BUSINESS DEVELOPMENT | OUR BUSINESS 47services’ relative share of Group reve- DKK 8.8 billion (2006: DKK 3.6 billion) riod up to 2010. Our security servicesnue has declined in the period, while equal to 12% of Group revenue, are mainly growing in emerging mar-the revenue share from support servic- which is an increase of 5 percentage kets while in certain mature marketses and catering services in particular points from 2006. Catering services we see greater benefits in establish-has steadily increased. continued to be positively impacted ing strategic partnerships with large by cross-selling to existing customers security service providers. This led toCleaning services continues to be very combined with an increase in catering the divestment of security activities inimportant to us. In the short term, we services delivered under some of the Norway, Australia and New Zealand,may experience a slight increase in large IFS contracts. the Netherlands, Denmark, Germany,the cleaning services share of revenue Israel and Greece in 2012-2014. As aas we continue to divest businesses Support services In 2014, support consequence of divestments revenuethat are non-core to our strategy. This services accounted for approximately declined DKK 1.0 billion in 2014 orwas the case in 2014 when revenue 8% of Group revenue, up from 5% from 8% of Group revenue in 2013 toas a percentage of Group revenue in 2006. In absolute figures, revenue 7% of Group revenue in 2014.increased to 51% from 49% in 2013. increased from DKK 2.9 billion in 2006 to DKK 6.0 billion in 2014. Support Facility management RevenueProperty services In 2014, revenue services have been favourably impact- increased to DKK 3.4 billion in 2014from property services was DKK 12.9 ed by an increase in services provided (2006: DKK 2.1 billion), equivalentbillion, representing 17% of Group to Global Corporate Clients customers to 5% of Group revenue, which is anrevenue, down from 23% (DKK 12.6 and in cross-selling services mainly to increase of 1 percentage point frombillion) in 2006. Property services cleaning customers. Support services 2006.revenue was adversely affected by a revenue was adversely impacted by anumber of strategic divestments com- number of divestments including thepleted from 2011 to 2014, including Nordic temporary labour and staffingthe landscaping activities in France activities in 2014.in 2014. These divestments includ-ed non-portfolio-based services and Security services Revenue was DKKthereby underline the strategic focus 5.3 billion, equivalent to 7% of Groupon portfolio-based on-site services. revenue in 2014, an increase of 3 per- centage points from 2006 (DKK 2.4Catering services In 2014, revenue billion). The increase was mainly duefrom catering services amounted to to strategic acquisitions during the pe-SERVICES PROVIDEDCLEANING 51% PROPERTY 17% CATERING 12% SUPPORT 8% SECURITY 7% FACILITY MANAGEMENT 5%• Daily office • Building and tech- • In-house restau- • Reception services • Manned guarding cleaning nical maintenance rants and cafés • Hostess services • Access control • On-site • Internal mail • Patrolling of management of• Industrial cleaning • Technical services • Hospital canteens facility services• Washroom and • Energy • Conference room handling, scanning customer facilities and other office • Installation of • Change dust control management and meeting room logistics management• Specialised • Grounds services • Call centre services alarm and access • Vending services • Welfare facilities systems • Space cleaning for maintenance • Event catering • Labour supply • Consulting services management nuclear plants, • Heating, ventilation hospitals and food • Risk management production facilities and air condition• Periodical cleaning (HVAC)
48 GROUP ANNUAL REPORT 2014“ I help patients on the way to recovery with a clean sheet” EDITH LIU General worker, ISS Taiwan Edith Liu works at the well-renowned TZU CHI HOSPITAL in Taiwan. Here, she and her team are in charge of cleaning and changing the bed linen. Edith makes a virtue of remembering each patient’s name so she can help relatives and visitors find the patients they have come to see. She finds it rewarding to see recovered patients leave the hospital with a ‘thank you’.
CORPORATE RESPONSIBILITY | OUR BUSINESS 49CorporateresponsibilityWe believe that long-term for us to be able to demonstrate that STRONG COMMITMENT TOsustainable business success we understand their CR goals and UN GLOBAL COMPACTrelies on a high level of CR, are capable of addressing them. Ouras economic, social and systematic approach to CR, such as our On human rights, labour rights, environ-environmental issues are Group Health, Safety and Environment mental protection and anti-corruption,inevitably interconnected. (HSE) management system, supports we have made a strong commitmentDue to our long-held this ability and helps us in our efforts as a signatory and supporter of thecorporate values for quality, to become a preferred partner to our United Nations Global Compact since itshonesty and responsibility, customers and the employer of choice inception in 1999. We remain committedour commitment to CR has in our industry. to aligning our strategy and operationsevolved organically, and with the ten Global Compact principles.today it is an integral part Our approach to CR Furthermore, we respect, support andof our corporate values and promote human rights and support thestrategy. We have adopted a principles-based ambitions stated in the United Nations approach to CR that contributes to Universal Declaration of Human RightsAs a global company with more than sustainable development as defined and the Core Conventions of the510,000 employees serving both by the international community. This International Labour Organisation.private and public sector customers approach effectively integrates univer-we influence the lives of many people sally accepted principles into the way VISION AND POLICYevery day through providing employ- we conduct our business, forming ament and training as well as safe and foundation that is embedded in our Our HSE vision is called ‘100’:healthy work environments for millions corporate values, our Code of Conduct 1: We aim to be number 1 in our industryof employees and customers in the and our strategy. In other words, CRfacilities we service. plays an important role in each of the and recognised as an industry leader in five strategic initiatives of our strategy the way we deliver Health, Safety andTo ensure a positive customer experi- implementation initiative GREAT, most Environmental performance;ence, we need capable and engaged significantly in relation to IFS strategy 0: We operate with 0 fatalities at ouremployees who are motivated and take and Striving for excellence. Due to our workplaces; andpride in working at ISS. To achieve this, group-wide systematic approach to 0: We incur 0 serious incidents and occu-we believe that having sound CR poli- HSE, we promote consistency across pational injuries at our workplaces.cies embedded in the way we conduct services and locations, contributingour business is a necessary prerequisite. to our customers’ performance on Our HSE policy is to: health, safety and environment targets. • have a systematic approach to HSECR is becoming increasingly important In terms of excellence, we self-deliverfor our customers as they strive to services through our own employees management designed to ensureimprove their own business perfor- who apply our contract lifecycle pro- compliance with the law and achievemance and make a positive impact cesses that incorporate HSE and people continuous improvement;on society. Leading global companies management. • measure, review and reportrequire a consistent CR performance performance and set targets forfrom their partners, and this is increas- We have developed and rolled out improvement;ingly becoming a key factor in winning across the Group a strategy for HSE • investigate incidents to determineand retaining contracts with most and CR. This strategy supports the their root causes and take appropriatecustomers. It is therefore important overall Group strategy and the HSE corrective action; require our suppliers vision “100”. to manage their HSE in line with this policy; and Our initiatives and actions • include HSE performance in the appraisal of staff and reward For the past five years we have built accordingly. and implemented an operational
50 GROUP ANNUAL REPORT 2014 KEY EVENTS 2014 management system, which enables us ing water. As in 2013, the majority of to measure, monitor and document our the work-related fatalities that occurred 29 April performance. It plays an important role in 2014, i.e. six out of seven, were in raising the awareness for employees traffic-related. Thus, we concentrated ISS UK ranked three stars and stakeholders to ensure that CR and our safety efforts on a ‘Driving Safely’ in Business in the HSE is prioritised, that risks are man- campaign that included the launch of Community Corporate aged appropriately and that corrective the ‘Driver Safety Handbook’. Responsibility Index action is taken. Furthermore, it ensures that responsibility and ownership of Environment is one area we plan to ISS UK was recognised in Business in the HSE is transferred to our operations, focus on even more in the coming Community’s (BITC’s) annual benchmark i.e. ISS regions, countries and business years. The main environmental impact of responsible business – BITC’s Corporate units. from ISS’s operations derives from our Responsibility Index (CR Index). ISS was cleaning services and consists of the ranked as a three-star company and To continuously improve our overall use of chemicals as well as water and recognised as the best performing facility HSE and CR performance, a Group energy consumption. We also emit CO2 services provider of the companies that HSE and CR action plan is issued each through the use of cars in our opera- completed the updated and more chal- year. The plan is based on our current tions and travel activities. lenging CR Index this year. HSE and CR performance, and the stated targets and actions are reviewed There are three ways we can influence Richard Sykes, Country Manager UK, said: and amended annually as deemed the extent of our impacts: “Being a responsible and sustainable busi- appropriate for meeting our HSE vision. ness is embedded in our corporate values. Actions that countries were required • Through conscious behaviour in This year’s CR Index result is recognition to incorporate in their country action terms of consumption at our own of the strong progress we have made plans in 2014 were for instance: sites; in recent years. Our vision is to be ‘the world’s greatest service organisation’ and • I ndividual Personal Safety Action • T hrough the portfolio of services we to achieve this we need to be recognised Plan for management including offer to our customers; and as a responsible and sustainable company. KPIs; and BITC’s CR Index provides a robust roadmap • Through the design of processes and to continue that journey.” • C arry out audits at our operational the equipment we use at customer sites to ensure implementation sites.framework to create a consistent ap- of the country HSE managementproach to HSE across the Group. This is system in operations. We have developed the Green Cleaningdocumented in our Group HSE manual, Tool, a simple computer-based pro-which is based on four international In order to stay on course and keep HSE gramme to help our operations developstandards (OHSAS 18001, ISO 14001, in constant focus, we run an annual and offer our customers cleaningISO 22000 and ISO 9001). As part of global campaign ’Me and You’. The solutions that use less chemicals, lessthis approach, we have made a global campaign covers safety, health and the energy and less water. We are nowagreement with a certification body, environment and emphasises that HSE able to govern our own impact on theDet Norske Veritas, to implement and is a common responsibility and that we environment in a more structured andmaintain ISO certification across the all have important roles to play in HSE. systematic way with the implementa-ISS Group. Our objective is to achieve Since the launch in 2010, the campaign tion of the HSE manual, including thecontinuous improvements in quality has been repeated each year but with management and reporting system.and performance. changing focus points reflecting the In addition, many ISS operations are challenges currently faced within the already certified to environmentalTo support our objective of continuous three areas. standards such as ISO 14001.progress and improvement, we haveimplemented an HSE performance In 2014, the safety campaign focused In 2014, we continued to roll out the on working at heights, slips, trips and ISS Green Offices Programme (GOP). falls, driving safely and working alone. The programme has now become The health campaign focused on a mandatory in all countries. The GOP is healthy back, chemicals and personal an office-based programme designed to protection equipment, while the envi- reduce the environmental impact of our ronmental campaign focused on reduc- own ISS offices and daily work practic- ing energy, reducing waste and conserv- es. By changing our behaviour, we can
CORPORATE RESPONSIBILITY | OUR BUSINESS 51reduce our environmental footprint, use always be zero injuries and zero envi- Audits We are firmly embedding CR inresources efficiently and dispose of our ronmental incidents, and this must be our operations by carrying out auditswaste responsibly. clear to everyone in the organisation. in our countries. This year, we again exceeded the target of 20% of theOther CR initiatives Group performance for 2014 and countries by carrying out CR audits in targets for 2015 for selected CR KPIs more than 20 countries.Our supply chain is part of our value are shown below:proposition and to ensure that our sup- Employee engagement survey Ourpliers, subcontractors and other provid- Fatalities In accordance with the target in 2014 was to give 400,000 ofers are aligned with our commitment, HSE vision, our first priority is to our employees in 48 countries an op-we have developed and implemented prevent fatalities at our work places. portunity to respond to the question-the ISS Supplier Code of Conduct. It Sadly, in 2014 we experienced seven naire by the end of 2014. We coveredcontains ISS’s key principles and require- work-related fatalities associated with 339,659 employees, yet anotherments to our suppliers, subcontractors our operations. As our HSE vision is increase on 2013. The response rateand other providers with respect to zero fatalities at our workplaces, the increased to 61% in 2014 from 59%responsible social, environmental and number of fatalities is not acceptable. in 2013.ethical practices. To achieve our HSE vision of zero fatalities, we are focusing our efforts Going forwardOur suppliers must comply with this on embedding HSE culture in our op-code and ISS expects all suppliers to erations. As six of the fatalities were We believe that we have a solidcommunicate the obligations set out in traffic-related, our focus for the global foundation for both systematic riskthe code and ensure compliance with safety campaign in 2015 will again be management and reporting supportedthe code throughout their organisations driving safely. We are also working on by management systems and IT tools.and supply chains. making safety a common responsi- Going forward, our focus is on further bility. We will focus our efforts going embedding hazard identification andWe have also developed a supplier forward on getting management at risk management in our operationsself-assessment questionnaire for our all levels to understand their roles and and continuing to improve our incidentmajor suppliers dealing with issues such responsibilities in terms of safety. Our investigation performance. We will alsoas our Code of Conduct, forced labour, success depends on the full commit- further develop the value proposi-non-discrimination, human rights and ment of all levels of management tions for our customers by identifyingchild labour. This is to ensure that we starting at country management level the needs, providing solutions andalso include the supply chain in our CR and this is a vital requirement of our outcomes based on our skills and expe-scope. Group HSE manual. rience in these areas.Our performance and targets Lost Time Injury Frequency (LTIF) Our full CR report as per section 99a We have improved our performance of the Danish Financial StatementsConsistent with the ISS values, our by 54% from the baseline figure at 13 Act is available at www.responsibility.highest priority is to protect our em- in 2010 to an LTIF of 6 in 2014, the issworld.com/report2014. The CR Re-ployees from injury. We will be stead- fourth straight year of improvement. port also serves as ISS’s communicationfast in our commitment to make our This shows that the strategy we devel- on progress in implementing the tenworkplaces free from hazards, and we oped and implemented five years ago principles of the Global Compact.will operate under the assumption that is producing results.all injuries can be prevented and thatinjuries are unacceptable. Our goal willGROUP PERFORMANCE ON SELECTED CR KPIs Target Performance 2014 2014 2013 2012 2011 2010Fatalities Zero 7 6 6 7 5 Less than 7 6 10 11Lost Time Injury Frequency (LTIF) More than 20 30 7 8 25Audits on CR (% of countries) 339,659 28 30 150,000 –Employee engagement survey 400,000 337,154 235,548 –
52 GROUP ANNUAL REPORT 2014“ Creating value for the customer is my main purpose” ALICIA MOVILLA Facility manager, ISS Spain Alicia Movilla plays a central role in ensuring that financial institution BANKIA can focus on what they do best. She is a facility manager and every day she encourages and motivates her team of dedicated ISS employees to deliver excellent services at Bankia’s 1,944 offices throughout Spain.
