I. Table of Contents - ISS

By e-mail to ost@bourse.lu, jpr@bourse.lu and cme@bourse.lu 

Luxembourg Stock Exchange 09 November 2005 

11, avenue de la Porte-Neuve 

B.P. 165 

L-2011 Luxembourg 

Dear Sirs, 

ISS Global A/S - Euro Medium Term Notes due 2010 and 2014 

ISS A/S (parent of ISS Global A/S) announces its release of 

updated public information relating to ISS A/S, its subsidiaries and 

parent following the acquisition of ISS A/S by ISS Holding A/S 

(formerly known as PurusCo A/S). The release was prepared for 

the lending banks participating in the financing arrangements 

entered into in connection with the acquisition and contains 

information relating to the financing arrangements and postacquisition 

structure and capitalization. The document also 

includes ISS A/S's unaudited financial statements for the nine 

months ended September 30, 2005 and the unaudited consolidated 

preliminary interim balance sheet of ISS Holding A/S. 

Yours faithfully 

ISS Global A/S 

Bredgade 30 

1260 Copenhagen K 

+45 38 17 00 00 

Forward-looking Statements 

This Stock Exchange Release contains forward-looking statements within the meaning of the US 

Private Securities Litigation Act of 1995 and similar laws in other countries regarding expectations to 

the future development, in particular future sales, operating efficiencies and business expansion. 

Such statements are subject to risks and uncertainties as various factors, many of which are beyond 

ISS’ control, may cause the actual development and results to differ materially from the expectations 

expressed in the stock exchange release. Factors that might affect such expectations include, but are 

not limited to, overall economic and business conditions, fluctuations in currencies, the demand for 

ISS’ services, competitive factors in the service industry, operational problems in one or more of the 

Group’s business units and uncertainties concerning possible acquisitions and divestments. 

Reference is also made to the description of risk factors on pages 9-13 of the Interim Report January 

– March 2005 for ISS A/S. 

ISS Global A/S Bredgade 30 

DK-1260 Copenhagen K Telephone:+45 38 17 00 00 www.issworld.com 

Denmark Telefax:+45 38 17 00 11

tatiana\Bank Book\Public Bank Book\FINAL ISS PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 2/91 

The factual information contained in this document concerning the Group has been obtained from the 

Group and other sources. The market data included in this document represent estimates taken from 

external sources. Within this document, the term “market” is used interchangeably with “segment”. 

While ISS has compiled, extracted and reproduced market or other industry data from external 

sources, including third party or industry or general publications, ISS has not independently verified 

such data. Where ranges are presented, these ranges represent the general variance among 

countries in the European facility services market. There can be no assurance as to the accuracy and 

completeness of, and ISS and its subsidiaries take no responsibility for, such data. 

The actual results may be materially affected by changes in economic, operational, or other 

circumstances, which cannot be foreseen. Any reliance, which can be placed upon the projections and 

forecasts, is a matter of commercial judgement. Any estimates regarding ISS’s business, projections, 

targets or forecasts relating to the Group and its operations contained herein have been prepared by 

the Group and involve significant elements of subjective judgement and analysis, which may or may 

not be correct. No representation or warranty is made as to the achievability or reasonableness of any 

estimate contained in this document. The information contained in this document should not be 

assumed to have been updated at any time subsequent to 9 November 2005 and the distribution of 

this document does not constitute a representation by any person that such information will be 

updated at any time after the date of this document. 

