleaning professional, ISS Australia

BUSINESS DEVELOPMENT | OUR BUSINESS 45Business REVENUE BY CUSTOMER SEGMENTdevelopment % of Group revenue % of Group revenueWe have developed our We focus in particular on key 29% Business Services & ITbusiness substantially over accounts, large and medium-sized 29% Business Services & ITthe past decade from customers, for whom we become a 14% Industry & Manufacturingbeing primarily a european strategic partner, because our services 14% Industry & Manufacturingcleaning service provider to make a difference to their business 13% Public Administrationbecoming a global facility by helping them fulfil their objectives. 13% Public Administrationservices provider. These segments already represent 11% Healthcare most of our revenue and we plan to 11% HealthcareThis has significantly increased our continue building strategic relation-revenue from integrated facility ships with our largest customers. 7% Retail and Wholesaleservices (IFS) contracts and interna- 7% Retail and Wholesaletional contracts through our Global The progress we have made and 7% Transportation & InfrastrutureCorporate Clients organisation. how the characteristics of our 7% Transportation & Infrastruture business have changed since 2006 is 4% Energy & ResourcesAt the same time, our business model demonstrated by the following three 4% Energy & Resourceshas transformed from a product-ori- measures: 4% Hotels, Leisure & Entertainmentented to a customer-oriented ap- 4% Hotels, Leisure & Entertainmentproach focused on developing leading • Revenue by customer segment 4% Food & Beveragevalue propositions to our chosen • Revenue by delivery type 4% Food & Beveragecustomers founded on our philosophy • Revenue by service type 3% Pharmaceuticalsof self-delivery of excellence within 3% Pharmaceuticalseach of our service offerings. Revenue by customer 4% Other segment 4% OtherThe development continued in 2014,with particular focus on a review Revenue is classified into ten custom- REVENUE BY DELIVERY % of Group revenueof our customer segmentation and er segments identified by ISS, based DKK billion % of Group revenueorganisational structure as part of on the section classification level of DKK billion 53% 2014GREAT. We have implemented a the International Standard Industrial 5731%% 22000164process of customer segmentation Classification. Single-services 71% 2006by size to establish a more detailed Single-servicesunderstanding of our customer base. Our service concepts are tailored to Multi-services 16% 2014By the end of 2014 we had mapped address specific customer needs in Multi-services 1156%% 22000146our customer segments in countries order to provide added value offerings Integrated facility services 15% 2006representing 56% of Group revenue to our chosen customers. This entails Integrated facility servicesin ten countries across the Nordic, defining variations of our service of- 31% 2014Western Europe, Latin America and ferings built on our core service skills 1341%% 22000164Pacific regions. and presenting an integrated solution 14% 2006 of services customised for a givenHaving this knowledge enables us segment. REVENUE BY SERVICE % of Group revenueto align our organisational structure DKK billion % of Group revenuewith our target customer segments From an industry segment perspec- DKK billion 51% 2014and establish separate structures for tive, Business Services & IT, Industry & 51% 2014key accounts/large customers and for Manufacturing, Public Administration 57% 2006medium- and small-sized customers. and Healthcare are our largest and 57% 2006 most important customer segments, 17% 2014 and our focus remains to develop 17% 2014 service solutions for these segments. 23% 2006 Not least Business Services & IT has 23% 2006 12% 2014 12% 2014 7% 2006 7% 2006 8% 2014 8% 2014 5% 2006 5% 2006 7% 2014 7% 2014 4% 2006 4% 2006 5% 2014 5% 2014 4% 2006 4% 2006 Cleaning services Support services Cleaning services Support services Property services Security services Property services Security services Catering services Facility managment Catering services Facility managment

46 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 grown as a result of our focus on this In 2014, IFS accounted for 31% of segment through our Global Cor- our revenue compared with 14% in28 February porate Clients organisation as well 2006. Multi-services and single services as regional and national sales force generated 16% and 53%, respectively,ISS divested the efforts. This focus produced several compared with 15% and 71% in 2006.landscaping activities major contract wins, such as the mul- The increase in the share of revenuein France tinational IFS contracts with Barclays in origin from delivering IFS or multi-ser- 2012 and Nordea in 2013, increasing vices increased by 18 percentage pointsISS successfully divested its landscaping Business Services & IT revenue. The from 2006 to 2014. This illustrates thatactivities in France. The activities were segment thus remained the largest we have continued to attract customersacquired in 2001 and over the last decade customer segment in 2014, accounting who see the benefits of our IFS offering,ISS developed ISS Espaces Verts into for 29% of our revenue. and have thus accelerated our strategyFrance’s leading landscaping provider with implementation.nearly 2,500 employees and annual reve- The share of revenue from Industry &nue of DKK 2.1 billion in 2013. The divest- Manufacturing remained on a level The relative share of revenue originment was part of ISS’s strategy of focusing with 2013 at 14% in 2014. Similarly from delivering multi-services or IFSon its core activities and creating a more the share of revenue from Public Ad- solutions is increasing in all regions,aligned business platform. The proceeds ministration and Healthcare remained with the largest increases seen infrom the divestment were used to support level with 2013 at 13% and 11%, Western Europe (primarily in Germany,the continued deleveraging of ISS. respectively, in 2014. France, Spain and the Netherlands), Nordics (primarily in Denmark andHenrik Andersen, Group COO EMEA, said: Despite the significant size of certain Norway) driven by large local multi-ser-“We carefully considered our ownership segments, including Business Servic- vice and IFS contracts wins as well asof the landscaping activities in France and es & IT, ISS is not depending on any divestments of non-core single servicedecided that these activities were not key individual customers. Our ten largest activities. Multi-service and IFS contractsto the execution of our strategy.” customers account for approximately allow ISS to exploit synergies in the 10% of Group revenue. provision of services and create strongerAfter completion of the transaction, ISS customer relationships.remained the largest foreign employer in Revenue by serviceFrance with more than 27,000 employees delivery type Revenue by service typedelivering cleaning, property, support andfacility management services. Our service offering to customers ISS offers a range of facility services in consists of single services, multi-servic- cleaning services, property services, ca- es or IFS. tering services, support services, security services and facility management. Our Our strategy is clearly focused on focus is to understand customer needs delivering IFS solutions to our selected and provide the services required to customers, primarily to key accounts meet them. as well as large and medium-sized customers. Over the past decade, this The transformation from primarily has produced significant growth in being a cleaning service provider to our IFS revenue, from approximately becoming a full facility service provider DKK 8 billion in 2006 to approxi- is illustrated by the growing volume of mately DKK 23 billion in 2014. Our our non-cleaning services and the fact IFS solution revenue base is built on that non-cleaning services now make organic growth through our Global up 49% of our business compared with Corporate Clients organisation as well 43% in 2006. Individually, all service as at country and regional level. types have grown in absolute terms. Our aim is to deliver IFS across our Cleaning services In 2014, cleaning entire business, as this is a key part of services remained our largest business our unique value proposition and also area with revenue of DKK 37.8 billion, a higher growth and margin accretive representing 51% of Group revenue activity. We expect to grow our IFS down from 57% (DKK 32.1 billion) revenue further as we continue to in 2006. In line with our strategy to implement our strategy. broaden the service platform, cleaning

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