OUR EMPLOYEES | OUR BUSINESS 53OuremployeesOur 510,968 employees Empowering our people and enabling KEY EVENTS 2014represent ISS on a daily them to take responsibility for theirbasis. When we are recog- roles and how they interact with our 3 Junenised as a great company it customers also drives a feeling ofis because our employees cohesion with the company. Having the ISS named the world’sare delivering a great feeling of being part of the company best outsourcingservice day in and day out. also makes it easier to engage in what service providerThis reinforces our firm we do and take pride in the differencebelief that by engaging and we make to our customers. For the second straight year, ISS wasempowering our employees ranked the global #1 outsourcing servicethey become great ambas- Creating a sense of purpose is extremely provider by an independent industrysadors of ISS. important in this respect. To facilitate jury for The International Association of the process of employees defining and Outsourcing Professionals (IAOP) aheadGreat leadership and living their own purpose, we introduced of companies such as Accenture, Johnsonempowering people The Apple Award programme. The Controls, CBRE and Aramark. ISS received idea is for each employee to find their the highest possible scores from all juryWe place strong emphasis on lead- own Apple, i.e. their contribution (and members on the parameters: size andership and the quality of the people the contribution of their colleagues on growth; customer references; organisa-we appoint to leadership positions site as a team) to the realisation of our tional competencies; and managementbecause that is the root of our people’s customers’ value propositions and the capabilities.engagement and what gives ISS the job satisfaction this provides. The Applestrength that differentiates us from the Award programme has gained consid- Jeff Gravenhorst, Group CEO, said aboutcompetition. erable momentum, and it is expected his more than 510,000 colleagues as ISS’s to continue to contribute to creating a key factor for success:Ensuring the right leadership behaviour greater sense of purpose and therebyis a high priority for us as it enables engagement at ISS – employee-by-em- “I am so proud of my colleagues through-us to continually improve our services ployee and site-by-site. out the world. It is their appreciation andand to do so in a value-based way. Our understanding of how our services helpapproach to leadership is expressed in As our greatest strategy enablers, lead- our customers’ businesses, coupled withour Leadership Principles and in the way ership and empowerment are key focus their strong engagement in deliveringwe have integrated them into how we areas of our Human Resources strategy those quality services day after day thatselect and develop our leaders. From around the world. We make this hap- make our customers happy and satisfied.”the recruitment process to the annual pen by focusing on five key initiatives:appraisal our Leadership Principles arepart of living the ISS culture. 1. Leadership development Continue to develop programmesAn organisation where all employees for key leaders and act as rolepush towards the same objective and models for leadership developmentunderstand the role they play is a initiatives.powerful organisation. This is one ofthe strengths we rely upon to be able 2. L eadership assessment andto move quickly and respond to our culture Continually assess whethercustomers’ needs while operating in a we have the right people to makeconsistent manner across the globe. the journey to becoming the world’s greatest service organisation and assess how to bridge gaps.
54 GROUP ANNUAL REPORT 20143. Succession planning Ensure utives, ensuring that the organisation leadership development; and equally business continuity and mitigate as a whole understands its purpose and that they have the tools and skills risk through systematic succession how it creates value to our customers. necessary for financial and operational planning and secure long-term It is this alignment of purpose, which follow-up. development of individuals to replace drives the empowerment of our front- key positions as the need arises. line employees. In 2014, we had 35 graduates from the Leadership Mastery programme4. Employee engagement Under- Leadership development and 25 from the Acorn programme stand the underlying factors behind and training and we aim to have similar or slightly ISS employee engagement and higher attendance for 2015. The prioritise follow-up actions. Communication and training are two SWAHT programme was rolled out to key elements of developing leadership approximately 250 supervisors in 20145. P erformance and rewards at ISS. To this end, we have invested but will be upscaled for 2015 with an Align our performance with strong heavily in leadership programmes since expected attendance of approximately compensation programmes, keep the launch of The ISS Way in 2008. 1,000 supervisors. leaders focused on supporting our We continue to run the ISS Advantage strategy through aligned objective senior manager induction programme, Fundamentally, all the programmes setting, review key positions and which is also focused on our strategy revolve around the same themes, focus on continued development of and the ISS value chain management although individually adjusted to key talent. tool. match the target group in question. In Leadership Mastery, a comprehensiveOur Human Resource vision guides the In 2013, we launched the Leadership five-module programme for selectedHR agenda of ISS: Mastery programme for top manage- top leaders, the focus is on personal ment, the Acorn programme for key leadership development and behaviour,“We are going to be the world’s great- account managers and the Service with developing a team as well as securingest service organisation by being the a Human Touch (SWAHT) programme a deep understanding of our strategyenabler of best practices in HR globally for supervisors – programmes which and facilitating a greater understand-– making sure we have the right people provide our employees with an essen- ing of customers and employees.in the right place at the right time creat- tial understanding of the key elementsing superior results”. of our strategy and give them tools The Acorn programme targets talented relevant for their daily work. Ensur- managers with the aim of developingGreat leaders are able to connect the ing that our leaders are equipped to them into top-notch IFS Key Accountfrontline employees to the senior exec- communicate the strategy and engage Managers. The programme is based the organisation is a key focus area forSERVICE WITH A HUMAN TOUCHREAD MY TRAIN MESIGNALS EMPOWER MECOMMUNICATE OBSERVE ANDWITH ME ASSESS MESUPPORT ME COACH MEMAKE A RECOGNISE MEDIFFERENCEFOR MEMAKE ITRIGHT FOR ME
OUR EMPLOYEES | OUR BUSINESS 55on three modules focused on under- shops and activities that have been expanded year by year. In 2014, westanding and working with complex specifically designed by ISS for ISS, invited 339,659 employees acrosscommercial models and operational to engage and motivate employees all continents to participate in theexcellence in a global environment and managers, and spur them on to engagement survey with 207,545including focus on intercultural aspects provide exceptional service both to responding. Intentionally, we use theand communication. our customers and to each other. The same questions globally to com- programme creates awareness of the pare the results around the world.For supervisors, the key messages importance of meeting and exceeding Based on the results of the survey,and tools revolve around the overall customer expectations, enables our which showed an overall employeestrategic direction of the Group, our people to clearly understand their pur- engagement of 4.4 (2013: 4.3) outleadership fundamentals and the pose in helping to build the world’s of a possible 5, we know we haveSWAHT programme, the purpose and greatest service organisation, and it a high degree of engagement inapplication of the ISS value chain, empowers our people to use their the company, and we know what iskey principles for designing a value initiative and to make a difference by important to our people in their workproposition for the customer as well as creating those winning moments for environment.financial management. Our supervisors our customers.are specifically in focus here. After all, Engagement builds upon a sense ofthey have the daily delivery respon- Employee engagement purpose and pride in our people and:sibility to, and interaction with, ourcustomers and frontline employees. It is Employee engagement is a key driver • a strong belief in ISS goals andessential that their conduct is consistent of the customer experience. Measur- values;with the business fundamentals of The ing and improving employee engage-ISS Way and that they are able to instil ment is therefore a key focus area at • a willingness to “go the extrathese fundamentals in their teams. ISS. Since the service industry gener- mile” for our customers;Furthermore, relatively high frontline ally has a high degree of employeeemployee turnover is a natural part of turnover, as part of the industry is • a strong desire to stay with ISS;our business and therefore it is essential often considered suitable for short-that we have continuity at supervisor term or secondary employment, our • employees who believe in ISS andlevel by investing in them and providing efforts in terms of engagement and in what they do; anda clear career progression path. retention are even more important. • managers who understand andWe have introduced SWAHT training, In 2011, we piloted a global Employ- lead our people as individuals.which is a suite of training work- ee Engagement Survey (EES) and the scope of the survey has since beenGLOBAL EMPLOYEE ENGAGEMENT SURVEY RESULTS2014 4.4 4.4 4.4 4.3 4.4 05 05 05 0 50 5Overall engagement Capability Motivation Pride Retention2013 4.3 4.3 4.3 4.2 4.4 05 05 05 0 5 05Overall engagement Capability Motivation Retention Pride
56 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 Besides measuring employee engage- Diversity ment in itself, we also measure four16 September key drivers of employee engagement: As one of the world’s largest private employers and with operations in ourISS Czech Republic won • Capability: “I feel able to do my 48 countries, we are committed toIFS contract with Philip job well” fostering, cultivating and preservingMorris a culture of diversity and inclusion. • Motivation: “I am motivated to With more than 510,000 employees,ISS Czech Republic won a contract to do my job well” ISS embraces and encourages diversityprovide a wide range of services for Philip in its broadest sense, including age,Morris in the central part of the Czech • Pride: “I feel proud to work for gender, ethnicity, nationality, culture,Republic. ISS” language, religion, physical ability, education and skills.Philip Morris is the leading producer andmarketer of tobacco products in the Czech • Retention: “I would like to With operations in 48 countries andRepublic, and is also present in 55 other continue working for ISS” more than 510,000 employees, ISSmarkets globally. employs a wealth of nationalities. In Knowing what lies behind the employ- ISS Denmark alone, we have moreJan Boháček, Country Manager Czech ee’s engagement is critical in driving than 130 nationalities. This alsoRepublic & Slovakia, said: “The Industry employee engagement. Through means that our Employee Engage-& Manufacturing sector is one of our our survey, we are able to provide ment Survey globally can be answeredthree top-priority customer segments. We managers at all levels with specific in- in 52 languages, and as an example inprovide services to other customers within formation about their teams and their ISS Sweden 17 different languages arethis sector and we are very proud to have employees, allowing them to address offered for the survey.won the Philip Morris contract, as this is an the causes of low engagement andextremely important customer and a great help make individual employees feel a At ISS, we recognise that our diverseopportunity for us.“ greater sense of engagement. The five workforce gives us a key competitive key priorities in our Human Resource advantage and we consider our em- strategy also provide support and focus ployees to be our most valuable asset. for our managers and leaders. Diversity makes ISS creative, produc- tive and an attractive place to work. We continuously work to improve our insights into what drives engagement We recognise the importance of pro- in our employees and how we can moting gender diversity at manage- become better at creating a sense of ment levels. When making appoint- purpose in the services each of us de- ments to management level positions liver, as well as the difference we make at ISS, we are committed to selecting to our colleagues, to our customers, the best person for the job based on and to the society we are part of. We qualifications, experience and compe- will also work further on connecting tencies, while also considering other employee engagement scores to our factors, such as diversity. customer satisfaction scores as we have seen a correlation and believe In order to promote, facilitate and that the two are connected and that increase the number of women in they are key drivers of financial and management level positions at ISS operational performance. global head office, we continue leveraging our diversity policy which The service industry generally has a defines a number of objectives. Our high degree of employee turnover, as initiatives include ensuring that female part of the industry is often considered candidates are identified for vacant suitable for short-term or secondary positions, developing succession plans employment. To counter that we put aiming at identifying female succes- a lot of effort into retaining our em- sors as well as tabling the matter ployees, e.g. our five key initiatives ex- of women in leadership at ISS for plained above all support our retention discussion at least once a year at the efforts, which are key to our strategy. Executive Group Management Board
OUR EMPLOYEES | OUR BUSINESS 57PEOPLE INDICATORS KEY EVENTS 2014Total employees 2014 2013 2012Full time employeesTotal employees > 1 year 510,968 533,544 534,273 73% 74% 73% 69% 68% 69%and Group Management Board levels. committee and annual meetings with 14 OctoberFurthermore, we ensure that women the entire EWC. We gather the EWCare adequately represented in various for 3 days at our head office and ISS won nine awards atleadership development programmes spend considerable executive manage- the 2014 Australian Serviceas well as in graduate programmes ment time with them to ensure align- Excellence Awardsacross EMEA and at the ISS global ment of our priorities and commonhead office. understanding of our strategy and the ISS Australia won nine awards at the Group’s direction. Customer Service Institute of Australia’sIn 2014, the amount of women at (CSIA) 2014 Service Excellence Awards –management level at ISS global head We see these agreements as a basis the result was even better than last yearoffice increased slightly compared for how we cooperate and as an when ISS received eight awards. Theseto last year and diversity focus will opportunity to explore what we can awards recognise the highest achievementcontinue in 2015. accomplish together. in customer service for individuals and organisations. ISS was proud to take homeEmployee and trade for the second year in a row the covetedunion relations ‘National Training Excellence’ award, acknowledging leadership in training andWe want to ensure that our people development.take pride in what they do, the rolethey fulfil and the difference they At the event, Group CEO Jeff Gravenhorstmake every day at our customer sites spoke of ISS’s drive to deliver the ultimatearound the world. in customer service: “Across the ISS Group we are working on common themesBeing among the first signatories to – our value proposition is to facilitatethe UN Global Compact, we are fully our customers’ purpose through peoplecommitted to observing the basic empowerment. This is about putting thehuman rights of all of our employees customers’ vision and purpose into focusand to contribute to the improvement and figuring out how we can supportof employment conditions within the them to become even better at their jobs.service industry. In line with this com- That type of customer service is what wemitment, we have a global agreement aspire to achieve at ISS.”with Union Network International(UNI), and we support the socialdialogue between management andemployees through workers councilsand employee representatives. In2014, we sponsored a UNI project inMexico, where we worked with localgovernment to ensure a minimumwage for people working in the ser-vice industry.We also continue to stay committedto working closely with the Europe-an Workers Council (EWC) and holdquarterly meetings with the steering
58 GROUP ANNUAL REPORT 2014Welcoming and well-maintained buildings and surroundings are importantelements in a property’s value. Owning a building is a question of decidinga time horizon for the investment to prevent deterioration, breakdowns ordamage. Partnering with ISS supports an increase in our customers’ propertyvalue whatever the investment horizon.Our services can be combined in numerous ways either as selected servicesor as a complete solution focused on resource optimisation, efficiency andsystematic planning.HP, PALO ALTOFrancisco Martinez, O&M technician, ISS USA
GOVERNANCE 59 Governance Corporate governance 61 Risk management 66 Internal controls relating to financial reporting 70 Remuneration report 75 Shareholder information 80 Group Management Board 82 Board of Directors 84
60 GROUP ANNUAL REPORT 2014 “ My business is to make the customer shine” RIDHA OUNI Cleaning professional, ISS NorwayNORDEA is the largest financial services group in NorthernEurope, and Ridha Ouni is proud to be part of keeping theoffices in Oslo, Norway clean and inviting for the manycustomers and employees. He enjoys the numerousinteractions he has with people during his workday andalways greets everyone with a smile.