2


I. Table of Contents 

I. Executive Summary 7 

A. Overview of the Acquisition 8 

B. Sources & Uses, Pro Forma Capitalisation and Key Credit Statistics 9 

C. Overview of Transaction Structure 11 

D. Company Overview 17 

E. Strategy 20 

F. Financials 22 

II. Company Characteristics 24 

A. Large and Diversified Business 25 

B. Leading Market Positions 25 

C. Cash Generative Business 26 

D. Flexible Cost Base 28 

E. Stable and Predictable Business 28 

F. Disciplined and Well-established Approach to Acquisitions 29 

G. Decentralized and Experienced Local Management Structure 30 

H. Comprehensive Financial Management and Control 31 

III. Summary of Principal Terms and Conditions 32 

A. Description of the Financing Structure 33 

IV. Industry Overview 38 

A. Industry Overview 39 

B. European Facility Services Market 40 

C. Demand Drivers 41 

D. Industry Characteristics 41 

E. Industry Trends 41 

V. Company Overview 43 

A. Company Description 44 

B. History 45 

C. Services Overview 46 

D. Operations 49 

E. Acquisition History 53 

F. Customers and Contracts 54 

G. Human Resources 55 

3



H. Sales and Marketing 56 

VI. Business Strategy 57 

A. Strategy 58 

VII. Legal Issues 59 

VIII. Corporate Governance and Management 62 

A. Board of Directors of ISS Holding, ISS, and ISS Global 63 

B. Board of Directors of ISS Management 64 

C. Executive Management Board of ISS Management 64 

D. Executive Officers of ISS Management 66 

IX. Historical Financial Information 68 

A. Introduction 69 

B. Income Statement 70 

C. Balance Sheet 73 

D. Cash Flow Statement 75 

E. Seasonality 77 

F. Overview of Impact of Transition to IFRS 79 

G. Current Trading Update 81 

X. Appendices 86 

List of Tables 

Appendix A: Consolidated Income Statement, ISS 87 

Appendix B: Consolidated Cash Flow Statement, ISS 88 

Appendix C: Consolidated Balance Sheet, ISS 89 

Appendix D: Consolidated Balance Sheet, ISS Holding 90 

Table 1: Acquisition Pro Forma Sources & Uses (1) 9 

Table 2: Pro Forma Capitalization Table, as of September 30, 2005 10 

Table 3: Senior Credit Facilities (Committed) 13 

Table 4: Senior Credit Facilities (Uncommitted) 13 

Table 5: Temporary Financing 14 

Table 6: Companies Providing Guarantees 15 

Table 7: Historical Financial Data 22 

Table 8: Pro Forma EBITDA, Twelve Months Ended September 30, 2005 23 

Table 9: ISS’s Ten Largest Customers (2004) 25 

4



Table 10: Overview of Key Controls and Systems in Place 31 

Table 11: Pro Forma Capitalization Table, as of September 30, 2005 33 

Table 12: Cash Balance Reconciliation, as of September 30, 2005 34 

Table 13: Senior Term Facilities 34 

Table 14: Revolving Credit Facilities and Letter of Credit Facility 35 

Table 15: Acquisition Facilities 35 

Table 16: Companies Providing Guarantees 36 

Table 17: Key Historical Events 46 

Table 18: Breakdown of Revenues, Cleaning Services 47 

Table 19: Breakdown of Revenues, Property Services 47 

Table 20: Breakdown of Revenues, Office Services 48 

Table 21: Breakdown of Revenues, Catering Services 48 

Table 22: Breakdown of Revenues, Integrated Facility Services 49 

Table 23: Unaudited Breakdown of Operations by Country (2004) 51 

Table 24: ISS Service Offering by Country 52 

Table 25: ISS Acquisition History 2002- present 54 

Table 26: Key Employee Statistics 56 

Table 27: Board of Directors, ISS Holding 63 

Table 28: Executive Management Board, ISS Management 64 

Table 29: Executive Officers, ISS Management 66 

Table 30: Consolidated Income Statement 70 

Table 31: Breakdown of Revenue Growth 70 

Table 32: Summary Historical Balance Sheets 73 

Table 33: Cash Flow Statement 75 

Table 34: Historical Overview of Operational Leases 76 

Table 35: IFRS implication on 2004 Income Statement 80 

Table 36: Pro Forma EBITDA, Twelve Months Ended September 30, 2005 80 

Table 37: Revenue Growth, 9M 2005 versus 9M 2004 81 

Table 38: Cash Flow Data, 9M 2005 versus 9M 2004 84 

Table 39: 9M Income Statements, IFRS (unaudited) 87 

Table 40: 9M Cash Flow Statement, IFRS (unaudited) 88 

Table 41: Assets, IFRS (unaudited) 89 

Table 42: Equity and Liabilities, IFRS (unaudited) 89 

Table 43: Assets, IFRS (unaudited) 91 

Table 44: Equity and Liabilities, IFRS (unaudited) 91 

5



List of Figures 

Figure 1: Overview of Group Structure (1) 12 

Figure 2: ISS Service Overview (1) 17 

Figure 3: Geographical Breakdown of Revenues in 2004 18 

Figure 4: Geographical Breakdown of EBITA in 2004 18 

Figure 5: Historical Overview of Acquisitions 2000 – 9M 2005 (Approximate Acquired Full 

Year Revenues) 19 

Figure 6: Overview of ISS’s Market Positions (2004) 26 

Figure 7: Historical Free Operating Cash Flow 2000 - 2004 27 

Figure 8: 2004 Cost Categories and EBITA (1) 28 

Figure 9: Historical Revenues and EBITA Margins, 1995 – 2004 29 

Figure 10: Overview of Historical Acquisitions, Revenues, 2000 – 9M 2005 (DKK million) 30 

Figure 11: Geographical Breakdown of Revenues in 2004 44 

Figure 12: Geographical Breakdown of EBITA in 2004 44 

Figure 13: ISS Service Overview (1) 45 

Figure 14: Approximate Acquired Revenues, Historical Overview of Acquisitions 2000 – 9M- 

2005 (Approximate Acquired Full Year Revenues) 53 

Figure 15: Total Number of Employees and Percentage of Full Time Employees 55 

Figure 16: Current Group Management Structure 65 

Figure 17: 2004 Organic Growth and Operating Margin (1) by Country 71 

Figure 18: Average Number of Employees & Staff Costs 2000-2004 72 

Figure 19: Historical Adjusted EBITDAR and EBITDAR Margin 2000-2004 72 

Figure 20: Capex 2000-2004 76 

Figure 21: Development in Receivable Days Outstanding, 2000-2004 77 

Figure 22: ISS Revenues, 2001-Q3 2005, by Quarter 77 

Figure 23: ISS EBITA Margin, 2001-Q3 2005, by Quarter 78 

Figure 24: ISS Working Capital, 2001-Q3 2005, by Quarter 78 

Figure 25: ISS Operating Cash Flow before Interest and Taxes, 2001-Q3 2005, by Quarter 79 

6


I. Executive Summary 

7 

Executive Summary


A. Overview of the Acquisition 

8 

Executive Summary 

On March 29, 2005, ISS Holding A/S 1 (“ISS Holding”), a newly incorporated Danish company 

ultimately controlled by funds advised by EQT Partners (“EQT”) and Goldman Sachs Capital Partners 

(“GSCP”) launched a voluntary public tender offer to acquire the shares of ISS A/S and its subsidiaries 

(“ISS” or the “Company”). 

The offer price was DKK 470 (EUR 2 62.98) per share, but was subsequently reduced to DKK 465 

(EUR 62.31) per share following ISS’s declaration on April 13, 2005 to pay a dividend of DKK 5 (EUR 

0.67) per share. 

On April 27, 2005, the Board of Directors of ISS unanimously recommended that ISS shareholders 

accept the tender offer. 

On May 3, 2005, the voluntary tender offer expired and, on May 9, 2005, ISS Holding announced that 

it had received tenders representing 91.55% of ISS’s outstanding shares. 

The provisions of the Danish Securities Act require that any acquirer of a majority interest in a Danish 

listed company shall institute a mandatory tender offer for the shares that it has not already acquired, 

in this case during the voluntary tender offer period. Accordingly, ISS Holding commenced a 

mandatory tender offer for the remaining ISS shares, which expired on June 10, 2005. Upon expiration 

of this mandatory tender offer ISS Holding held 98.30% of ISS’s shares. 

On July 26, 2005, the remaining outstanding shares of ISS were acquired by ISS Holding through a 

compulsory acquisition procedure regulated by the Danish Companies Act. Finally, ISS Holding and 

its subsidiaries have settled part of the outstanding options and warrants. 

In connection with the acquisition of ISS (the “Acquisition”), the Joint Book Runners (Citigroup Global 

Markets Limited and Goldman Sachs) and the Mandated Lead Arrangers (“MLAs”; Danske Bank A/S, 

Den Norske Bank, HSBC Bank plc, HVB, Nordea Bank Danmark A/S and Société Générale) 

committed to provide DKK 9,675 million (EUR 1,296 million) of Senior Facilities (the “Senior Credit 

Facilities” or “Senior Facilities”) to finance the purchase price, to pay transaction fees and expenses, 

and to finance certain ongoing capital requirements and expected acquisitions. The Senior Facilities 

include: 

� DKK 5,675 million (EUR 760 million) of Term Facilities (“Term Facilities” or “Terms Loan”), 

� DKK 1,750 million (EUR 235 million) Revolving Credit Facility (the “Revolving Credit Facility”), 

� DKK 500 million (EUR 67 million) Letter of Credit Facility (the “Letter of Credit Facility” or the “L/C 

Facility”), and 

� DKK 1,750 million (EUR 234 million) committed Acquisition Facility A (the “Acquisition Facility A”), 

In addition to the above mentioned senior financing commitments, the Acquisition was financed with a: 

� DKK 2,380 million (EUR 319 million) Cash Bridge Facility (the “Cash Bridge Facility”), 

� DKK 6,567 million (EUR 880 million) Subordinated Bridge Facility (the “Subordinated Bridge 

Facility”), 

� DKK 925 million (EUR 124 million) PIK Bridge Facility (the “PIK Bridge Facility”), and 

� DKK 7,693 million (EUR 1,031 million) of Cash Equity contributed by the Sponsors. 

