Annual Report 2006 ISS Global A/S

Tempo as well as a number of smaller acquisitions,
including broad-ranged service companies in Germany
and Switzerland, a security service provider in
the United Kingdom and a catering company in Israel.
This outflow was offset by proceeds from divestments
of DKK 68 million, most significantly the
sale of industrial services activities in Sweden. Investments
in intangible assets and property, plant
and equipment, net, (which excludes goodwill,
brands and customer contract portfolios and related
customer relationships) were DKK 831 million, representing
1.5% of revenue. Investments in financial
assets, net, were an inflow of DKK 47 million in
2006
Net cash flow from investing activities represented
an outflow of DKK 2,269 million in 2005. During this
period, acquisitions of businesses used DKK 2,581
million in cash, comprising a number of smaller acquisitions.
This outflow was offset by proceeds from
divestments of DKK 845 million, primarily related to
the sale of the Health Care operations and the joint
venture stake in Japan. Investments in intangible
assets and property, plant and equipment, net, were
DKK 542 million during the period, representing
1.2% of revenue. Investments in financial assets,
net, represented an inflow of DKK 9 million of cash
in 2005.
Cash flow from financing activities
Cash flow from financing activities was a net inflow
of DKK 2,039 million in 2006. This amount reflected
DKK 4,651 million of cash received following an increase
in indebtedness. Interest paid, net was DKK
1,344 million, primarily due to an increased indebtedness
during the second half of 2005 and in 2006.
Due to the increased indebtedness of ISS Global, a
significant part of cash flows will be used to pay interest
going forward. Payment of dividends to
shareholders was a cash outflow of DKK 1,260 million
and net payments to minority interests
amounted to DKK 8 million.
Net cash flow from financing activities represented a
net inflow of DKK 88 million in 2005. This amount
reflected DKK 5,867 million of cash received following
an increase in indebtedness. Interest paid, net,
represented a cash inflow of DKK 18 million, including
an inflow of DKK 514 million related to a gain on
a partial settlement of the interest rate swaps hedging
ISS Global’s EMTNs. Net payments related to
settlement of warrants and stock options were DKK
47 million. Payment of dividends to shareholders
was a cash outflow of DKK 5,740 million. Net payments
to minority interests amounted to DKK 10 million.
Cash conversion
Cash conversion ratios for individual years may
vary. The cash flows from operations for the individual
periods depend on the timing of a number of
ANNUAL REPORT 2006 / Financial Review
payments towards the end of the individual months
and years.
Cash conversion was 95% in 2006. The free cash
flow of DKK 2,175 million did not include the gain on
the sale of a call option on property, which was included
in profit before impairment/amortisation of intangibles.
Accordingly, the calculation of cash conversion
in 2006 was adjusted for the gain of DKK
108 million. Cash conversion was negatively impacted
by payments of DKK 94 million, which were
expensed in 2005 under the Group Restructuring
Project; a payment of DKK 40 million related to a
loss on a settlement of interest rate swaps, of which
only DKK 2 million was recognised in the income
statement; and DKK 88 million related to a partial
recognition in the income statement in 2006 of a net
gain of DKK 514 million on the settlement of interest
rate swaps, which was fully included in the cash
flow statement in 2005. This was offset by the receipt
of a tax repayment of DKK 114 million related
to on account tax payments for 2005, which was not
included in the income statement.
Balance sheet
Total assets
Total assets amounted to DKK 38,898 million at 31
December 2006, an increase of DKK 7,116 million,
or 22% from DKK 31,782 million at 31 December
2005. The increase was primarily due to higher levels
of intangible assets, trade receivables, as well
as cash and cash equivalents.
Intangible assets
Intangible assets increased by DKK 4,396 million, or
24% from DKK 18,548 million at 31 December
2005, to DKK 22,944 million at 31 December 2006.
Intangible assets were primarily related to goodwill
and customer contract portfolios and related customer
relationships.
Goodwill relates to acquisitions carried out under
varying circumstances and at different stages of
macroeconomic cycles. The goodwill is distributed
on most of the countries in which the Group operates.
The acquired companies, to which the goodwill
relates, comprise a diverse portfolio of service
types, customer segments, geographical regions,
contract sizes and management skills. The largest
amount of goodwill relates to the Group’s operations
in France, representing approximately 22% of the
total carrying amount of goodwill. At 31 December
2006, goodwill stood at DKK 20,065 million, an increase
of DKK 3,423 million, or 21%, from DKK
16,642 million. Additions related to acquisitions in
2006 amounted to DKK 3,508 million while negative
currency adjustments of DKK 70 million and write
down of DKK 15 million reduced goodwill.
Customer contract portfolios and related customer
relationships increased by DKK 920 million to DKK
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