CORPORATE GOVERNANCE | GOVERNANCE 61CorporategovernanceIt is important to us that is available at http://inv.issworld.com/ KEY EVENTS 2014we exercise sound corporate governancereport.cfm. At the end ofgovernance practices and 2014, we complied with all but one 24 Novembercomply with statutory re- recommendation: no. 4.1.4 regardingquirements and the Danish share-based remuneration as certain ISS issued new EUR bondsCorporate Governance share units vest earlier than three for EUR 1.2 billionRecommendations. years from the date of grant. This is explained in more detail in the report ISS successfully priced an issuance of EURThe Board of Directors (the Board) referred to above. bonds for a principal amount of EUR 1.2regularly reviews the Group’s corporate billion under the EUR 2.0 billion EMTNgovernance framework and policies Shareholders and general programme.in relation to the Group’s activities, meetingsbusiness environment, corporate The notes were issued in two tranchesgovernance recommendations and ISS A/S is a limited liability company of EUR 700 million maturing in 5 yearsstatutory requirements; and contin- incorporated and operating under with a coupon of 1.125% and EUR 500uously assesses the need for adjust- Danish law. The company’s shares are million maturing in 10 years with a couponments that will benefit the Group and admitted to trading and official listing of 2.125%. These rates are the lowestour stakeholders. on Nasdaq Copenhagen. interest rates ever for a Danish company and the lowest ever internationally for aCorporate governance policies and The shareholders of ISS A/S exercise company with ISS’s financial rating.procedures at ISS are based on their rights at the general meetingopenness, transparency, constructive which is the supreme governing Group CFO, Heine Dalsgaard, said: “Wedialogue with our stakeholders, sound body of ISS. Resolutions are generally are very pleased with the strong supportprocesses and controls and take into passed by simple majority, unless they from investors regarding the issue of EURaccount the Danish Companies Act, involve amendments to the Articles notes. By issuing EMTN bonds we havethe Danish Financial Statements Act, of Association, dissolution, merger or optimised our debt structure through aIFRS, Nasdaq Copenhagen’s Rules for demerger. Such resolutions must be more diversified split between bank andIssuers of Shares, our Articles of Asso- adopted by at least 2/3 of the votes bond debt and at the same time increasedciation as well as applicable law. cast as well as of the share capital tenors at slightly reduced interest costs.” represented at a general meeting.Corporate Governance Shareholders are entitled to have spe-Recommendations cific business considered at our gen- eral meetings provided that a writtenNasdaq Copenhagen has incorporated request to that effect is submitted tothe Danish Corporate Governance our Board not later than six weeks pri-Recommendations in its Rules for Issu- or to the general meeting. At generalers of Shares. These were last updated meetings, the attending shareholdersin November 2014 and are available are able to ask questions to our Boardat www.corporategovernance.dk. and our Executive Group Manage-In respect of the recommendations, ment Board (the EGM) concerningcompanies shall either comply or the items on the agenda. Furtherexplain any deviation. Our statuto- information regarding the governancery report on corporate governance of general meetings can be found inprovides an overview of ISS’s position our Articles of Association, which areon each of the recommendations and available on our website. The Board strives to plan the general meetings in a manner that encourages active ownership by shareholders.
62 GROUP ANNUAL REPORT 2014Management in 2014. The EGM provides the Board More details on the individual board with a monthly financial reporting members are available on pages 84-85.As is current practice in Denmark, package and the Board is briefed aboutmanagement powers are distributed important matters occurring between Board Committeesbetween our Board and our Executive board meetings.Group Management Board (the EGM). The Board has established four com-No person serves as a member of both All Board members elected by the mittees. Each committee has a charterof these corporate bodies. Our EGM general meeting stand for election each which sets out its purpose, respon-carries out the day-to-day manage- year at our annual general meet- sibility and procedural matters. Thement, while our Board supervises the ing. Board members are eligible for committees report to the Board.work of our EGM and is responsible for re-election. According to our Articles ofthe overall management and strategic Association, only persons younger than The Audit and Risk Committee is re-direction. 70 at the time of election may be elect- sponsible for the review and monitor- ed to our Board of Directors. All board ing of the Group’s risk managementBoard of Directors members elected by the shareholders at and internal controls related to finan- the general meeting are considered to cial reporting which are describedThe primary responsibilities of the Board be independent as defined in the Cor- on page 66 and 70, respectively.are to approve the strategy plan, the porate Governance Recommendations. Furthermore, the committee evaluatesannual budget and, based on rec- the external financial reporting as wellommendations from the Transaction In addition to the board members as the main accounting policies andCommittee (see Board Committees), elected by the general meeting, three estimates. Its duties also include thecertain large acquisitions, divestments employee representatives also serve on supervision of the independent au-and customer contracts. The Board the Board. They are elected on the basis ditor and the internal audit function.annually performs an evaluation of the of a voluntary arrangement regarding In addition, the committee considersperformance of the Board, and of its Group representation for employees the relationship with the independentindividual members and its collabora- of ISS World Services A/S as further auditors and reviews the audit pro-tion with the EGM. described in the Articles of Association. cess. The committee consists of three Employee representatives serve for members (currently Henrik PoulsenThe Board is responsible for determining terms of four years. The current em- (chairman), Morten Hummelmose andannually the appropriate qualifications, ployee representatives joined the Board Jo Taylor). The independent auditorsexperience and competencies required following the annual general meeting attend the meetings if requested andof the members of the Board as well in March 2011. A new election will be must attend at least one meetingas the EGM in order for these boards held in March 2015, and the elected per year at which the EGM is notto best perform their tasks, taking into candidates will join our Board after the present. The Head of Group Internalaccount ISS’s needs and the existing annual general meeting in April 2015. Audit shall also attend at least onecomposition of these boards. Nomina- The employee representatives have the meeting per year at which the EGM istion of Board candidates to be submit- same rights and obligations as other not present. The committee held nineted to the general meeting are prepared members of the Board. meetings in 2014.on this basis. The Board functions in accordance with The Remuneration Committee isThe Board considers that the present applicable statutory rules, the Articles of described as part of the Remunerationcapital and share structure serves the Association and its rules of procedure, report on page 75.best interests of both the shareholders which provide guidelines for the Board’sand ISS as it gives ISS the flexibility to work in general. Board resolutions are The Nomination Committee assistspursue strategic goals thus providing passed by simple majority, and in the the Board in ensuring that appropriatelong-term shareholder value, combined event of equal votes, the Chairman, or plans and processes are in place forwith short-term shareholder value by in his absence the Deputy Chairman, the nomination of candidates for theway of ISS’s dividend policy. has the casting vote. Board and the EGM and in evaluating the composition of the Board and theThe Board convenes at least six times a The principles of remuneration of the EGM. The committee consists of threeyear, including for one strategy meeting Board are described in the Remuner- members (currently Lord Allen ofeach year. Extraordinary meetings ation report on page 75 and remu- Kensington Kt CBE (chairman), Jennieare convened by the Chairman when neration for the year is disclosed in Chua and Morten Hummelmose). Thedeemed necessary or when requested note 6.1 to the consolidated financial committee held one meeting in 2014.by a board member, a member of the statements. In addition, the committee membersEGM or by the independent auditors. A have had several update calls duringtotal of 13 board meetings were held
CORPORATE GOVERNANCE | GOVERNANCE 63AGENDA ITEMS TO BE TRANSACTED BY THE BOARD OF DIRECTORS EACH YEARQ1 Q2 Q3 Q4February April August October• Annual general meeting • Constitution of the Board, • Approval of Q2 report • Review and assessment of the • Review of whistleblower system preparation including election of Chairman competencies and composition• Review of capital, share and Deputy Chairman of the Board, including assessment of independence of structure and financing, etc. May board members• Review of Dividend Policy • Approval of Q1 report • Review of charters for• Review of Corporate • Review of insurance cover, committees and composition of members Governance, including Rules including D&O • Consider the composition of the of Procedure of the Board and EGM, as well as development, the EGM and other corporate June risk and succession plan governance documents • Approval of engagement of • Evaluation of (i) performance of individual members of the BoardMarch the Group’s external auditor (ii) performance of the EGM and• Approval of Annual Report, including fees upon recommen- (iii) cooperation between the dation from the Audit and Risk Board and the EGM, including including review of going Committee presentation of results concern assumption • Review of material risks, and • Consider the Group’s activities• Approval of CR report risk management reporting with the view to ensure relevant• Session with external auditor • Approval and review of overall diversity in other management and Head of Group Internal strategy, business and action levels and set specific targets in Audit without the EGM plan, including review of this regard necessary competencies and financial resources November • Approval of Q3 report December • Approval of annual budget • Review of internal control procedures and risks related to financial reporting • Review of Remuneration Policy and Overall Guidelines on Incentive Pay2014 to discuss the search for new Executive Group Board or the EGM, we are committednon-executive directors including Management Board to selecting the best person for thedesired competencies and profiles of position, but aspire to have diversity inpotential candidates. The primary responsibilities of the gender as well as in broader terms such EGM are to carry out the day-to-day as international experience.The Transaction Committee makes management of the Group, developrecommendations to the Board in and implement strategic initiatives, The assessment of candidates is basedrespect of certain large acquisitions, develop Group policies, monitor Group on an evaluation of qualifications,divestments and customer contracts, performance and evaluate investments experience and competencies as wellreviews the transaction pipeline, as well as acquisitions, divestments and as other relevant factors. Emphasis isconsiders ISS’s procedures for large large customer contracts. placed on:transactions and evaluates selectedeffected transactions. The committee An overview of the EGM is available on 1. experience and expertise (such asconsists of four members (currently page 82. industry, risk management, finance,Lord Allen of Kensington Kt CBE financing, strategy, international(chairman), Morten Hummelmose, Competencies and diversity business, labour force managementAndrew Wolff and Jo Taylor). The and HR, management and leader-committee held eight meetings in ISS recognises the importance of pro- ship);2014. moting diversity at management levels. When considering nominations to the
64 GROUP ANNUAL REPORT 20142. diversity (including in respect of age, An overview of the GMB is available on reports in connection with the audit gender, new talent and international pages 82-83. of the annual consolidated financial experience) as well as diversity of statements and any other long-form perspectives brought to the Board or Country management audit reports. Auditor reports are dis- the EGM; and cussed in detail by the Audit and Risk In each of the countries in which ISS Committee.3. p ersonal characteristics matching operates, country management teams ISS’s values and leadership principles. have been appointed to manage the The Board reviews the Annual Report business in accordance with Group at a Board meeting attended by theTo support our commitment to gender policies and procedures as well as local independent auditors. The findingsdiversity the Board has adopted a target legislation and practice. Substantial of the independent auditors and anyof increasing the number of women on autonomy and considerable power major issues arising during the courseour Board elected by the general meet- resides with the country management of the audit are discussed, and signif-ing from one to at least two members teams including management of oper- icant accounting policies and criticalat the annual general meeting at the ations in their relevant markets, finan- accounting estimates and judgementslatest in 2017. The Board seeks to iden- cial reporting, local tax and compliance are reviewed.tify female candidates when nominat- with local legislation and practices.ing new board members, but remains In 2014, the statutory Group audi-committed to always selecting the best An overview of the country managers tors (formerly KPMG) joined the EYcandidate for the position. Presently, the of the Group is available on pages network. KPMG remained statutoryBoard has one female board member 160-163. The country management auditors of foreign subsidiaries.elected by the general meeting who is teams are set out under each relevantnot standing for re-election due to the country on the ISS website at www. Internal audit Group Internal Auditage limitation of 70 years in our Articles issworld.com. reports to the Audit and Risk Com-of Association. mittee and the Group CFO and its Assurance activities are governed by a charterIn terms of international experience, approved by the Board. Group Internalthe Board aims at all times to have External audit The Board nominates Audit is responsible for providing thesufficient international experience at all the independent auditors for election EGM and the Audit and Risk Commit-management levels taking into account at the annual general meeting. The tee with independent and objectivethe size and activities of ISS. The Board nomination follows an assessment assurance on the design and operationconsiders that it has adequate and of the competencies, objectivity and of the system of internal controls.broad international experience. The independence of the independent Annual audit plans are agreed with theEGM is considered to have the neces- auditor and the effectiveness of the Audit and Risk Committee.sary international experience if half of audit process.its members have international experi- Whistleblower policy The Groupence from large international compa- An independent business relationship has adopted a whistleblower policy tonies. Presently, all four members of the with the Group’s independent auditors enable employees, business partnersEGM have international experience. is essential for the control environ- and other stakeholders to report any ment. As part of the safeguards to serious and sensitive concerns. SuchGroup Management Board ensure independence, the indepen- concerns may be reported to the Head dent auditors cannot perform certain of Group Internal Audit via a secureThe primary tasks of the Group non-audit services for ISS including, and externally hosted reporting siteManagement Board (the GMB) are to but not limited to, the preparation of which is accessible via the ISS website.develop and execute new strategic accounting records and financial state-initiatives, develop and implement ments or participate in recruitment forGroup policies, monitor Group per- senior management positions.formance, review financial matters,coordinate and evaluate acquisitions, ISS collaborates with the independentdivestments and large customer con- auditors at country and Group leveltracts and to provide the EGM with in relation to procedures and internalinput for decision-making purposes. A controls by exchanging internal auditmember of the GMB is not permitted reports and by generally sharing rele-to hold directorships in companies vant knowledge.outside the Group unless specificconsent is granted. All Board members receive the inde- pendent auditors’ long-form audit
CORPORATE GOVERNANCE | GOVERNANCE 65“ Helping power a city of over 1 million people fills me with energy” TIMOTHY O’BANON Facility engineer, ISS USA Timothy O’Banon provides facility management services and maintenance at CPS ENERGY, San Antonio, Texas. His approach to doing a great job is talking with the customer to get their viewpoint. It helps him to understand what is most important to them, and how to assure them that their issues will be solved before he leaves the job.