1 Initially named PurusCo A/S. 

2 Solely for the convenience of the reader, certain amounts in this document stated in Danish Kroner (DKK) have been translated into Euro 

(EUR) at a rate of EUR 1= DKK 7.4624, which was the exchange rate as of September 30, 2005.


9 


B. Sources & Uses, Pro Forma Capitalisation and Key Credit 

Statistics 

Sources and Uses 

The Acquisition was funded as follows: 

� The sources of funds for the Acquisition amounted to DKK 23,240 million (EUR 3,114 million). The 

Acquisition has been financed from drawings under a Senior Term Loan A and a Senior Term Loan 

B of DKK 5,675 million (EUR 760 million), a Cash Bridge Facility of DKK 2,380 million (EUR 319 

million), a Subordinated Bridge Facility of DKK 6,567 million (EUR 880 million) and a PIK Bridge 

facility of DKK 925 million (EUR 124 million). The Sponsors contributed DKK 7,693 million (EUR 

1,031 million) in the form of Cash Equity. 

� The uses of funds for the Acquisition amounted to DKK 23,240 million (EUR 3,114 million) 

comprising: the purchase of shares for an amount of DKK 21,896 million (EUR 2,934 million), the 

settlement or expected settlement of warrants and stock options for an amount of DKK 216 million 

(EUR 29 million), and the payment or expected payment of fees and expenses of an estimated 

amount of DKK 872 million (EUR 117 million). The resulting over-funding of DKK 256 million (EUR 

34 million) of Cash has been or will be used for general corporate purposes. 

� The table below outlines the Sources and Uses of the Acquisition as well as Drawings and 

Repayments ("Drawings/Repayments") made subsequent to the Acquisition. The table also 

outlines Foreign Exchange Adjustments ("FX") to the local currency drawings made to finance the 

Acquisition. The table is provided to allow a reconciliation to the outstanding amounts illustrated 

elsewhere in this document as Pro Forma Capitalization as of September 30, 2005. 

Table 1: Acquisition Pro Forma Sources & Uses (1) 

Drawing / 

Repayments FX (2) 

Capitalisations as of 

September 30, 2005 

Sources DKK m EUR m DKK m DKK m DKK m 

Cash Bridge 2,380 319 (2,380) (3) 0 

Acquisition Facility 0 0 604 604 

Term Loan A 2,000 268 24 2,024 

Term Loan B 3,675 492 4 3,679 

Subordinated Bridge Facility 6,567 880 112 6,679 

PIK Bridge Facility 925 124 39 (4) 3 967 

Cash Equity 7,693 1,031 7,693 

Total Sources 23,240 3,114 

Uses DKK m EUR m 

Shares Purchases 21,896 2,934 

Net proceeds for settlement of 

options and warrants (5) 216 29 

Estimated Fees & Expenses (6) 872 117 

Cash over-funding 256 34 

Total Uses 

Note: 

23,240 3,114 

(1) The existing debt of ISS of DKK 10,074 million European Medium Term Notes (“EMTN” or “EMTNs”) and the DKK 1,393 million local facilities will remain 

outstanding post completion of the new financing structure. See Table 3, Pro Forma Capitalisation table. 

(2) Represents changes in foreign exchange rates from funding to September 30, 2005. 

(3) The Cash Bridge Facility was repaid in full on August 31, 2005. 

(4) Represents rolled up interest since funding. 

(5) Represents net proceeds paid or expected to be paid to settle outstanding warrants and options. 

(6) The net fees and expenses of ISS Holding primarily relate to financing fees and fees paid or expected paid to advisors. The net fees and expenses of ISS include 

the settlement of bonuses payable to ISS management in connection with the Acquisition. 

Source: ISS Holding


Pro Forma Capitalization 

10 


Since the completion of the tender offer, ISS Holding and its subsidiaries have made a number of 

changes and adjustments to their capital structure. On July 27, 2005 and August 31, 2005, ISS 

Holding received dividends from ISS which it used primarily to repay outstanding amounts under the 

Cash Bridge Facility, Term Loan A and a portion of Term Loan B. ISS paid these dividends with 

proceeds by way of dividends it received from ISS Global A/S (“ISS Global”) and cash on hand. In 

addition, ISS Global financed its dividends to ISS from borrowings under Term Loan A, Term Loan B, 

and cash on hand. ISS Global also borrowed amounts under the Acquisition Facility A to replenish 

cash spent on acquisitions since September 30, 2005. Please see below for a summary of the pro 

forma capital structure of the Group as of September 30, 2005, adjusted for the changes described 

above. 

Table 2: Pro Forma Capitalization Table, as of September 30, 2005 

LTM September 30, 2005 

DKK m EUR m PF EBITDA (1) 

PF EBITDA – Capex % of Total 

Local Facilities (2) 1,393 187 0.42x 0.51x 4% 

Acquisition Facility (3) 604 81 0.61x 0.73x 2% 

Term Loan A 2,024 271 1.22x 1.48x 6% 

Term Loan B 3,679 493 2.34x 2.83x 12% 

Total Senior 7,700 1,032 2.34x 2.83x 24% 

Cash (1,493) (200) 1.89x 2.28x (4)% 

Total Net Senior 6,207 832 1.89x 2.28x 20% 

EMTN (4) 10,074 1,350 4.96x 5.98x 32% 

Subordinated Bridge Facility (5) 6,679 895 6.99x 8.44x 21% 

Net Cash Pay Debt 22,960 3,077 6.99x 8.44x 73% 

PIK Bridge Facility (6) 967 130 7.28x 8.79x 3% 

Cash Equity 7,693 1,031 9.63x 11.62x 24% 

Total Capitalization 31,620 4,238 9.63x 11.62x 100% 

Revolver (committed) (2) 1,750 235 

Revolver (uncommitted) 750 100 

Letter of Credit Facility 

(committed) 

500 67 

Acq. Facility A (committed) 1,750 235 

Acq. Facility B (uncommitted) 3,500 469 

Note: 

(1) Leverage multiples based on an estimated PF LTM September 2005 EBITDA of DKK 3,285 million and actual LTM September 2005 Capex of DKK 564 

million. 

(2) The Senior Credit Facilities Agreement allows ISS to retain up to EUR 100 million of its existing facilities which are provided on a bilateral basis 

primarily to fund local working capital requirements. As of September 30, 2005, these amounted to DKK 1,393 million. ISS expects to reduce these 

facilities by drawing on its Revolver. 

(3) Subsequent to closing (May 11, 2005), the company has made a number of acquisitions and has drawn down DKK 604 million on Acquisition Facility A. 

(4) EMTN refer to ISS Global’s European Medium Term Notes due 2010 and 2014. 

(5) The Subordinated Bridge Facility is expected to be rolled-up into a permanent financing or refinanced on or before May 11, 2006. 

(6) The PIK Bridge Facility entered into by ISS Equity, the parent of ISS Holding, is expected to be rolled into a permanent financing or refinanced on or 

before May 11, 2006. 

