Annual Report 2006 ISS Global A/S

to costs related to a turnaround plan, initiated in
2006, and which included restructuring of the country
management.
Continental Europe
Revenue in Continental Europe was DKK 26.2 billion,
a 13% increase over 2005. The increase was
due primarily to 10% growth from acquisitions, which
was partly offset by negative growth of 1% from divestments
and the discontinuation of the hospital
cleaning services business in Germany. The level of
organic growth in the region was 4%, almost unchanged
from 2005 and primarily stemming from organic
growth in France, Spain and Austria. With an
organic growth rate of 30% in 2006, the organisation
in Turkey, which was established in 2005, also supported
organic growth in the region.
The operating profit before other items in Continental
Europe increased 17% to DKK 1.7 billion. The operating
margin before other items in Continental
Europe increased from 6.2% in 2005 to 6.4% in 2006
as margin increases in Germany, the Netherlands
and Switzerland were partly offset by margin decreases
in France and Austria.
ISS France, the largest ISS Global country in terms
of volume as well as number of employees, increased
revenue to DKK 9.6 billion, or by 9% in
2006. The revenue growth was driven by equal contributions
from organic growth and net acquisitions.
In particular, the offering of office support services
and pest control was further strengthened through
acquisitions in 2006.
The operating margin in France decreased from
6.4% in 2005 to 6.2%. The development was primarily
due to lower profitability in Property Services.
ISS Netherlands increased revenue by 7% to DKK
3.5 billion in 2006, driven almost entirely by net acquisitions.
Organic growth remained at 1% in a challenging
market with fierce price competition.
The operating margin increased from 6.1% to 7.0%,
favourably impacted by a curtailment gain related to
defined benefit pension plans of DKK 98 million. This
was partly offset by lower profitability in general
cleaning and losses in the damage control business.
ISS Spain continued the positive trend, lifting revenue
by 17% to DKK 3.1 billion, of which 6 percentage
points were organic and primarily stemmed from the
hospitals sector. Bolt-on acquisitions within cleaning
and building maintenance increased density and
added 11% to revenue in 2006.
The upward trend in the operating margin continued
in 2006 with an increase from 5.9% to 6.1%, primarily
driven by improvements in cleaning services.
ISS Belgium grew revenue by 8% to DKK 2.5 billion
in 2006, primarily due to acquisitions. Organic growth
ANNUAL REPORT 2006 / Company Report
declined from 4% in 2005 to 3%. A restructuring of
the sales organisation has been initiated with the
aim of improving organic growth.
The operating margin before other items increased
from 6.2% last year to 6.5% in 2006, primarily due
to enhanced profitability in cleaning services.
ISS Switzerland increased revenue by 34% to
DKK 1.9 billion, mainly due to acquisitive growth.
The most significant acquisition in 2006 was Edelweiss,
which strengthened the Facility Services
competencies of ISS Switzerland’s Facility Services
offering on the Swiss market.
The operating margin before other items in Switzerland
increased from 6.8% in 2005 to 7.6% as a result
of the better than expected performance in
most business areas, which was partly offset by a
negative development in certain parts of the landscaping
business.
After several years of negative organic growth, ISS
Germany continued the positive trend seen at the
end of 2005 and achieved organic growth of 7% in
2006, driven by increasing activity in the damage
control segment. In late 2006, the market position
of Germany was strengthened through the acquisition
of DEBEOS, DaimlerChrysler’s internal facility
services company. Germany generated total revenue
of DKK 1.8 billion in 2006, an increase of 3%
including the negative impact of approximately DKK
0.3 billion from the discontinuation of the hospital
cleaning services segment announced in 2005.
The operating margin increased from 3.2% in 2005
to 4.0% in 2006 as a result of margin increases in
cleaning services as well as in the damage control
business.
Continuing the trend from previous years, ISS Austria
generated above average organic growth of
9% in 2006, which together with acquisitive growth
of 7% lifted revenue to DKK 1.6 billion.
The operating margin fell from 7.7% in 2005 to
6.7%, primarily due to increases in staff costs,
which could not be fully passed on through price
increases. The office support business developed
favourably in terms of operating margin.
ISS Turkey expanded its services by establishing
pest control operations. Furthermore, the existing
platform was strengthened through two bolt-on acquisitions
in security and cleaning services. Total
revenue was DKK 0.5 billion, an increase of 81%
compared with last year, of which approximately
30% was attributable to organic growth.
In spite of the rapid growth, the Turkish organisation
remained focused on profitability which resulted
in an operating margin increase from 5.7%
to 6.2%.
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