66 GROUP ANNUAL REPORT 2014RiskmanagementWe consider risk an integral Risk governance Operational risks are insured throughpart of doing business. global or local insurance programmesRisk-taking provides oppor- The Board of Directors (the Board) when considered appropriate. Thistunities, but it might also and the Audit and Risk Committee is managed centrally by Group Riskprevent us from achieving review and monitor key risks and Management.our strategy. Effective risk related risk management and approvemanagement ensures that Group risk policies. It is the responsi- Status on 2014 and focusthe risks we take on in bility of management at all levels to areas for 2015respect of our customers ensure that the assessment of risk isand ourselves are calculat- formalised and that risks are under- In 2014, we focused on embeddinged and well-managed and stood, appropriately managed and re- risk processes and controls throughoutis therefore an important ported in accordance with the Group the organisation to raise awareness oftool in helping us reduce Risk Policy. Our risk governance risk responsibilities and ensure that riskuncertainty and ultimately structure is illustrated below. The management is embedded in relevantachieving our strategy. Group Risk Policy and other Group business processes. For this purpose, policies set out the requirements and selected stakeholders have been minimum levels of achievement nec- trained in risk management and relat- essary to implement the risk manage- ed tools. Examples of training activities ment requirements of our Corporate are internal training seminars for local Governance Guidelines. risk managers, local legal professionalsRISK GOVERNANCE STRUCTURE • Reviews and monitors key risks and related risk GROUP FUNCTIONS BOARD OF DIRECTORS management, action plans and controls • Supervise compliance with AUDIT AND RISK COMMITTEE • Approves Group Risk Policy internal risk standards EXECUTIVE GROUP • Monitors performance of risk management MANAGEMENT BOARD and key risks GROUP MANAGEMENT BOARD • Decides Group Risk Policy and key risk strategies COUNTRY MANAGEMENT • Ensures alignment of risk management activities and business strategy and policies • Monitors risk and evaluates risk management • Implements the Group Risk Policy and other related risk policies • Ensures sufficient resources to support major risk management projects • Ensures appropriate parties are aware of their risk responsibilities • Develops risk recommendations • Ensures that risks are adequately identified and managed • Monitors risk activities and initiatives
RISK MANAGEMENT | GOVERNANCE 67and local internal auditors. In 2015, each risk. The framework deployed forour focus remains on improving our risk reporting and risk assessment isrisk management through incorpora- consistent with acknowledged risk andtion in existing activities and processes control frameworks. The Board reviewsand by monitoring relevant risk-related material risks and risk managementindicators. reporting yearly; the Audit and Risk Committee reviews twice a year.Group key risks The risks listed below are those thatWe are exposed to various risks the Board and the Executive Groupthrough our actions and activities at Management Board currently view asour own premises as well as at cus- being the most critical to our business.tomer premises. Operational risks areassessed based on the activities of each Additionally, we are exposed to finan-operating company, historic and cur- cial risks, including currency risk, inter-rent claims events, and the markets in est rate risk, credit and liquidity risk,which the companies operate as well as a result of our operating, investingas on an individual site-by-site basis at and financing activities. The Group’scustomer premises where we provide financial risks are managed centrallyour services. by Group Treasury based on policies approved by the Board. The Group’sWe use a risk mapping approach to financial risk management is describedidentify and assess the key risks the in note 5.3, to the consolidated finan-Group faces, their potential eco- cial statements.nomic impact and the likelihood oftheir occurrence. In addition heretorisk aspects such as the reputationalimpact is considered when assessingGROUP KEY RISKS 16 2 1. C ontract governance Major 37 High 2. Operational risks and 4 contract execution Significant 3. Financial reporting fraud, fraud and corruption 4. C ustomer retention and competition 5. M acroeconomy 6. Employee risks 7. Regulatory environment 8. S ubcontractor riskReputational impact 58 Economic impact Minor Remote Unlikely Possible Probable Likelihood of risk occurring
68 GROUP ANNUAL REPORT 2014GROUP KEY RISKS MITIGATING MEASURES1. Contract governance • Formal framework and IT tool for contract risk management.The profitability of our contracts depends upon our ability to • Formal procedure for approval of large contracts.successfully calculate prices by taking all economic factors, legal • Contract risk reviews performed by Group Risk Managementand other risk elements into consideration, and to manage ourday-to-day operations under these contracts. With the increased for specific customer industries.complexity of our integrated facility services (IFS) contracts this is • Contract governance forming part of Group Internal Audit’sincreasingy important. scope.2. Operational risks and contract execution • ISS Transition and Operational Process Frameworks.As our services are increasingly becoming an integral part of our • ISS facility management IT system (FMS@ISS) supportscustomers’ value streams, there is a risk of causing a disruption ofour customers’ operations and/or brand damage, if operational automation of the operating processes, which ensures thatprocedures or contract requirements are not complied with. services are delivered and managed according to the process frameworks.3. Financial reporting fraud, fraud and corruption • Operational risk reviews performed on selected contracts asOur decentralised structure of financial IT systems and operational part of the global risk management framework.control structures increases the risk of fraud and corruption. • Group HSE policies implemented.Our growing emerging market presence increases our exposure • Escalation policy.to compliance risks in countries where improper practises maybe common. This may result in overstatement of revenue, • Documented financial controlling processes. See “Internalmisstatement of expenses, misappropriation of assets, kick-backs, controls related to financial reporting” on page 70.bribery and theft. • Review of the integrity and robustness of interfaces is an integral part of internal audit assignments. • Implementation of key controls is monitored through the system of Control Self-Assessments. • Mandatory e-learning modules on anti-corruption and anti-bribery & competition law for selected managers. • Whistleblower system. • Roll-out of automated interfaces between local ERP platforms and the Group’s standardised financial reporting tool for all countries.4. Customer retention and competition • Sales and Operational Process Frameworks established andOur ability to target selected customer segments with attractive continuously embedded into the business.and competitive value propositions is key to attracting andretaining IFS, multi-service and single-service customers. Failure to • Central Customer Relationship Management system (CRM@ISS)develop and execute on value propositions may lead to increased being rolled out.price competition and contract portfolio losses as the facilityservices market is fragmented with relatively low barriers to entry • Annual measurement of customer satisfaction (Net Promoterand significant competition from local and regional companies. Score) through a survey covering most of the Group’s revenue.5. Macroeconomy • Ongoing formal monitoring of market developments, includingThe facility services industry is less sensitive to macroeconomic continuous credit risk assessment of our customers.cycles than a number of other industries. However, economicdownturns or uncertainties in the financial markets could adversely • We strive to predict market dynamics and trends that couldimpact prices, payment terms and demand for services, particularly affect our business in the long term, e.g. in cooperation with theif customers downsize their businesses or reduce their demand for Copenhagen Institute for Futures Studies, we have carried outservices. During the recent economic downturn, in certain regions a study on the future of Facility Management seen in a globaland customer segments, we experienced reduced activity levels perspective (available at www.issworld.com).that adversely impacted our revenue and depressed our operatingmargins.
RISK MANAGEMENT | GOVERNANCE 69GROUP KEY RISKS MITIGATING MEASURES6. Employee risks • Global HR standards.Employee qualifications • The five HR-priorities (see Our employees on page 53) towardsOur organisational structure is decentralised and country andregional managers have substantial autonomy regarding the attracting, engaging and retaining our employees, i.e.management of operations in their local markets. Our success 1) Leadership developmentstrongly relies on qualified local and regional managers in order 2) Leadership assessment and cultureto ensure best practices being shared across the Group, effective 3) Succession planningimplementation and management of our growth strategy as well as 4) Employee engagement; andGroup policies and operational processes. 5) Performance and rewards. • Global employee engagement surveys to gain insights intoEmployee retention and attraction where and how we can improve employee engagement.Our competitive strength is highly dependent upon our ability toattract, train and retain employees at all levels of the organisation.7. Regulatory environment • We strive to monitor and foresee changes in legislation, whichWe are subject to a variety of laws and regulations such as labour, could have a negative impact on our financial performance.employment, immigration, health and safety, tax (including socialsecurity, salary taxes and transfer pricing), corporate governance, • Group Corporate Governance Guidelines.customer protection, business practices, competition and the • Group Contract framework.environment. We incur substantial costs and commit a significant • Operational Process Framework.amount of our management’s time and resources to complying • Mandatory e-learning modules in anti-corruption andwith increasingly complex and restrictive laws and regulations. anti-bribery & competition law for selected managers.8. SubcontractorsWe use subcontractors where we do not have self-delivery • Negotiation Process Framework.capabilities. This represents a risk primarily in respect to: • Separate framework when using subcontractors in countries• Performance: If subcontractors do not perform in accordance with no ISS presence. with the customer contract ISS has entered into. • Supplier Code of Conduct.• Compliance: The use of subcontractors might increase the risk of non-compliance with labour laws or other regulatory requirements. See risk no. 7.
70 GROUP ANNUAL REPORT 2014Internal controls relatingto financial reportingOur internal control Group Internal Audit is responsible • our business is conducted in com-procedures are an essential for providing assurance concerning pliance with applicable legislation,management tool. Care the internal control environment in standards and other regulations.is taken to ensure that a accordance with the internal auditsound framework of con- plan approved by the Audit and Risk Risk assessmenttrols is in place to support Committee. Group Internal Auditthe quality and efficiency of operates under a charter approved by Risks related to the financial reportingour financial reporting. the Board and reports – in addition to process and consolidated accounts the Group CFO – directly to the Audit are identified and assessed annuallyThe Group’s internal control system and Risk Committee. based on a materiality test including anis an integral part of its risk manage- assessment of the impact of quantita-ment systems developed to mitigate The EGM has established a Group tive and qualitative factors as well asrather than eliminate significant risks Controlling department responsible an assessment of the likelihood of anyidentified in the financial reporting for controlling the financial reporting material error occurring. The risk of er-process and to ensure a true and fair from subsidiaries and preparing the rors is higher for accounting areas thatview of the Group’s financial report- consolidated financial reporting. require management judgement anding without material errors. for transactions generated through Internal control procedures related complex accounting processes, e.g.The governance structure applied for to the financial reporting process at impairment and divestments. Account-internal controls related to financial Group level have been established ing areas that require managementreporting follows our risk governance to assess on an ongoing basis the to make estimates and judgementsstructure illustrated on page 66. Group’s internal control environment are described in the relevant notes to and to manage significant identified the consolidated financial statements,The Board of Directors (the Board) risks. However, as a risk of misuse under Critical accounting estimateshas the overall responsibility for the of assets, unexpected losses, etc., and judgements.Group’s internal control environment will always exist, such controls canand has approved policies, standards provide reasonable, but not absolute On an ongoing basis the Audit andand procedures in key areas related assurance against material misstate- Risk Committee discusses:to financial reporting, including the ments, omissions or losses. The aim Code of Conduct, the Accounting of the control environment is there- • material and relevant newManual, the Reporting Manual, Treas- fore to provide the Board and theury Policy, the Financial Policy and EGM with reasonable assurance that: accounting pronouncements andControl Procedures. implementation of such; • internal controls are in place to The Audit and Risk Committee is support the quality and effi- • evaluation of the overall effective-responsible for monitoring the inter- ciency of the financial reporting ness of the internal controls fornal controls and risk management processes; financial reporting; andsystems as well as challenging the Executive Group Management Board • significant risks are identified • accounting for material legal and(the EGM) in its assessment of materi- and material misstatements are tax issues and significant account-al financial reporting risks, i.e. any detected and corrected; ing estimates.risk that may cause a material error inthe Group’s financial reporting. • the financial reporting is in Control activities compliance with ISS policies and procedures and gives a true and In order to sustain a sound control fair view of the Group’s financial environment, control activities are de- position and results; and signed to obtain the desired assurance. These control measures must ensure that all relevant aspects of a specific area are covered and that the combi-
INTERNAL CONTROLS RELATING TO FINANCIAL REPORTING | GOVERNANCE 71nation of control activities monitors all ITEM REPORTING CONTROL ACTIVITIESrelevant aspects of the business. Thecontrol activities are based on the risk Financial All countries must report a full Group controlling monitors andassessment made by the EGM and position and income statement, statement of controls the reporting for significantthe purpose is to prevent, detect and results financial position, statement of deviations compared to budget.correct any material misstatements in cash flows, portfolio analysis andthe financial reporting. three-month forecasts etc. on a monthly basis.In 2014, Group Internal Audit sus-tained and strengthened its focus on Cash flow All countries must bi-weekly report Actual figures are continuouslykey process audits and a new compre- forecasts their daily cash flow forecasts for a monitored and validated by Grouphensive audit programme was devel- rolling three-month period. Treasury for deviations comparedoped and piloted. The new programme to forecasted figures, incl. e.g. dailyprovides broader and more consistent follow-up on local material cashassurance on the effectiveness of the balances.system of internal control activities.The scope includes approximately 70 Business All countries must report a full Monthly meetings betweenkey control activities designed to miti- reviews income statement, statement regional management and countrygate risks of significant errors relating of financial position, statement management with a focus on theto financial reporting, governance of cash flows, portfolio analysis, current performance and the stateand compliance, and operational three-month forecasts and contract of the business.processes. The implementation of the performance etc. on a monthlyprogramme, which will extend to all basis.ISS country organisations, commencedin the second half of 2014 and is the Budgets and All countries must prepare budgets Regional management reviews theprimary focus area for Group Internal financial plansAudit in 2015. and plans for the following financial proposed budgets and plans withThe Group has implemented a formal- year in a pre-defined format. the countries.ised financial reporting process that in-cludes the reporting requirements and Full-year All countries must update and Monthly meetings betweenrelated control activities for key areas forecasts report their full-year estimates regional management and countryillustrated in the table to the right. twice a year. management with focus on the cur- rent performance and the state ofInformation and the business. Regional managementreporting systems reviews the proposed full-year estimates with the countries.All countries use a standardisedfinancial reporting tool. Due to the Strategy Country management must provide Annual meetings held with countrydecentralised structure, various ERP reviews annual updates of a predefined managers at which the strategy isplatforms exist within the Group, but strategy template, including discussed and priorities and plansthe number of different ERP platforms progress on key strategic priorities. for the coming year are agreed.is being reduced on an ongoing basis. Acquisitions Acquisition and divestment Transaction Committee/BoardFurthermore, the roll-out of automated and proposals must be presented for approval is required for largeinterfaces between local ERP platforms divestments approval in a predefined report or strategic acquisitions andand the Group’s standardised financial format and valuation model. divestments.reporting tool for all countries is inprogress. Large Certain large contracts must Depending on size, approval is contracts be presented for approval in a required by regional management,Information and communication predefined format focusing on risk EGM or Transaction Committee/systems to ensure accounting and evaluation. Board.internal control compliance have beenestablished, including an Accounting Control self- Twice a year, country management Group Internal Audit performsManual, Reporting Instructions, a assessments must self-assess the implementation ongoing audits basedBudgeting Manual and other relevant of certain key internal control on the countries’ control self- activities and develop plans to close assessment. any implementation gaps.