Source: ISS Holding 

In addition to the Senior Term Facilities required to finance the Acquisition, the Senior Facilities 

include committed facilities in the form of DKK 1,750 million (EUR 235 million) Revolving Credit 

Facility, a DKK 500 million (EUR 67 million) Letter of Credit Facility and a DKK 1,750 million (EUR 235 

million) Acquisition Facility A. The committed Revolving Credit Facility will be available to ISS Global or 

its subsidiaries to be used for general corporate purposes including working capital requirements. The 

Letter of Credit Facility will be available on an ongoing basis used for general guarantees (primarily 

performance bonds) required in ISS Global’s daily operations. The Acquisition Facility A will be 

available to fund general corporate acquisitions over the next 3 years, subject to satisfaction of several 

conditions precedent.


11 


The Senior Credit Facilities Agreement also provides for uncommitted facilities in the form of DKK 750 

million (EUR 100 million) Revolving Credit Facility and a DKK 3,500 million Acquisition Facility B (EUR 

469 million). Acquisition Facility B, is available to fund general corporate acquisitions over the next 4 

years, subject to satisfaction of certain criteria. 

C. Overview of Transaction Structure 

The equity investment from the Sponsors totals DKK 7,693 million (EUR 1,031 million) and was initially 

made into ISS Equity. After a corporate reorganisation the Sponsors now hold their investment 

through ISS Invest SARL (“ISS Invest SARL”) and its direct subsidiary ISS Invest II SARL (“ISS Invest 

II SARL”), which are both wholly beneficially owned Luxembourg holding companies. Certain 

employees of the subsidiary ISS Management A/S have committed to co-invest alongside the 

Sponsors, however, the final structure of their investment has yet to be determined. 

The Figure below represents the capital structure prior to the expected re-financing of the DKK 6,567 

million (EUR 880 million) Subordinated Bridge Facility and the DKK 925 million (EUR 124 million) PIK 

Bridge Facility. A potential capital markets issuance would also be envisaged to raise additional 

funding for general corporate purposes of certain subsidiaries.


Figure 1: Overview of Group Structure (1) 

12 


Note: 

(1) Amounts shown represent funded amounts before foreign exchange adjustments. Amounts shown for Senior Facilities represent committed 

amounts. Amounts shown for Local Facilities and European Medium Term Notes are outstanding amounts as of September 30, 2005. 

(2) As of September 30, 2005, ISS Holding’s subsidiaries had an amount equivalent to DKK 1,393 million (EUR 187 million) of outstanding 

borrowings under local debt facilities, comprising primarily working capital facilities entered into by ISS Holding’s subsidiaries and a marginal 

amount of local long-term mortgage facilities. ISS Holding is required pursuant to the Senior Credit Facilities Agreement to limit its 

subsidiaries’ borrowings under the local facilities to an amount equivalent to EUR 100 million. A portion of these local facilities may be 

refinanced with borrowings from the Revolving Credit Facility under the Senior Facilities. 

(3) Subsidiaries of ISS Global pay ISS a royalty of 0.75% of their annual revenue in consideration primarily for the use of ISS’s trademarks. The 

0.75% rate is lower than historical rates and is evaluated on an arm length’s basis on an ongoing basis. The royalty payments are made 

pursuant to agreements between ISS and its subsidiaries. A subsidiary may terminate its agreement upon six months prior written notice to 

ISS; however, it is presently expected that the subsidiaries will continue these arrangements. The agreement will automatically terminate in 

the event such subsidiary ceases to be a direct or indirect subsidiary of ISS. The trademarks of ISS have been pledged as security under 

the Senior Facilities. 

(4) ISS Global and certain of its subsidiaries will be able to draw directly on the Revolving Credit Facility, Local Credit Facility, and Acquisition 

Facility A. 


Notes: 

� The Senior Facilities will be secured by a first-priority security interest in all of the share capital of 

ISS and Material Companies (“Material Companies” are based on a test of 5% of aggregate gross 

assets, EBITDA or revenues). The Material Companies will grant a guarantee, together with 

security over its bank accounts, trade receivables, intercompany receivables and intellectual 

property. The guarantee and security package for the Senior Facilities comprise amongst others, 

guarantees from ISS Holding, ISS and ISS Global and a share pledge from ISS Holding over its 

shares in ISS. See section entitled “Security” for further detail on the full security and guarantee 

package. 

� The new Senior Facilities will not be secured by a security interest in the share capital of ISS 

Global.


13 


� In-line with the Senior Credit Facilities Agreement, the initial drawing of the Senior Term Debt at 

ISS Holding will be refinanced with a similar drawn amount by ISS Global. Following the 

refinancing in the end of July 2005, there is currently DKK 2,250 3 million (EUR 302 million) of 

Senior Facilities (Term Loan B) drawn at ISS Holding, which the Company has agreed to use best 

endeavours to refinance as soon as possible. Any Senior Term debt outstanding at ISS Holding 

post August 31, 2006, will constitute an event of default. The next refinancing is scheduled for 

November 30, 2005, and is expected to amount to approximately DKK 1.0 billion. The refinancing 

of Senior Term Debt of ISS Holding is being facilitated via dividends based on distributable 

reserves. Following the final refinancing at ISS Holding on August 31, 2006, total free reserves are 

expected to be approximately DKK 1,087 million (EUR 134 million). Further details are provided in 

the PWC Structure Report. 

Summary of Credit Facilities 

Table 3 below illustrates the summary items of the committed Senior Credit Facilities 

Table 3: Senior Credit Facilities (Committed) 

Facility Size DKK 

2,000,000,000 

Drawn Amount DKK 

2,000,000,000 

Senior Term A Senior Term B 

DKK 

3,675,000,000 

DKK 

3,300,000,000 

Letter of Credit 

Facility 

DKK 

500,000,000 

L/C of EUR 

57,270,000 

Revolving Credit 

Facility 

DKK 

1,750,000,000 

Acquisition 

Facility A 

DKK 

1,750,000,000 

- DKK 

604,000,000 

Commitment Committed Committed Committed Committed Committed 

Drawdown SEK, NOK, CHF EUR and GBP Multi Currency Multi Currency Multi Currency 

Maturity 7 years 8.5 years 7 years 7 years 7 years 

Repayment 

Prepayment 

Penalties 

Amortizing Two Bullets, equal 

instalments 

Revolving Revolving Amortizing/ 

Revolving 

None None None None None 

Initial Margin 2.25% 2.75% 2.25% 2.25% 2.25% 

Benchmark Interbank Offered 

Rate 

Interbank Offered 

Rate 


Rate 


Rate 


Rate 

Margin Ratchet Applicable Applicable Applicable Applicable Applicable 

Table 4: Senior Credit Facilities (Uncommitted) 

Revolving Credit Facility Acquisition Facility B 

Facility Size DKK 750,000,000 DKK 3,500,000,000 

Drawn Amount - - 

Commitment Uncommitted Uncommitted 

Drawdown Multi Currency Multi Currency 

Maturity 7 years 8.5 years 

Repayment Revolving Two equal instalments, 

At 8 years and 8.5 years 

Prepayment Penalties None None 

Initial Margin 2.25% 2.25% 

Benchmark Interbank Offered Rate Interbank Offered Rate 

Margin Ratchet Applicable Applicable 

The Senior Facilities were used to finance part of the acquisition consideration, and expenses in 

connection with the Acquisition. The Revolving Credit Facility will be used to finance the Company’s 

on-going working capital requirements and for general corporate purposes. The Acquisition Facilities 

will be used for corporate acquisitions going forward. 

