Annual Report 2006 ISS Global A/S

Company Report
ISS Global A/S is a wholly owned subsidiary of ISS
A/S (referred to as “ISS”), an international provider of
facility services. ISS Global A/S (referred to as “ISS
Global”) owns – directly or indirectly – the ISS Global
Group’s operating companies.
Business highlights of the year
During 2006, ISS Global continued to develop the
business towards achieving the targets set out in the
Group strategy. Further steps were taken towards offering
Integrated Facility Services (“IFS”) in more
countries and to more clients. Simultaneously, the
single service offering, which forms the foundation
for all ISS Global operations, was strengthened, as
were management capabilities.
Focus on profitability, organic growth, cash flows,
and on-going investment in the business through acquisitions
was maintained.
As a result, ISS Global passed a new milestone in
2006, as Group revenue exceeded more than DKK
50 billion. Group revenue was DKK 55.8 billion, an
increase of 20% from 2005, the highest growth rate
in a single year since 2001.
Organic growth increased from 3% in 2005 to 5.5%,
the highest level since the year 2000. The positive
performance in organic growth was driven by improvements
in all regions, with Asia and Latin America
seeing double-digit organic growth rates.
The focus on profitability resulted in an increase in
the operating margin before other items from 5.7% in
2005 to 5.8% in 2006 at the ISS A/S level. However,
at the ISS Global level the operating margin before
other items decreased from 6.2% in 2005 to 5.9% in
2006. This decrease was mainly a result of a change
in the management structure leading to higher staff
costs but lower royalty payments. ISS Global’s operating
margin after other items increased from 4.9% in
2005 to 5.0% in 2006.
ISS Global generated positive cash flows and increased
the net inflow from operating activities from
DKK 1.6 billion in 2005 to DKK 3.0 billion, primarily
due to the increase in operating profit before other
items, cash inflow from changes in working capital
and lower tax payments.
ISS Global continued to invest in acquisitions in order
to strengthen its service offerings and to pursue
opportunities in new geographies with high growth
potential. The acquisitions encompassed several
companies with a broad-ranged service offering, including
the acquisition of the outstanding 51% of the
ANNUAL REPORT 2006 / Company Report
shares in Pacific Service Solutions Pty Ltd., the
parent company of Tempo Services Ltd (“Tempo”)
in Australia, which by itself is expected to add DKK
2.9 billion to the annual revenue and establish ISS
Global as a leading provider of Facility Services in
the Australian market, as well as broad-ranged service
companies in Germany and Switzerland.
Mexico and the Philippines were added to the
country list in 2006 through acquisitions establishing
platforms in cleaning services. Furthermore, in
early 2007, platforms were established in Taiwan
through acquisitions, and operations in Bosnia and
Herzegovina were started up greenfield.
The combination of acquisitions and organic growth
meant that ISS Global employed more than
391,000 people worldwide at the end of the year –
roughly 80,000 more employees than the year before.
Financials
Income statement
Following the positive cash flow and operating
margin performances in recent years, ISS Global
decided in the beginning of 2004 to strengthen the
focus on organic revenue growth. This was sustained
in 2006 and resulted in a further improvement
of the organic growth rate to 5.5% from 3% in
2005. The organic growth was in particular driven
by 15% growth in the overseas region headed by
double-digit organic growth rates in the growth
economies of Asia and Latin America. Organic
growth also increased from 2% in 2005 to 6% in
Northern Europe, while an organic growth rate of
4% was maintained in Continental Europe.
Revenue increased 20% to DKK 55.8 billion in
2006 from DKK 46.5 billion in 2005 driven by the
increase in organic growth and 17% growth from
acquisitions. This was partly offset by negative
growth of 2% from divestments and the discontinuation
of the hospital cleaning services business
in Germany, which was initiated in 2005. Foreign
currency adjustments were generally flat.
Operating profit increased by 22% to DKK 2.8 billion
and the operating margin after other items was
5.0% compared with 4.9% in 2005. In line with previous
years, changes in social legislation, pensions
and a number of non-recurring items affected the
Group in 2006, including a curtailment gain related
to defined benefit pension plans in the Netherlands,
which was partly offset by restructuring costs in
Finland and margin-dilutive acquisitions in Australia
and Mexico as well as investments in organic
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