72 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 guidelines. The aim is to ensure that employees receive relevant information14 November on a timely basis to ensure efficient and reliable execution of tasks includ-New IFS partnership ing for carrying out the establishedwith Molson Coors control activities.ISS North America won a new IFS contract Monitoringwith the globally leading brewing compa-ny Molson Coors. ISS oversee and delivers Each month the Group’s subsidiariesintegrated facility services to major Molson report financial position and results toCoors sites throughout Canada including Group Controlling, see Control activi-breweries in Toronto, Montreal, Vancouver, ties. This information is used to prepareSt. John’s and Moncton as well as to cor- consolidated financial statements andporate buildings in Toronto and Montreal. reports submitted to the Board and theThe contract commenced November 2014 EGM.and will run for five years. In Decem-ber, services expanded into Distribution Local country management is respon-Centres located throughout the Province sible for ensuring that the controlof Quebec. environment in each operating country is sufficient to prevent material errorsJennifer Bonilla, CEO of ISS North Amer- in the country’s financial reporting. Re-ica, said: “We are extremely proud and gional management provides govern-excited that Molson Coors has chosen to ance of the country operations.partner with ISS in Canada. This is a veryimportant win for ISS in North America, In order to ensure that adequate inter-as our expansion continues in the market, nal control procedures are maintainedand we are fully committed to making this locally, Group Internal Audit visits thepartnership a success.” country organisations on a regular basis. These visits take place according to a plan for the year approved by the Audit and Risk Committee with a primary focus on providing assurance on a consistent set of key control ac- tivities across the Group. The findings and conclusions of internal audits, including recommendations on how to improve the control environment, are reported to country and regional man- agement, representatives of the EGM and the independent auditor. Group Internal Audit performs follow-up audits to ensure that the recommenda- tions are implemented. The key find- ings from internal audits are presented to the Audit and Risk Committee, which evaluates the results and uses the conclusions when reviewing the internal audit plan for the coming year.
INTERNAL CONTROLS RELATING TO FINANCIAL REPORTING | GOVERNANCE 73“ I’m always ready to go the extra mile for the customer” MICHA ROHRHUBER Cleaning professional, ISS Germany Working at world-famous car manufacturer, AUDI AG, fills Micha Rohrhuber with pride and purpose. He goes the extra mile to keep the premises neat so that Audi can focus on developing innovative solutions, revolutionary engineering and progressive design. Micha finds the cooperation with people from different cultures the most rewarding part of his workday.
74 GROUP ANNUAL REPORT 2014At the luxury HOTEL MARMARA in Istanbul, Turkey, OğuzKalaycı takes pride in ensuring the safety of all guests andvisitors. After a day of exploring the city or business meetings,guests are welcomed by Oğuz and he does what he can tomake them all feel at home at the hotel. “ I welcome people at the door with a smile on my face” OĞUZ KALAYCI Security guard, ISS Turkey
REMUNERATION REPORT | GOVERNANCE 75RemunerationreportRemuneration at ISS is and is designed to be competitive and THE REMUNERATION COMMITTEEdesigned to support our in line with market practice in compa-strategic goals and to rable listed companies. The Remuneration Committee was es-promote value creation tablished in 2010. The committee assistsfor the benefit of our The principles outlined in the Remu- the Board in preparing the remunerationshareholders. neration Policy also apply to members policy and the overall guidelines on of the Group Management Board (the incentive pay and recommends to theRemuneration Policy GMB) in addition to the EGM. Board the remuneration of the members of the Board and the EGM as well as theThe overall objectives of the Activities in 2014 and remuneration policy applicable to ISS inRemuneration Policy are: objectives for 2015 general.• to attract, motivate and retain In 2014, the Remuneration Committee The Remuneration Committee has qualified members of the Executive continued to focus on aligning ISS’s engaged Kepler Associates to advise the Group Management Board (the remuneration programmes with our committee as external and independent EGM) and top talent for key strategic goals. advisors on remuneration matters. positions, by providing competitive Kepler Associates do not provide any remuneration recognising high In connection with the IPO in March other services to ISS. performance and supporting our 2014, we redesigned our incentive Leadership Principles; plans for the EGM, the GMB and cer- The applicable remuneration policy tain other senior officers. The incentive was approved by the shareholders at• t o create a strong link between plans were designed to create align- the Annual General Meeting held on 3 the financial performance, ment and to strike a balance between March 2014. The remuneration policy achievement of our strategic goals the short-term and long-term focus is reviewed at least annually by the and remuneration – both short-term of the incentive plans. Two long-term Remuneration Committee. and long-term – for the EGM and share-based incentive programmes other employees in key positions by were implemented; a Long-Term Incen- The Remuneration Policy and the Overall providing a significant proportion tive Programme (LTIP) and a Transition Guidelines on Incentive Pay are available of their total remuneration as Share Programme (TSP) (the latter at http://inv.issworld.com/policies.cfm. performance-based incentives; and being a one-time grant). To cover the obligation under the incentive plans ISS The committee consists of three• t o align the interests of the EGM A/S purchased treasury shares during members (currently Lord Allen of and other employees in key 2014. Kensington Kt CBE (Chairman), Thomas positions with the interests of Berglund and Andrew Wolff). the shareholders by providing Furthermore, adjustments were made a significant proportion of their to the short-term incentive plan (the The committee held six meetings in total remuneration as shares and/ annual bonus) so as to include targets 2014. or as share-related instruments for non-financial KPIs (i.e. employee and to require or recommend a engagement, customer experience and certain amount of shares and/or health and safety) in addition to tar- share-related instruments to be held gets for the Group’s key financial KPIs by members of the EGM and other (i.e. organic growth, operating margin employees in key positions. and cash conversion), which were already taken into account. The non-fi-Remuneration is based on responsibil- nancial KPIs focus on how we conductities, competencies and performance our business. Setting targets for these together with our financial KPIs ensure that high financial performance is
76 GROUP ANNUAL REPORT 2014recognised and that our Leadership Remuneration of the members KPIs; employee engagement, customerPrinciples are supported. of the EGM and the GMB experience and health and safety. Two- thirds of the bonus is paid out in cashThe short-term incentive plan also The main remuneration elements are the following year, while one-third isincludes an element of deferral to summarised in the table below and deferred and settled in restricted sharecreate a balance between the short- applies to the members of the EGM and units, of which 50% are converted intoterm and the long-term objectives of the GMB unless otherwise stated. shares after one year and 50% are con-the incentive programmes. This balance verted into shares after two years.is furthermore supported by the intro- All members receive an annual baseduction of share ownership guidelines, salary based on experience, qualifica- The Long-Term Incentive Programmewhich also aligns the interests of the tions, responsibilities and performance (LTIP) is granted as Performance Shareshareholders with the EGM and other and customary non-monetary benefits Units (PSUs) and the annual grant hasemployees in key positions. These initia- such as a company car, insurance, com- a value of 100% of the annual basetives are described in more detail on the munication and IT equipment. salary for the Group CEO, 70% for oth-next pages. er members of the EGM and 70% for In addition, an annual bonus of up members of the GMB. The performanceOur objective for 2015 is the fur- to 60% of the annual base salary is targets for vesting of the PSUs are totalther alignment of remuneration targeted, which in the event of over- shareholder return (TSR) and earningsprogrammes, particularly incentive achievement can reach 90%. The bonus per share (EPS). The vesting criteria areprogrammes at country level. We do is subject to achieving performance tar- illustrated in the table on the next page.not expect to launch any major new gets for the Group’s key financial KPIs; TSR is compared to a peer group ofprogrammes. organic growth, operating margin and listed Danish companies (Nasdaq Co- cash conversion; and to non-financialELEMENT OBJECTIVE AWARD LEVEL PERFORMANCE MEASURESAnnual base salary Attract and retain high-performing Take into account competitive Reviewed annually based on individ- leaders reflecting their position, market rate of industry peers as well ual responsibilities, qualifications andNon-monetary skills, competencies and experience. as competencies and experience. performance.benefits Customary benefits in accordance Benefits corresponding to market N/A. with market standards to support standards. recruitment and retention.Annual bonus Drive delivery of short-term financial Target bonus is up to 60% of annual Measures and weighting: organic results, implementation of The ISS base salary. Maximum bonus oppor- growth (25%), EBITA margin (25%),Long-Term Incentive Way and behaviour consistent with tunity is up to 90% and is awarded cash conversion (25%), employeeProgramme (LTIP) the ISS Leadership Principles. for performance significantly above engagement, customer experience budget. Objectives are set for and health and safety (15%) periods of one year. One-third of and individual objectives (10%). the bonus is deferred for up to two Performance is measured for each years and settled in restricted share financial year. units. Drive delivery of long-term financial Face value of grant of PSUs is 100% The vesting criteria of the LTIP results, retention of leaders and of annual base salary for the Group are TSR measured against peers alignment to shareholder value CEO, and 70% for other members and growth in EPS. Performance creation. of the EGM and the GMB. conditions are measured over three years from the date of grant.Pension The members of the EGM and N/A. N/A. the GMB are not - apart from one member of the GMB - covered by a pension plan of the Group but shall arrange for their own pension planning.