3 Based on the foreign exchange rates as of closing (May 11, 2005).


Table 5: Temporary Financing 

Subordinated Bridge Facility PIK Bridge Facility 

14 


Amount DKK 6,567,000,000 DKK 925,000,000 

Maturity until conversion 364 days from May 11, 2005 364 days from May 11, 2005 

Maturity after conversion 9 years 9 years 

Initial Libor Margin 7.25% 11.00% 

Step-up 50bps/qtr capped at 1,000bps 

Not been refinanced by 31 Oct 2005, further 

increase of +75 bps 

25bps/qtr capped at 12.00% 

Post Conversion Libor Margin Tranche A: 5.50% Cash + 6.00% PIK 

Tranche B: 4.00% + 4.00% PIK + warrants, 

to achieve an IRR of 11.50% over cost funds 

11.00% + warrants, to achieve an IRR of 14.5% 

over cost of funds 

The Subordinated Bridge Facility and PIK Bridge Facility rank contractually subordinated to all the 

Senior Credit Facilities. Prior to the maturity of the Bridge Facilities, it is anticipated that they will be 

repaid with the proceeds from a future refinancing. 

Security 

The guarantee and security package for the Senior Facilities comprise guarantees from ISS Holding, 

ISS and ISS Global and a share pledge from ISS Holding over its shares in ISS. If the Senior Facilities 

were to be accelerated, it is most likely that any enforcement of the security would be by way of 

enforcement of the ISS Holding guarantee and the share pledge, enabling the sale of the ISS Group 

as a whole. 

To the extent that the senior debt is refinanced by ISS Global, and such debt is secured by ISS Global, 

then the senior lenders will rank ahead of the EMTN holders, who have an unsecured claim against 

ISS Global. Please refer to the section entitled "Summary of Principle Terms and Conditions" and 

more specifically to the section entitled “Security” on page 44 for further information on the provisions 

on the security documents entered into by ISS Global and its subsidiaries. 

The Senior Credit Facilities Agreement requires additional guarantees and security to be put in place 

as a condition subsequent.


Table 6: Companies Providing Guarantees 

Denmark 

France 

Spain 

Finland 

Norway 

Belgium 

The Netherlands 

Sweden 

UK 

Note: 

(1) Holding company 


� ISS Holding A/S (Bidco) (1) 

� ISS A/S (Target) (1) 

� ISS Global A/S (1) 

� ISS Facility Services A/S 

� ISS Holding Paris SA (1) 

� ISS Abilis France SAS 

� Integrated Service Solutions S.L. (1) 

� ISS Palvelut Oy (1) 

� ISS Facility Services AS (1) 

� ISS NV (1) 

� ISS Holding Nederland BV (1) 

� ISS Nederland BV 

� ISS Facility Services Holding AB (1) 

� ISS Facility Services AB 

� ISS UK Holding Limited (1) 

� ISS UK Limited 

� ISS Mediclean Limited 

� ISS Facility Services Limited 

15 


Pursuant to the Senior Credit Facilities Agreement, each Material Company will grant a guarantee, 

together with security over its bank accounts, trade receivables, intercompany receivables and 

intellectual property. In addition the shares in such Material Company will be pledged and in 

specifically agreed cases shares that the Material Company holds in certain of its subsidiaries will be 

pledged (although please note that ISS will not pledge its shares in ISS Global). 

Given the granularity of the Group, which comprises a significant number of entities, the Arrangers 

have looked at the gross assets, revenues and EBITDA figures on a jurisdiction by jurisdiction basis to 

determine which jurisdiction is a material jurisdiction. The holding company in a material jurisdiction 

has then been identified as a Material Company. These countries include France, Spain, Finland, 

Norway, Belgium, The Netherlands, Sweden, the UK and Denmark. In addition, security includes 

share pledges over the holding company in: Hong Kong, Singapore, Austria, Germany, Portugal, 

Switzerland and Ireland. The total share pledges represent approximately 90% of revenues and assets 

of the Group 4 . 

The alternative enforcement scenario would therefore be enforcement of the share pledges on a 

jurisdiction by jurisdiction basis, so that local groups could be sold off individually. As the vast majority 

of the group's intellectual property portfolio is held by ISS, the Lenders would also look to enforce their 

intellectual property pledge from ISS in these circumstances 

Notably, no security or guarantees were granted by ISS or its subsidiaries for the borrowings of ISS 

Holding. 

Finally, subject to agreed limits, the providers of foreign exchange treasury transactions and local 

working capital facilities to the ISS Group will share in the senior guarantee and security package but 

without any rights of enforcement. 

The relationship between the senior secured and subordinated lenders will be governed by an 

intercreditor agreement. The equity contribution will be subordinated on terms agreeable to the senior 

and subordinated lenders. 

4 Note that jurisdictions report on a local GAAP basis, so only estimates are available. Average foreign exchange rates for the period January 

1 through December 31, 2004 were used to convert local revenues, assets, and EBITDA into DKK.


Covenants 

16 


The financial covenants for the Credit Facilities are standard for a leveraged transaction of this type 

including: 

� Net Senior Bank Debt/Pro Forma EBITDA 

� Total Net Debt/Pro Forma EBITDA 

� EBITDA/Total Net Cash Interest 

� Free Cash Flow/Total Debt Service 

� Limitations on Capital Expenditure


D. Company Overview 

1. Company Description 

17 


ISS is one of the world's largest providers of facility services, with operations in 43 countries in Europe, 

South America, Asia and Australia. ISS is Europe's largest provider of cleaning services and is one of 

the top three cleaning companies, based on revenue, in Austria, Belgium, Hong Kong, the Netherlands, 

the Nordic region (Sweden, Denmark, Norway and Finland), Singapore, Spain, Switzerland, and the 

United Kingdom. ISS has a diversified customer base of more than 100,000 public and private sector 

customers. The Company employs more than 305,000 employees worldwide and is among Europe's 

ten largest private employers as of September 30, 2005. In 2004, ISS had total revenue of DKK 40.4 

billion (EUR 5.4 billion) and EBITDA of DKK 2.9 billion (EUR 386 million). For the twelve months 

ended September 30, 2005, ISS had revenue of DKK 45.1 billion (EUR 6.0 billion) and EBITDA of 

DKK 3.3 billion (EUR 440 million). 

Figure 2: ISS Service Overview (1) 

Facilities Services 

Cleaning Property Catering Office IFS 

Daily Office 

Cleaning 

Dust Control 

Washroom 

Services 

Specialised 

Cleaning 

Food Hygiene 

Maintenance 

Landscaping 

HVAC 

Pest Control 

Damage Control 

Operation of 

Canteens Within 

Customer 

Facilities 

Event Catering 

Call Centres 

Reception 

Services 

Office Logistics 

Access Control 

Integrated 

Facilities 

Services 

Revenues 

(’04 DKKm) 26,429 8,252 2,003 1,822 1,230 

% of Total 

Revenues 66% 21% 5% 5% 3% 

Note: 

(1) Excludes Health Care operations, which were divested in two separate transactions in H1 2005. 

Source: ISS 

ISS has been operating for more than 100 years. The Company started as a security company and 

began offering cleaning services in 1934. Since that time, ISS has expanded its business, both 

through organic growth and acquisitions, and its facility services currently include: 

� Cleaning Services, which represented approximately 66% of 2004 revenue, include daily office 

and facility cleaning, dust control, washroom and specialized cleaning services; 

� Property Services, which represented approximately 21% of 2004 revenue, include landscaping, 

damage control services, building maintenance and pest control services; 

� Office Support Services, which represented approximately 5% of 2004 revenue, include call 

centres, reception services, office logistics and access control; 

� Catering Services, which represented approximately 5% of 2004 revenue, include company 

restaurants, catering, event catering, executive dining and office catering solutions such as coffee 

points; and


18 


� Integrated Facility Services (“IFS”), which represented approximately 3% of 2004 revenue, 

consist of the provision of multiple facility services with on-site management and a single point of 

contact for the customer. 

In recent years, ISS has increasingly offered its customers integrated facility services. By providing onsite 

management, integrated facility services are intended to relieve a customer from the need to 

supervise and manage various suppliers of facility services and to reduce its overhead costs. 

Integrated facility services allows ISS to leverage on-site labour synergies. 

2. Operations 

ISS maintains a decentralized organizational structure in which the chief executive officer of each 

country’s operations typically reports directly to the ISS head office in Copenhagen. Each of the 

country organizations is separately organized and acts independently in its local market. ISS’s head 

office performs certain centralized functions, including procurement, risk management, finance, legal, 

treasury, information technology, human resources, marketing, international sales and key account 

management and supervision of mergers and acquisitions. 

� Northern Europe; comprising the United Kingdom, Denmark, Norway, Sweden, Finland, Ireland, 

Iceland, Russia, and Estonia. 

� Continental Europe; comprising France, the Netherlands, Belgium and Luxembourg, Spain, 

Germany, Switzerland, Austria, Central and Eastern Europe (the Czech Republic, Slovenia, 

Slovakia, Hungary, Croatia and Romania), Portugal, Greece, Italy, Poland and Turkey. 

� Overseas; comprising Israel, China, Hong Kong, Brazil, Singapore, Australia, Thailand, India, 

Indonesia, Malaysia, Argentina, Chile, Sri Lanka, Brunei, Uruguay and New Zealand. 

In 2004, Northern Europe, Continental Europe and Overseas represented 46%, 49% and 5% of 

revenues respectively. ISS employed more than 305,000 employees as of September 30, 2005, of 

which 91 employees were in its operational head office. 

Figure 3: Geographical Breakdown of 

Revenues in 2004 

Germany 

4% 

Spain 4% 

Belgium and 

Luxembourg 

5% 

The Netherlands 8% 

Finland 6% 

Other 

14% 

Norway 

8% 

Denmark 

9% 

France 

19% 

UK 

14% 

Sweden 

(excluding 

Health Care 

operations) 

9% 


EBITA in 2004 

Sweden (excluding Health Care operations) 5% 

Belgium and 

Luxembourg 

5% 

Other 2% 

Switzerland 3% 

Austria 4% 

Spain 5% 

Finland 

9% 

Norway 

9% 

France 

23% 

Denmark 

10% 


Note: 

(1) EBITA represents Earnings before Interest, Taxes, Amortization, Other Income and Expenses, and Income from Associates. Further 

amortization, which is not included herein, is amortization of goodwill under Danish GAAP or amortization of customer contracts under IFRS. 


UK 

16%


3. Acquisitions 

19 


Consolidation of the industry is an integral part of ISS’s strategy and consequently ISS makes a large 

number of acquisitions every year in its key business areas to strengthen competencies, enhance 

service offerings or establish critical mass. 

During the last 5 years ISS has expanded primarily by acquiring a large number of smaller companies. 

Since January 2000, ISS has acquired and integrated 375 companies in 30 countries for a total 

consideration of more than DKK 15 billion (EUR 2.0 billion) adding more than DKK 23 billion (EUR 3.1 

billion) of revenues. Most of these acquisitions have been of relatively small companies, typically with 

annual revenues of less than DKK 100 million (EUR 13 million). Acquisitions have been made in the 

following segments; 

Figure 5: Historical Overview of Acquisitions 2000 – 9M 2005 (Approximate Acquired Full Year 

Revenues) 

DKK million 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 


0 

6,363 

4,384 

1,930 

1,280 

6,095 

3,150 

2000 2001 2002 2003 2004 9M 2005 

Cleaning Property Catering Office Support Integrated Facilities Services Other 

4. Customers and Contracts 

As of September 30, 2005, ISS had more than 100,000 public and private sector customers, and in 

2004, the revenue derived from its ten largest customers was less than 5% of its total revenue. In 

2004, no more than 19% of ISS’s 2004 revenue was generated in any one country, with France being 

the largest contributor to revenue. ISS’s customers operate in a number of industries, and ISS does 

not believe that its business is dependent on any particular industry segment in the private sector or 

particular authority in the public sector. 

ISS’s commercial customers range in size from small firms requiring a single service employee to 

large, multinational organizations seeking integrated facility services. ISS is focused on developing 

larger accounts, particularly European multinational companies, with the goal of becoming their 

provider of integrated facility services. In addition, ISS believes that these customers may be more 

likely to require integrated facility services. 

The terms of ISS’s customer contracts vary widely by country and customer segment due to different 

customer requirements and applicable legislation. However, ISS typically provides services under 

multi-year contracts with a stated term of between two and five years and reciprocal termination rights 

upon three to 12 months’ prior written notice. ISS’s commercial customer contracts typically provide for 

automatic renewal in the absence of a party’s notice to terminate the contract. For larger contracts, the 

quality of ISS’s services is often measured against defined quality benchmarks stipulated in service 

level agreements with the customer.


20 


ISS is highly focused on customer retention and has introduced a wide range of initiatives, including 

dedicated management of key accounts and additional training of sales staff, to increase customer 

retention rates. ISS believes that it benefits from quality customer relationships and estimates that the 

average length of its customer relationships is approximately eight to ten years, equating to 

approximately 90% customer retention. According to an internationally recognised consulting firm, this 

level of contract churn is in line, and in some cases better compared with ISS’s main competitors and 

the industry average as a whole. 