REMUNERATION REPORT | GOVERNANCE 77penhagen OMX C20) and a peer group VESTING CRITERIA FOR EPS CRITERIA FOR TSRof comparable international servicecompanies. The EPS-target weighs 50% No vesting EPS grows below 12% annually ISS performs below median of peerand each of the two TSR-targets weigh group25%. The peer groups are illustrated inthe table below. 25% vesting EPS grows 12% annually ISS performs at median of peer groupThe PSUs vest three years after grant,provided the performance targets are 100% vesting EPS grows 18% annually or more ISS performs at upper quartile ofmet, i.e. the 2014 grant vests in 2017. peer group or betterPrior to vesting, holders of PSUs do nothave any of the rights that holders of Linear vesting between 25% and 100% vestingshares would otherwise be entitled to,such as voting and dividend rights, and Peer groupsall unvested PSUs will lapse in the event International service companies: ABM Industries, Adecco, Aramark, Bunz, Berendsen, Compass Group, Capita,that employees terminate their employ- G4S, Interserve, Mitie Group, Randstad, Rentokil Initial, Securitas, Serco, Sodexo.ment without cause or if ISS terminatestheir employment with cause. OMX C20 companies: AP Møller – Maersk A, AP Møller – Maersk B, Carlsberg, Chr Hansen Holding, Coloplast, Danske Bank, DSV, FLSmidth & Co, Genmab, GN Store Nord, Jyske Bank, Nordea Bank, Novo Nordisk,Under the Transition Share Pro- Novozymes, Pandora, TDC, Topdanmark, Tryg, Vestas Wind Systems, William Demant Holding.gramme (TSP), members of the EGMand the GMB received a number of PERFORMANCE SHARE UNITS GRANTED TO THE EGMPSUs at no cost (one time grant). TheTSP was granted as PSUs at the time of Jeff Heine Henrik Johnthe IPO and the grant had a value of TSP (number of PSUs) Gravenhorst Dalsgaard Andersen Peri100% of the annual base salary for the 29,063Group CEO; 75% for other members of Granted during the year 49,725 29,063 29,935 29,063the EGM and 70% for members of the Total 49,725 29,063 29,935GMB. The PSUs vest with 50% in 2015and 50% in 2016. The performance Jeff Heine Henrik Johncriteria are the non-individual criteria of LTIP (number of PSUs) Gravenhorst Dalsgaard Andersen Perithe annual bonus plans for 2014, and Granted during the year 27,1252015, respectively. Total 49,725 27,125 27,939 27,125Remuneration to each member of the 49,725 27,125 27,939EGM and an overview of granted PSUsare disclosed in the tables on this page.Total remuneration to the GMB is dis-closed in note 6.1 to the consolidatedfinancial statements.REMUNERATION TO THE EGM 2014 2013 John Jeff Heine Henrik John Jeff Heine Henrik PeriDKK thousand Gravenhorst Dalsgaard Andersen Peri Gravenhorst Dalsgaard Andersen 2,507Base salary and non-monetary 8,215 6,499 6,619 6,429 7,901 2,839 6,431 1,451 benefits 4,314 3,388 3,470 3,389 5,044 1,550 4,046 8,798 2,325 5,031 1,705 –Annual bonus 3,977 2,274 2,343 2,274 – – – –Bonus related to the IPO – – –Share-based payments 13,797 3,958 12,945 4,389 10,477Total remuneration 25,304 14,486 17,463
78 GROUP ANNUAL REPORT 2014KEY EVENTS 2014 Termination and severance payment and the shareholders, the Remuneration Employment contracts of the EGM may Committee has introduced share own-13 March be terminated at 18-24 months’ notice. ership requirements for the members Employment contracts of the GMB may of the EGM and the GMB. The GroupISS successfully listed be terminated at 12 months’ notice, CEO is expected to build up a holdingits shares on Nasdaq with the exception of one contract. of shares equivalent to 100% of theCopenhagen Members of the EGM and the GMB may annual base salary, while other members terminate their positions at six months’ of the EGM are expected to build upISS was successfully listed on Nasdaq notice. Apart from one employment a holding of shares equivalent to 70%Copenhagen and was the largest IPO in contract with a member of the GMB of their annual base salary, and finallyDenmark in two decades. The offer price that includes severance payment of each member of the GMB is expected towas set at DKK 160 per share equiva- approximately two years’ salary in the build up a holding of shares equivalentlent to a market capitalisation of DKK event of termination by ISS, no members to 35% of their annual base salary. To29.6 billion. The proceeds from the IPO of the EGM or the GMB are entitled to build up the required holding of shareswere used to deleverage ISS, and were severance payments. The employment over time, the members of the EGMtogether with the senior facilities used to contracts contain no special termination and the GMB will be required to retain acompletely take out the pre-IPO financ- rights and no change of control clauses. minimum of 50% of the shares receivedings, thereby strengthening the financial from the LTIP, the TSP or deferred bonusprofile of the company. Reclaiming variable pay shares (subject to disposals required to meet any tax and other associatedLord Allen of Kensington Kt CBE, Chair- Bonuses and any other variable com- obligations) until the required shareman of the Board of Directors, said: ponents of remuneration are subject ownership is met. The actual holdings“ISS has grown into a global facility to claw-back if in exceptional cases it is for the members of the EGM as per 31services leader and we are pleased that subsequently determined that payment December 2014 is shown below.private and institutional investors have was based on information that wasappreciated the qualities of our business. manifestly misstated. Reclaim in full or in Investment and incentiveI am also delighted for our team, which is part of the variable component of remu- programmes settledled with such drive, focus and enthu- neration is determined at the discretion following the IPOsiasm by Jeff Gravenhorst. Becoming a of the Board.listed company is just the beginning not In 2006, EQT Partners (EQT) and Thethe end and the management team is Share ownership guidelines Goldman Sachs Group, Inc. (GSCP thefocused on delivering for all sharehold- owners of ISS at the time) established aers, employees and, importantly, our In order to strengthen the alignment of Management Participation Programmecustomers.” interests between the EGM, the GMB SHARE OWNERSHIP GUIDELINES FOR THE EGM Jeff Heine Henrik John Gravenhorst Dalsgaard Andersen Peri Share ownership requirement of 100% 70% 70% 70% annual base salary (over time) Required shares to be retained from 0% 0% 0% 0% vested incentive programmes at 31 127% 142% 101% 142% December 2014 99,450 56,188 57,874 56,188 Actual holding at 31 December 2014 Unvested PSUs at 31 December 2014 EGM HOLDINGS OF ISS A/S SHARES Jeff Heine Henrik John Gravenhorst Dalsgaard Andersen Peri 49,569 Shares received in settlement of the 56,621 49,569 36,211 49,569 MPP investment Number of shares at 31 56,621 49,569 36,211 December 2014
REMUNERATION REPORT | GOVERNANCE 79(MPP) through which the members tatives of EQT, GSCP and Ontario Teach- BOARD HOLDINGS OF ISS A/S SHARESof the EGM and a number of senior ers’ Pension Plan Board (OTPP)) receivedofficers of the Group invested. Follow- remuneration for duties performed in Name Numbering the IPO in March 2014, the MPP ISS A/S and other companies of the ISS Lord Allen of 86,843investment was settled in ISS shares. The Group based on a fixed fee approved by Kensington Kt CBE ISS shares received by members of the the general meeting for the current year.EGM and the GMB are subject to lock Remuneration guidelines are illustrated Thomas Berglund 8,676up for a period of 360 days ending on 9 in the table below.March 2015. After this date the shares Jennie Chua 8,676may be sold independently of the share Members of the Board (employee repre-ownership guidelines. sentatives excepted) did not participate Morten Hummelmose None in any incentive programmes in 2014.Certain members of the Board of Direc- Henrik Poulsen 26,052tors participated in a Directors’ Partici- Expenses, such as travel and accommo-pation Programme (DPP) established by dation in relation to board meetings, Jo Taylor NoneEQT and GSCP, under which they invest- relevant training as well as reasonableed indirectly in shares in FS Invest S.à r.l. office expenses for the Chairman, are Andrew Evan Wolff NoneFollowing the IPO in March 2014, the reimbursed by ISS. If members of theDPP investment was settled in ISS shares. Board are required to travel overseas to Pernille Benborg NoneThe ISS shares received are subject to attend board meetings, a fixed travellock up for a period of 360 days ending allowance per day of travelling and Joseph Nazareth 3,125on 9 March 2015. At 31 December physical meeting attendance is paid to2014, the members of the Board held a such Board members. Palle Fransen Queck Nonetotal of 133,372 shares in ISS A/S. BOARD FEE STRUCTURE Base fee Additional fee,In January 2014, a cash-based bonus DKK 400,000 % of base feescheme was established for the EGM, Board membersthe GMB and certain other employees Chairman of the Board 200%subject to the completion of an IPO. Deputy chairman of the Board 50%The scheme paid out DKK 14 million to Chairman of the Audit and Risk Committeethe EGM. Chairman of other committees 100% Members of committees 75%The EGM, the GMB and certain other 38%employees participated in our pre-IPOlong-term incentive plan. This plan was REMUNERATION TO THE BOARD Base Additional Travelcash-based and was subject to an IPO fee fee allowance Totalor a sale of the majority of shares in ISS DKK thousandto a third party. The pre-IPO long-term 1,200 900 74 2,174incentive plan paid out DKK 3 million Lord Allen of Kensington Kt CBE 810to the EGM. Thomas Berglund 600 150 60 729 Jennie Chua -One member of the EGM, three Morten Hummelmose 400 150 179 800members of the GMB and certain Henrik Poulsen -other employees participated in an MPP Jo Taylor --- -2012 Transaction Bonus Scheme. The Andrew Evan Wolff 400MPP 2012 Transaction Bonus Scheme Pernille Benborg 400 400 - 400was designed for a limited number Joseph Nazareth 400of employees in connection with the Palle Fransen Queck ---unwinding of the MPP. The MPP 2012 5,713Transaction Bonus Scheme paid out DKK Total ---1 million to one member of the EGM. 400 - -Remuneration of theBoard of Directors 400 - -Members of the Board (except represen- 400 - - 3,800 1,600 313
80 GROUP ANNUAL REPORT 2014ShareholderinformationOur shareholders are Share price performance MAJOR SHAREHOLDERSimportant to us. We arecommitted to maintaining a The share price ended the year at DKK FS Invest II, 19%constructive dialogue and a 178.1, an increase of 11.3% fromhigh level of transparency in the initial listing price of DKK 160 per Ontario Teachers’ Pensionour communication with the share. During the same period, the Plan Board (OTPP), 12%market, aiming to ensure Nasdaq Copenhagen OMX C20 indexfair and efficient pricing of increased 5.5%. Artisan Partners Limitedour shares. Partnership, 11% The average daily trading volume of KIRKBI Invest A/S, 6%ISS A/S’s shares were listed on Nasdaq ISS shares on Nasdaq Copenhagen was Other, 51%Copenhagen on 13 March 2014 and 484,000 shares in 2014, with volumebecame part of the Nasdaq Copenha- picking up during the year. ISS A/S andgen OMX C20 index in June 2014. In Management, 1%addition, ISS Global A/S, an indirect At year end 2014, ISS had a marketsubsidiary of ISS A/S, has issued bonds capitalisation of DKK 33.1 billion, com- Major shareholders at 31 Decemberunder an EMTN programme which pared with DKK 29.7 billion at the time 2014 based on direct and indirectare listed on the Luxembourg Stock of the IPO in March 2014. holdings reported to ISS by investorsExchange’s regulated market. For more are illustrated above.information regarding the Group’s Shareholdersfinancing see page 15 and section 5 to Dividendthe consolidated financial statements. At 31 December 2014, our largest single shareholder was FS Invest II The Board of Directors has adopted S.à r.l, holding 19.3% of our shares. a dividend policy with a target initial pay-out ratio of approximately 50% As of 31 December 2014, the free of Profit before goodwill impairment float, i.e. excluding shares held by FS and amortisation/impairment of brands Invest II S.à r.l and ISS A/S’s holding of and customer contracts. At the annual treasury shares, was 80%. general meeting to be held on 15 April 2015, the Board of Directors will propose a dividend for 2014 of DKK SHARE PRICE ISS A/SPrice OMX C20 (indexed)210200190180170160150 March April May June July August September October November December 2014
SHAREHOLDER INFORMATION | GOVERNANCE 814.90 per share of DKK 1, equivalent to a ers through company announcements, COMPANY ANNOUNCEMENTSpay-out ratio of approximately 50%. press releases, conference calls, investor presentations, meetings, capital market ISS published 40 company announce-Capital structure days, our website and direct communi- ments in 2014, of which a selection are cation with key stakeholders. We have listed below:ISS A/S’s total share capital of nomi- an investor section on our corporatenally DKK 185,668,226 is divided into website, where investors can subscribe Sale of 25,000,000 existing shares in185,668,226 shares of DKK 1 each. to company announcements, ISS news ISS A/S by FS Invest II S.à r.lAll shares are fully paid up. As of 31 etc. 3 DecemberDecember 2014, ISS held a total of1,000,000 shares in treasury for the As part of our investor relations efforts, ISS issues EUR 1.2 billion notes in 5purpose of covering obligations under ISS maintains an active dialogue with and 10 yearsexisting share-based incentive pro- current as well as potential new inves- 24 Novembergrammes. tors and analysts through road shows and conferences in Europe and North ISS completes divestment of NordicISS has one class of shares and no America. staffing activitiesshares carry special rights. Each share 3 Octobergives the holder the right to one vote at We aim to maintain broad coverageour general meetings. by analysts. Year-end 2014, we were Sale of 31,000,000 existing shares covered by 13 Danish and international in ISS A/S by FS Invest II S.à r.l andShares shall be issued in the name of sell-side analysts who regularly publish Ontario Teachers’ Pension Plan Boardthe holder and shall be recorded in their recommendations. For a full list of 9 Septemberthe holder’s name in the register of analysts, please visit http://inv.issworld.shareholders. Reference is made to ISS’s com/analysts.cfm ISS to fully redeem EUR 256.3 millionshareholder portal on the ISS website. Senior Subordinated Notes Due 2016 We observe a four-week silent period 3 AprilIn line with our Financial Policy, our prior to the release of annual and inter-objective is to maintain an investment im financial reports, during which we do ISS completes divestment ofgrade financial profile, and the target not comment on any matters related to commercial security activities inis to reduce our financial leverage to our financial results or expectations or Pacific Regionbelow 2.5x pro forma adjusted EBITDA. take part in meetings or presentations 31 March with analysts or investors.Investor relations Completion of the offering, Investor relations contacts registration of share capital increaseWe aim to ensure that investors have and repayment of senior securedadequate and equal access to relevant Nicholas Ward facilitiesinformation by providing quality com- Head of Group Investor Relations 18 Marchmunications to the financial markets in Tel. +45 38 17 00an accurate and timely manner in order [email protected] ISS completes divestment ofto support normal trading and a fair landscaping activities in Francepricing of ISS’s shares and other listed FINANCIAL CALENDAR 2015 28 FebruaryISS securities. Annual General Meeting ISS extends global facility servicesWe comply with the statutory require- 15 April agreement with HP until 2018ments concerning the publication of 3 Februarymaterial information relevant to inves- Q1 2015 reporttors and the financial markets’ evalua- 21 May A complete overview of published companytion of our activities, business objectives, announcements are available atstrategies and results. Q2 2015 report http://inv.issworld.com/announcements.cfm 27 AugustWe strive to be recognised by the inves-tor community as an honest, open and Q3 2015 reportreliable company and to be well-known 18 Novemberamong institutional investors as wellas among private investors. We seekto achieve this by communicating withinvestors, analysts and other stakehold-
82 GROUP ANNUAL REPORT 2014Group Management BoardEXECUTIVE GROUP MANAGEMENT BOARDJeff Gravenhorst Heine Dalsgaard Luis AndradeGroup CEO since April 2010. Joined ISS in 2002. Group CFO since August 2013. Joined ISS in Regional CEO Latin America sinceBorn 1962. 2013. Born 1971. August 2009. Joined ISS in 1992. Born 1960.Member of the board of directors and manage- Member of the board of directors and manage- Previously held positions within ISS as Regionalment of certain ISS Group companies. ment of certain ISS Group companies. Director of Iberia & Latin America as well as Country Manager of ISS Portugal.Deputy chairman of the board of directors of Prior to joining ISS, held senior managementRambøll Gruppen A/S, member of the board positions latest as Group CFO of Grundfosof directors of Danish Crown A/S and member Group.of the Confederation of Danish Industry’s (DI)Permanent Committee on Business Policies.Previously held management positions within ISSas Group COO, Group CFO and CFO of ISS UK.Prior to joining ISS, held management positionsin Europe and US.Henrik Andersen John Peri Flemming BendtGroup COO EMEA since March 2013. Joined ISS Group COO Americas & APAC since August Regional CEO Eastern Europe sincein 2000. Born 1967. 2013. Joined ISS in 2013. Born 1961. February 2013. Joined ISS in 1998. Born 1971. Previously held positions within ISS as interimMember of the board of directors and manage- Member of the board of directors and manage- Country Manager and CFO of ISS Denmark,ment of certain ISS Group companies. ment of certain ISS Group companies. Executive General Manager and Country Man- ager of ISS Australia, CFO of ISS Belgium, HeadMember of the board of directors of Vestas Prior to joining ISS, COO and Executive Vice of Controlling in the ISS Group and variousWind System A/S and a member of the Invest- President of Global Operations of Celestica Inc. positions at ISS Netherlands.ment Committee of Maj Invest Equity 4 K/S. Troels BjergPreviously held several management positions Regional CEO Northern Europe since Januarywithin ISS among others as Group CFO, Country 2015. Joined ISS in 2009. Born 1963.Manager and CFO of ISS UK Ltd, International Member of the board of directors of EjnerBusiness Director Northern Europe and Head of Hessel Holding A/S (and three of its subsidiar-Group Treasury. ies) and member of the central board of the Confederation of Danish Industry (DI). Previously held positions within ISS as Regional CEO Nordic and regional CEO Eastern Europe.