ISS also provides its services to governmental entities, primarily in Europe. The contractual 

arrangements with these entities differ from ISS’s contracts with the commercial sector in that they are 

generally subject to public procurement rules. Under these rules, facility services contracts are 

generally retendered on a regular basis. As a result, ISS must tender to maintain existing 

governmental contracts. 

5. Human Resources 

The facility services industry is characterised by relatively high levels of employee turnover, as the 

industry is often considered a short-term or secondary source of employment. As a result, ISS 

pursues a number of strategies to reduce the turnover among blue-collar employees, including 

arranging for more full-time and daytime work. In 2004, the share of full-time employees (working 25 

hours or more per week) increased to 57% from 55% in 2003. The distribution of employee tenure (in 

years) provides another perspective on employee loyalty at ISS. In 2004, 69% of the Group’s 

employees had been with ISS for more than one year. 

E. Strategy 

In April 2005 ISS announced its current business strategy, named "Route 101" which sets out the 

objective of achieving revenues of DKK 101 billion. Route 101 comprises a number of initiatives aimed 

at developing the Company, i.e. continue to train staff and continue to invest in group-wide systems 

and tools to support, whilst adhering to certain operational objectives. The plan does not contain a 

defined period of time for achieving DKK 101 billion revenue target. 

Consistent with this strategy, ISS intends to: (i) continue to focus on operational efficiency to maintain 

or improve its competitive position; (ii) increase its ability to deliver integrated facility services 

throughout its operations; (iii) continue to make selective acquisitions; and (iv) focus on reducing the 

Group’s financial leverage on a multiple basis. The principal elements of this strategy include the 

following: 

� Continue to focus on operational efficiency. ISS will seek to maintain and enhance operational 

efficiency by continuing its focus on three well-established and prioritized operational objectives for 

its local managers: (i) cash flow; (ii) operating margin; and (iii) profitable organic growth. 

— Cash flow. ISS’s first objective is to continue to maintain a relatively high rate of cash 

conversion by operating in a manner that optimizes working capital. Through this approach, ISS 

expects to continue to generate positive Free Operating Cash Flow and ISS believes that, in a 

typical year, it should be able to achieve a target cash conversion ratio 5 of between 90% and 

95%. 

— Operating margin. ISS’s second objective is to maintain or increase its operating margin 

through continuous focus on costs. This will continue to be achieved by generating operational 

efficiencies by increasing its local market shares and operational densities, as well as through 

the implementation of company-wide best practices. Consistent with this approach, ISS has 

increased its operating margin, which ISS defines as operating profit before other income and 

expenses and income from associates divided by revenue, from 5.1% in 2000 to 5.6% in 2004. 

— Profitable organic growth. ISS’s third objective is to continue to leverage its international 

market position and service offering in order to increase its local market positions and drive 

5 The cash conversion ratio, as calculated by ISS, represents Free Operating Cash Flow as a percentage of profit before goodwill amortisation 

under Danish GAAP, or profit before goodwill impairment and write-down and amortisation of customer contracts under IFRS. In 2002, the 

cash conversion ratio was adjusted to remove the effect of a one-time gain of DKK 74 million (EUR 9.9 million) related to the sale of a minority 

interest in another entity. In 2003, the cash conversion ratio was adjusted to remove the effect of a tax repayment of DKK 168 million (EUR 

22.5 million) related to the issuance of shares to employees.


21 


organic growth. To do this, ISS has introduced a wide range of initiatives, including dedicated 

management of key accounts and additional training of sales staff, to increase customer 

retention rates. ISS will also continue to focus on the cross-selling of related services, such as 

pest control and washroom services, to existing customers. Additionally, ISS has established a 

market presence and operating platforms in, and will seek to leverage the growth potential of, 

selected high-growth economies, such as Brazil, Russia, India and China. 

� Increase Integrated Facility Services capabilities. ISS also intends to continue to broaden its 

service offering in order to eventually offer a full range of facility services in each of its markets, 

primarily through the introduction of additional services and by acquiring companies with additional 

competencies. ISS believes that integrated facility services strengthen customer relationships 

through ISS’s on-site management. In addition, Integrated Facility Services offer the opportunity to 

reduce customers’ overhead costs and for ISS to leverage operational synergies. 

� Continue disciplined acquisition process. ISS expects to continue its well-established 

acquisition process to facilitate its strategy of increasing local scale, broadening its local service 

offering and accessing new markets. ISS will continue to focus primarily on smaller acquisitions, 

which it believes will reduce the integration risks relating to individual acquisitions and enable it to 

leverage the experience of local management teams throughout its countries of operation. To 

access new geographic markets, ISS intends to establish operating platforms in higher growth 

markets, including through acquisitions. 

� Reduce financial leverage on a multiple basis. The Group intends to reduce its financial 

leverage (in terms of total debt to EBITDA) resulting from the acquisition financing, primarily 

through growth in operating profit. The Group intends to increase its operating profit through its 

continued focus on operational efficiency, organic growth and acquisitions.


F. Financials 

22 


See below for Historical financials. This is discussed in more detail in the sections entitled “Historical 

Financials”. 

Table 7: Historical Financial Data 

Danish GAAP IFRS 

DKK million 2000 2001 2002 2003 2004 9M-2004 9M-2005 

EBITA (1) 1,454 1,633 2,010 2,032 2,279 1,664 1,944 

Depreciation and Amortisation (2) 468 551 603 587 617 444 482 

EBITDA 1,922 2,184 2,613 2,619 2,896 2,108 2,426 

Share-based Payment - - - - - 6 3 

Changes in Working Capital (125) 52 412 319 186 (618) (1,097) 

Changes in Provisions (10) 4 (98) (36) (91) (19) (49) 

Other inc. and Exp. Net Payment (3) (25) (67) (19) (76) (43) (162) 

Payments Related to Integration Cost - - - - - (15) (77) 

Operating Cash Flow before Interest and 

Tax 

1,784 2,215 2,860 2,883 2,915 1,419 1,044 

Net Interest Paid (225) (328) (333) (215) (334) (255) 261 

Corporate Tax Paid (294) (377) (263) (323) (602) (355) (497) 

Operating Cash Flow 1,265 1,510 2,264 2,345 1,979 809 808 

Capex Net (391) (452) (525) (403) (583) (417) (398) 

Free Operating Cash Flow 874 1,058 1,739 1,942 1,396 392 410 

Acquisitions of Businesses (3,003) (3,098) (1,898) (1,065) (3,886) (3,524) (1,937) 

Divestment of Businesses (1) 13 16 20 36 33 828 

Investments in Financial Assets, Net (21) (180) 269 29 (53) (888) 365 

Cash flow After Investments (2,151) (2,207) 126 926 (2,507) (3,987) (334) 

Financial payments, net 916 2,131 (782) 556 3,358 3,277 4,270 

Proceeds – issuance of share capital 1,042 789 569 25 793 - - 

Purchase/disposal of own shares 12 - (5) - (30) (30) - 

Dividend Paid to Shareholders - - - (88) (177) (177) (5,830) 

Options and Warrants Settled - - - - - - (163) 

Minority Interests (16) (15) (5) (8) (6) (4) (10) 

Cash flow from Financing Activities 1,954 2,905 (223) 485 3,938 3,066 (1,733) 

Net Change in Cash (197) 698 (97) 1,411 1,431 (921) (2,067) 

Cash conversion % (3) 105% 118% 167% 150% 107% 

Note: 

(1) EBITA represents Earnings before Interest, Taxes, Amortization, Other Income and Expenses, and Income from Associates. Amortization 

represents only the amortization of intangible assets and software. Further amortization, which is not included herein, is amortization of 

goodwill under Danish GAAP or amortization of customer contracts under IFRS. 