GROUP MANAGEMENT BOARD | GOVERNANCE 83Jacob Götzsche Todd O’Neill Bjørn RaasteenRegional CEO Central Europe since July 2008. Head of Group Strategy & Corporate Devel- Group General Counsel since January 2005.Joined ISS in 1999. Born 1967. opment since September 2008. Joined ISS in Joined ISS in 1999. Born 1964. 2008. Born 1966.Previously held positions within ISS as COO Prior to joining ISS, attorney-at-law with DanishCentral Europe and Regional Director Central Prior to joining ISS, was a Director of SEB law firm Bruun & Hjejle. Has right of audienceEurope, International Business Director Central Enskilda. before the Danish Supreme Court.Europe and various other positions withinM&A, Corporate Finance and Controlling.Thomas Hinnerskov Andrew Price Jørn VestergaardRegional CEO APAC since February 2012. Head of Global Corporate Clients since 2011. CFO Americas & APAC since October 2013.Joined ISS in 2003. Born 1971. Joined ISS in 1995. Born 1964. Joined ISS in 2002. Born 1968.Previously Thomas held positions within ISS as Previously held positions within ISS as COO Previously held positions within ISS as CFO ofCountry Manager of ISS Austria and ISS Ireland, Facility Services as well as Managing Director of ISS Norway, Regional CFO Nordic, Internationalrespectively, and COO Key Accounts of ISS Integrated Solutions and Commercial Director, Business Director, Head of Group ControllingSweden as well as responsible for Task Force as Healthcare of ISS UK. and Group Controller.Vice President at the ISS Group.Henrik LangebækCFO EMEA & Group Procurement since Febru-ary 2013. Joined ISS in 2004. Born 1966.Previously held positions within ISS as COOProjects & Group Procurement, interim RegionalCEO APAC, COO Business Carve-Out & GroupProcurement, Regional CFO APAC and RegionalDirector (India, Thailand, Malaysia, Singapore &the Philippines).
84 GROUP ANNUAL REPORT 2014Board of DirectorsLord Allen of Kensington Kt CBE Thomas Berglund as chief corporate officer of CapitaLand Ltd and (Deputy Chairman) president and CEO of the Ascott Group Ltd as(Chairman) Born: well as CEO and chairman of Raffles Holdings Nationality: Ltd and Raffles International Ltd, respectively.Born: 1957 First elected: 1952 Independence: Swedish Education: Bachelor of Science from the SchoolNationality: British March 2013 of Hotel Administration, Cornell University. Independent Competencies: Executive management experience from international companies, strategic planning, extensive board experience, property and facility management, management expertise from the service and hotel industries.First elected: March 2013Independence: IndependentChairman of the Remuneration Committee, Member of the Remuneration Committee.Chairman of the the Nomination Committeeand Chairman of the Transaction Committee. President and CEO of Capio Holding AB (including management positions on the boardChairman of Global Radio Group (and a of directors and/or executive management of 12member of the board of directors of seven of its of its subsidiaries). In addition, a member of thesubsidiaries), Boparan Holdings Ltd and 2 Sisters executive management of TA Consulting GmbH.Food Group Ltd and a member of the board ofdirectors of Grandmet Management Ltd and Previously president and CEO of Securitas and Morten HummelmoseGrandmet Development Ltd as well as a partner CEO of Eltel.of Xseqour Partners. In addition, chairman of Born: 1971the management board of the British LabourParty and Join In Trust Ltd and senior advisor to Nationality: DanishGoldman Sachs Capital Partners and advisor toBoparan Holdings Ltd and Powerscourt. Education: Bachelor of Science in Business First elected: June 2013 administration and Economics from Stockholm School of Economics. Independence: IndependentPreviously CEO of Compass as well as chief Competencies: Extensive experience in leading Member of the Audit and Risk Committee, mem-executive of Granada Group Plc. and ITV plc and and growing international service companies. ber of the Nomination Committee and memberexecutive chairman of Granada Media Plc. He of the Transaction Committee.has also been chairman of EMI Music, a memberof the board of directors of Virgin Media Ltd Partner at EQT Partners and head of itsand Tesco Plc. In addition, previously chairman Copenhagen office as managing director ofof the British Red Cross and a member of the EQT Partners A/S and a member of the board ofLondon Organising Committee of Olympic and directors of EQT Partners A/S, R. Færch Plast A/S,Paralympic Games as well as vice chairman of Færch Plast Group A/S and Zebra A/S.the London 2012 Bid Committee for the Olym-pic and Paralympic Games. Previously worked at Enskilda Securities in Copenhagen, Goldman Sachs International in London and Nordea in Copenhagen.Education: FCMA from Institute of Manage- Jennie Chua 1944 Education: Master of Science in Economics fromment Accountants and Honorary Doctorate Born: Singaporean the University of Copenhagen and a Master ofDegrees from the University of Salford, the Nationality: December 2011 Science in Finance from the University of London.Manchester Metropolitan University and the First elected: IndependentSouthampton Solent University. Independence: Competencies: Professional experience in investing in large international companies, broadCompetencies: Professional experience in Member of the Nomination Committee. experience within banking and private equity,managing multi industry companies, significant expertise in complex financing structures andfinancial and commercial skills and extensive M&A.board experience. Chairman of Alexandra Health System Pte Ltd (and three of its subsidiaries), GLH Management Henrik Poulsen 1967 Group Pte Ltd and Geriatric Education and Born: Danish Research Institute Limited and deputy chairman Nationality: August 2013 of Temasek Foundation CLG Ltd as well as a First elected: Independent member of the board of directors of Far East Independence: Orchard Ltd, GuocoLand Ltd, GuocoLeisure Ltd, MOH Holdings Pte Ltd (and committee member of MOH Holdings Healthcare Infrastructure and Planning Committee), Pas De Deux Holdings Pte Ltd, The Singapore Chinese Girls’ School, Beeworks Inc, The RICE Company Ltd and CapitaLand Hope Foundation. In addition, a member of the Singapore Pro-Enterprise Panel, Justice of the Peace of the Prime Minister’s Office (Singapore) and Singapore’s Non-Resident Ambassador to the United Mexican States. Chairman of the Audit and Risk Committee. Previously held a number of management posi- tions in the hotel and tourism industry, including
BOARD OF DIRECTORS | GOVERNANCE 85CEO of DONG Energy A/S and deputy chairman Andrew Evan Wolff Joseph Nazareth (E)of Danfoss A/S. In addition, independent indus-trial advisor to EQT and a member of the board Born: 1969 Born: 1960of the Denmark-America Foundation as wellas a member of the Advisory Board of Danske Nationality: U.S.A Nationality: CanadianBank A/S. First elected: June 2013 First elected: March 2011Previously CEO and president of TDC A/S, oper-ating executive at Capstone/KKR in London and Independence: Independent Independence: Not independentheld various positions with Lego including exec-utive vice president of Markets and Products. Member of the Remuneration Committee and Group Vice President and Head of Group Health, member of the Transaction Committee. Safety and Environment and Corporate Respon-Education: Bachelor of Science in International sibility since 2010. Joined the ISS Group in 2010Business and a Master in Finance and Account- Head of the Goldman Sachs Merchant Banking from A.P. Møller-Mærsk, where he was Head ofing, both from Aarhus School of Business. Division in Europe, the Middle East and Africa Group HSSE. and co-head of Merchant Banking Division inCompetencies: International as well as APAC. In addition, a member of the board ofexecutive management experience from large directors of Hastings Insurance Group (Invest-international companies. ment) Plc and Taikang Life Insurance Co. Ltd. Previously a member of the board of directors Education: Civil Engineering degree from McGill of several companies in a number of countries. University and Master of Science in Business Administration from the University of Ottawa.Jo Taylor 1961 Education: Bachelor in Philosophy from YaleBorn: British University and a JD degree in law and a MasterNationality: August 2012 of Science in Business Administration, bothFirst elected: Independent from Harvard University.Independence: Competencies: Experience investing acrossMember of the Audit and Risk Committee and global markets and extensive global experience Palle Fransen Queck (E)member of the Transaction Committee. from serving on the boards of companies in the United Kingdom, the United States, Canada, Born: 1975 Argentina, Brazil, Japan, China, Korea, France, Norway and Denmark. Nationality: DanishManaging director, EMEA of Ontario Teachers’ First elected: March 2011Pension Plan Board and head of its Londonoffice and holds various positions as director Independence: Not independentand president in its subsidiaries. In addition,chairman of the board of directors of Teodin Group Vice President and Business DevelopmentHoldco AS (and one of its subsidiaries) as well as Director, Central Europe since 2012. Previouslya member of the board of directors of Helly Han- he held various positions with the ISS Groupsen Group AS, Frontier Holdco Ltd (and three of including as Vice President of Process Improve-its subsidiaries), Premier Lotteries UK Ltd (and ment and Business Solutions. Joined the ISStwo of its subsidiaries), Camelot Business Solu- Group in 2000.tions Ltd (and two of its subsidiaries), Busy BeesBenefits Holdings Ltd (and five of its subsidiaries) Pernille Benborg (E) Education: Bachelor of Science (Hons) in Engi-and Jaeger Eins Holdings Ltd. neering from Copenhagen University College of Born: 1970 Engineering and a Master of Science in Business Administration (MBA) from Henley BusinessPreviously held a number of non-executive Nationality: Danish School.positions with both public and private compa-nies following a 20-year career at 3i Group Plc, First elected: March 2011where he was head of venture, member of theGroup Management and Investment Commit- Independence: Not independenttees and CEO of a US investment subsidiary. Group Vice President and Head of Group Com- pliance since 2007.Education: Bachelor of Arts in History from the Previously she held various positions with the ISSUniversity of London and a Master of Science Group including as Vice President of Compli-in Business Administration from Manchester ance and Group Financial Controller of GroupBusiness School. Finance. Joined the ISS Group in 2000.Competencies: Professional experience in Education: Master of Science in Businessinvesting in international companies, broad Administration and Auditing from Copenhagenexperience within private equity and wide rang- Business School.ing non-executive roles working with growingcompanies. E = employee representative.
86 GROUP ANNUAL REPORT 2014
FINANCIAL STATEMENTS 87 Financial statements Consolidated financial statements 89 Management statement 150 Independent auditors’ report 151 Definitions 153
88 GROUP ANNUAL REPORT 2014“ Supporting the customer’s primary goals is my calling” SONIA BROCARD Receptionist, ISS Switzerland At the premises of AMBEV in Rio de Janeiro, Brazil, Marcos works hard to create beautiful gardens and seeing the area come to life makes it all worth it. He finds the flowers magical aAgBnersodtascatrfheordecreyaispajtironieobcnhowiisnstetplaalrtcdidtNoewnE.SieMtT.hLapÉrc’esoooptfhlfeircifveresosimnfrOoamlrlboetvh,eeSrwrteihtcezoewgrnloairntliddo,neSvhoeenriya day. Sonia finds that the contact with all the visitors and the numerous colleagues in a multicultural environment gives her a very diverse approach to life.“ The secret is not to chase butterflies, but to nurture the garden so they return.” MARCOS AURÉLIO DE ABREU Gardener (Cleaner), ISS Brazil
CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL STATEMENTS 89Consolidated 89 Consolidated financial statementsfinancial 90 Consolidated income statementstatements 91 Consolidated statement of comprehensive income 92 Consolidated statement of cash flows 93 Consolidated statement of financial position 94 Consolidated statement of changes in equity 96 Section 1 Basis of preparation 96 Note 1.1 Basis of preparation 99 Section 2 Operating profit 99 Note 2.1 Segment and revenue information 102 Note 2.2 Translation and operational currency risk 102 Note 2.3 Staff costs 103 Note 2.4 Other income and expenses, net 104 Section 3 Working capital 104 Note 3.1 Changes in working capital 105 Note 3.2 Trade receivables and related credit risk 106 Note 3.3 Other receivables 107 Note 3.4 Other liabilities 108 Section 4 Strategic investments and divestments 108 Note 4.1 Divestments 110 Note 4.2 Disposal groups 112 Note 4.3 Intangible assets 114 Note 4.4 Impairment tests 117 Note 4.5 Goodwill impairment 118 Section 5 Capital structure 118 Note 5.1 Equity 120 Note 5.2 Loans and borrowings 121 Note 5.3 Financial risk management 122 Note 5.4 Liquidity risk 123 Note 5.5 Currency risk 124 Note 5.6 Interest rate risk 126 Note 5.7 Derivatives 127 Note 5.8 Financial income and financial expenses 128 Section 6 Governance 128 Note 6.1 Remuneration to the Board of Directors and the Group Management Board 129 Note 6.2 Share-based payments 131 Note 6.3 Related parties 131 Note 6.4 Fees to auditors 132 Section 7 Tax 132 Note 7.1 Income taxes 134 Note 7.2 Deferred tax 136 Section 8 Other required disclosures 136 Note 8.1 Earnings per share 137 Note 8.2 Property, plant and equipment 138 Note 8.3 Other financial assets 139 Note 8.4 Pensions and similar obligations 142 Note 8.5 Provisions 143 Note 8.6 Contingent liabilities 144 Note 8.7 Reconciliation of segment information 145 Note 8.8 Subsequent events 145 Note 8.9 New standards and interpretations not yet implemented 146 Note 8.10 Subsidiaries, associates and joint ventures
90 GROUP ANNUAL REPORT 2014Consolidated income statement1 January – 31 DecemberDKK million Note 2014 2013 2.1, 8.7Revenue 74,105 78,459 2.3 (48,849) (51,234)Staff costs 6.4Consumables 4.3, 8.2 (6,413) (6,949)Other operating expenses (13,961) (15,174)Depreciation and amortisation 1) 2.4 2.1, 8.7 (732) (787)Operating profit before other items 2) 5.8 4,150 4,315Other income and expenses, net 5.8 (160) (100)Operating profit 1) 7.1 3,990 4,215 303 176Financial income 4.5Financial expenses 4.3 (1,599) (2,446) 7.1, 7.2Profit before tax, goodwill impairment and amortisation/impairment 2,694 1,945 of brands and customer contracts (878) (919)Income taxes 3) 1,816 1,026Profit before goodwill impairment and amortisation/impairment of brands and customer contracts (448) (985) (588) (667)Goodwill impairment 234 229Amortisation/impairment of brands and customer contractsIncome tax effect 4) 1,014 (397)Net profit for the year 1,011 (399) 3 2Attributable to: 1,014 (397)Owners of ISS A/SNon-controlling interests 8.1 5.8 (2.9) 8.1 5.8 (2.9)Net profit for the year 8.1 10.3 7.6Earnings per share:Basic earnings per share (EPS), DKKDiluted earnings per share, DKKAdjusted earnings per share, DKK 5)1) Excluding Goodwill impairment and Amortisation/impairment of brands and customer contracts.2) Excluding Other income and expenses, net, Goodwill impairment and Amortisation/impairment of brands and customer contracts.3) Excluding tax effect of Goodwill impairment and Amortisation/impairment of brands and customer contracts.4) Income tax effect of Goodwill impairment and Amortisation/impairment of brands and customer contracts.5) Calculated as Profit before goodwill impairment and amortisation/impairment of brands and customer contracts divided by the average number of shares (diluted).
CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL STATEMENTS 91Consolidated statement of comprehensive income1 January – 31 DecemberDKK million Note 2014 2013 1,014 (397)Net profit for the year 8.4 8.4 (621) 446Other comprehensive income 7.1 14 (27)Items not to be reclassified to the income statement in subsequent periods: (92)Actuarial gains/(losses) 5.7 138Impact from asset ceiling regarding pensions 5.7 (796)Tax 7.1 472 4 (20)Items to be reclassified to the income statement in subsequent periods: 23 80Foreign exchange adjustments of subsidiaries and non-controlling interests (21)Fair value adjustment of hedges, net (1) (406)Fair value adjustment of hedges, net, transferred to Financial expenses 5 (803)Tax 1,019 (804)Total other comprehensive income 1,016 1 3Total comprehensive income for the year (803) 1,019Attributable to:Owners of ISS A/SNon-controlling interestsTotal comprehensive income for the year
92 GROUP ANNUAL REPORT 2014Consolidated statement of cash flows Note 2014 2013 4.3, 8.21 January – 31 December 4,150 4,315 3.1 732 787DKK million 53 - 4.1 (71) 80Operating profit before other items (203) (146)Depreciation and amortisation (402) (388)Share-based payments (non-cash) (933)Changes in working capital (1,082)Changes in provisions, pensions and similar obligations 3,715Other expenses paid 3,177Income taxes paid (14) (19) 2,183Cash flow from operating activities 1,335 (902)Acquisition of businesses (848) 99Divestment of businesses 65 (35)Acquisition of intangible assets and property, plant and equipment 19Disposal of intangible assets and property, plant and equipment 1,331(Acquisition)/disposal of financial assets 552 4,425Cash flow from investing activities 23,483 (7,983) (33,862)Proceeds from borrowings 135Repayment of borrowings 130 (1,734)Interest received (912)Interest paid 7,788 -Proceeds from issuance of share capital (160) -Purchase of treasury shares (2)Non-controlling interests (2) (5,159)Cash flow from financing activities (3,535) (113)Total cash flow 194 3,528Cash and cash equivalents at 1 January 3,277 (113)Total cash flow 194 (138)Foreign exchange adjustments 86 3,277Cash and cash equivalents at 31 December 3,557
CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL STATEMENTS 93Consolidated statement of financial positionAt 31 DecemberDKK million Note 2014 2013Assets 4.3, 4.4 27,465 28,346Intangible assets 8.2 1,638 1,715Property, plant and equipment 7.2 755 634Deferred tax assets 8.3 431 307Other financial assets 3.2 30,289 31,002Non-current assets 3.3 4.2 309 309Inventories 10,446 10,299Trade receivables NoteTax receivables 212 209Other receivables 5.1 1,449 1,520Cash and cash equivalents 5.2 3,557 3,277Assets classified as held for sale 8.4 1,950 7.2 472Current assets 8.5 17,564 16,445Total assets 5.2 48,566 46,734DKK million 3.4 2013 8.5 2014Equity and liabilities 4.2 4,213Total equity attributable to owners of ISS A/S 12,910 9Non-controlling interests 10 4,222Total equity 12,920 20,416Loans and borrowings 14,887 869Pensions and similar obligations 1,415Deferred tax liabilities 1,415 1,590Provisions 348 470Non-current liabilities 18,065 23,345Loans and borrowings 1,338 5,648Trade payables 3,562 3,436Tax payablesOther liabilities 170 448Provisions 10,254 10,134Liabilities classified as held for sale 249 317Current liabilities 176 1,016Total liabilities 15,749 20,999Total equity and liabilities 33,814 44,344 46,734 48,566
94 GROUP ANNUAL REPORT 2014Consolidated statement of changes in equity1 January – 31 December Attributable to owners of ISS A/S2014 Share Retained Trans- Hedging Treasury Proposed Non-con- TotalDKK million capital earnings lation reserve shares dividends trolling equity reserve Total interestsEquity at 1 January 135 4,536 (427) (31) - - 4,213 9 4,222Comprehensive income for the yearNet profit for the year - 101 - - - 910 1,011 3 1,014Other comprehensive income -- 472 - - - 472 (0) 472Foreign exchange adjustments of sub- -- - (20) - - (20) - (20) sidiaries and non-controlling interests -- - 23 - - 23 - 23Fair value adjustment of hedges, net - (621) - - - - (621) - (621)Fair value adjustment of hedges, net, - 14 - - - - 14 - 14 transferred to Financial expenses - 138 - (1) - - 137 - 137Actuarial gains/(losses)Impact from asset ceiling regarding pensionsTaxTotal other comprehensive income - (469) 472 2 - - 5 (0) 5Total comprehensive income for - (368) 472 2 - 910 1,016 3 1,019 the yearTransactions with owners 50 7,986 - -- - 8,036 - 8,036Share issue - (248) - -- - (248) - (248)Costs related to the share issue -- - - (160) - (160) - (160)Purchase of treasury shares - 53 - -- - 53 - 53Share-based payments -- - -- -- (2) (2)Dividends paidTotal transactions with owners 50 7,791 - - (160) - 7,681 (2) 7,679Total changes in equity 50 7,423 472 2 (160) 910 8,697 1 8,698Equity at 31 December 185 11,959 45 (29) (160) 910 12,910 10 12,920
CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL STATEMENTS 95Consolidated statement of changes in equity1 January – 31 December Attributable to owners of ISS A/S2013 Share Retained Trans- Hedging Total Non-con- TotalDKK million capital earnings lation reserve trolling equity reserve 5,107Equity at 1 January interestsChange in accounting policy due to implementation 135 4,689 367 (94) 5,097 10 of amendments to IAS 19 (2011) - (81) 1 - (80) - (80)Adjusted equity at 1 January 10 5,027 135 4,608 368 (94) 5,017Comprehensive income for the yearNet profit for the year - (399) - - (399) 2 (397)Other comprehensive income - - (795) - (795) (1) (796)Foreign exchange adjustments of subsidiaries -4 - - -44 - 80 and non-controlling interests - 446Fair value adjustment of hedges, net -- - 80 80 - (27)Fair value adjustment of hedges, net, transferred - 446 - - 446 - (113) - (27) - - (27) to Financial expenses - (92) - (21) (113) (1) (406)Actuarial gains/(losses)Impact from asset ceiling regarding pensions - 327 (795) 63 (405) 1 (803)Tax - (72) (795) 63 (804) (2) (2)Total other comprehensive income/(loss) --- -- (2) (2)Total comprehensive income/(loss) -- for the year --- 63 (804) (1) (805) (31) 4,213Transactions with owners - (72) (795) 9 4,222Dividends paid 135 4,536 (427)Total transactions with ownersTotal changes in equityEquity at 31 December
96 GROUP ANNUAL REPORT 2014Section 1Basis of preparation In 2014, we continued our focus to ensure a more readable report with a logical structure taking the characteristics of ISS’sbusiness into account. The notes continue to be grouped into the following eight sections based on theme:Section 1 Basis of preparationSection 2 Operating profitSection 3 Working capitalSection 4 Strategic investments and divestmentsSection 5 Capital structureSection 6 GovernanceSection 7 TaxSection 8 Other required disclosuresDue to the IPO, the consolidated financial statements for 2013 included two years of comparative figures. This is changed in2014 to one year of comparison.Included in this section are required disclosures and general accounting policies relevant for the understanding of the basis ofpreparation of the consolidated financial statements of ISS A/S.NOTE 1.1 BASIS OF PREPARATIONThe consolidated financial statements of ISS A/S as of and for the year Defining materialityended 31 December 2014 comprise ISS A/S and its subsidiaries (togeth-er referred to as “the Group”) and the Group’s interests in equity-ac- The income statement and the statement of financial position sepa-counted investees. A group chart is included in note 8.10, Subsidiaries, rately present items that are considered individually significant, or areassociates and joint ventures. required under the minimum presentation requirements of IAS 1.Statement of compliance In determining whether an item is individually significant ISS considers both quantitative and qualitative factors. If the presentation or disclo-The consolidated financial statements have been prepared in accor- sure of an item does not increase the value of information to users, thedance with IFRS as adopted by the EU and Danish disclosure require- information is considered insignificant.ments for listed companies. In addition, the consolidated financialstatements have been prepared in compliance with the IFRSs issued by Explanatory disclosure notes related to the consolidated financialthe IASB. statements are presented for individually significant items. Where separate presentation of a line item is made solely due to the minimumThe Annual Report for ISS A/S for 2014 was discussed and approved by presentation requirements in IAS 1, no further disclosures are providedthe Executive Group Management Board (the EGM) and the Board of in respect of that line item.Directors (the Board) on 12 March 2015 and issued for approval at the subsequent Annual General Meeting on 15 April 2015. Changes in accounting policiesBasis of measurement Except for the changes below, the Group has consistently applied theThe consolidated financial statements are presented in Danish kroner accounting policies set out below to all periods presented in these(DKK), which is ISS A/S’s functional currency. All amounts have been consolidated financial statements. However, based on new informationrounded to nearest DKK million, unless otherwise indicated. minor adjustments to comparative figures in primary statements and notes have been implemented.The consolidated financial statements have been prepared on thehistorical cost basis except for the following assets and liabilities, which Furthermore, in 2014 the presentation of the consolidated statementare measured at fair value; interest rate swaps, currency swaps and of changes in equity was changed to include share premium in retainedfinancial assets classified as available for sale. earnings, as share premium is part of the Group’s free reserves. The comparative presentation was restated accordingly. The changed presentation did not affect recognition and measurement for 2014 and 2013. At 1 January 2014, share premium amounted to DKK 11,430 million (at 1 January 2013: DKK 11,430 million).
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