(2) Amortization represents only the amortization for intangible assets and software. Further amortization, which is not included herein, is 

amortization of goodwill under Danish GAAP or amortization of customer contracts under IFRS. 

(3) In 2002, the cash conversion ratio was adjusted to remove the effect of a one-time gain of DKK 74 million (EUR 10 million) related to the 

sale of a minority interest in another entity. In 2003, the cash conversion ratio was adjusted to remove the effect of a tax repayment of DKK 

168 million (EUR 23 million) related to the issuance of shares to employees. 


Set forth below is a reconciliation of EBITDA to Adjusted pro forma EBITDA to give effect to 

acquisitions and divestments during the twelve months ended September 30, 2005; 

� Pro Forma Effect of Acquisitions. The incremental EBITDA of entities acquired during the 12 month 

period to September 30, 2005, for the period in which such entities were not part of the Group. The 

amount of incremental EBITDA is based on ISS’s estimate, at the time of acquisition, as to the EBITDA 

to be generated by such acquired entities prior to the acquisition by ISS. 

� Pro Forma Effect of Health Care Operations Business. Reported EBITDA of entities divested 

during the 12 month period to September 30, 2005. The disposal of the Health Care operations 

business and ISS’s interest in CarePartner represented DKK 76 million (EUR 10 million) of EBITDA 

for the 12 month period. The remainder represents other minor divestments.


Table 8: Pro Forma EBITDA, Twelve Months Ended September 30, 2005 

DKK million 

LTM 

September 

2005 

Acq during LTM 

(pro forma) 

23 

Divestments during 

LTM (pro forma) 


Adj. Health Care 

operations 

Pro forma 

September 

FY05 

Revenues 45,114 1,973 (250) (487) 46,350 

Operating Expense (41,918) (1,791) 233 411 (43,065) 

EBITDA 3,196 182 (17) (76) 3,285 

EBITDA % 7.1% 9.2% 6.8% 15.6% 7.1% 

Depreciation and Amortisation (1) (655) (43) 4 14 (680) 

EBITA (2) 2,541 139 (13) (62) 2,605 

EBITA % 5.6% 7.0% 5.2% 12.7% 5.6% 

Note: 






Source: ISS


II. Company Characteristics 

24 

Company Characteristics


A. Large and Diversified Business 

25 

Company Characteristics 

ISS is one of the world’s largest providers of facility services, with 2004 revenue of DKK 40.4 billion 

(EUR 5.4 billion) and operations in 43 countries in Europe, South America, Asia and Australia. In 2004, 

no more than 19% of ISS’s 2004 revenue was generated in any one country, with France being the 

largest contributor to revenue. The services ISS offers are diverse and, in addition to cleaning, include 

property, office support, catering and integrated facility services. Through its size and diversification 

ISS has reduced its exposure to any single country, industry sector, customer or service. 


2004, revenue derived from its ten largest customers was less than 5% of its total revenue. 

Table 9: ISS’s Ten Largest Customers (2004) 

Top 10 Customers 

Annual Contract Revenues 

DKK million % of Total Revenues 

1. Customer A 213 0.5% 

2. Customer B 203 0.5% 

3. Customer C 176 0.4% 

4. Customer D 149 0.4% 

5. Customer E 149 0.4% 

6. Customer F 144 0.4% 

7. Customer G 144 0.4% 

8. Customer H 137 0.3% 

9. Customer I 134 0.3% 

10. Customer J 129 0.3% 

1,578 3.9% 


B. Leading Market Positions 

ISS is Europe’s largest provider of cleaning services and one of the largest providers of facility 

services globally. ISS is also one of the top three cleaning companies in the majority of the countries in 

which it operates, including in the United Kingdom, the Nordic Region (Sweden, Denmark, Norway 

and Finland), the Netherlands, Belgium, Switzerland, Austria, Spain, Hong Kong and Singapore. In 

2004, 67% of ISS’s revenue was derived from its top 13 countries. ISS believes that these market 

positions increases the company’s ability to leverage its resources through increased cross-utilisation 

and sharing of best practises. In addition, ISS believes that its market positions increase its credibility 

as a contract provider, assisting it in obtaining and effectively servicing new contracts from larger, 

high-volume customers, including contracts involving multiple services or locations. ISS’s market 

positions and size also enable the Company to achieve more efficient management and administrative 

functions i.e. leveraging overheads. ISS believes the same factors also assist it in attracting and 

retaining qualified local managers.


Figure 6: Overview of ISS’s Market Positions (2004) 

Source: Internationally recognised consulting firm 

ISS’s European Contract Cleaning Market Position 

C. Cash Generative Business 

26 

Country 

Austria 

Belgium & Luxembourg 

Denmark 

Finland 

France 

Germany 

Italy 


Norway 

Spain 

Sweden 

Switzerland 


ISS’s 

Market Position 

During the last six years, ISS’s cash conversion ratio, which ISS defines as Free Operating Cash Flow 

as a percentage of profit before goodwill amortisation under Danish GAAP, or of profit before goodwill 

impairment and write-down and amortisation of customer contracts under IFRS, has been above 

100%. ISS achieved this result primarily through a company-wide focus on reducing working capital 

and capital investment requirements, with particular emphasis on reducing debtor days and increasing 

the use of operating leases and rental arrangements rather than purchasing assets. In addition ISS’s 

business has relatively low capital expenditure requirements. For example, net investments in 

intangible assets and property, plant and equipment have averaged approximately 1.3% of revenue 

over the last five years. ISS expects to continue to generate positive Free Operating Cash Flow and 

aims to achieve a target cash conversion ratio of between 90% and 95%. 

UK 

1 

1 

1 

1 

3+ 

3 

3+ 

1 

1 

1 

1 

1 

2


Figure 7: Historical Free Operating Cash Flow 2000 - 2004 

Free Operating Cash Flow 

(DKK million) 

2,500 

2,000 

1,500 

1,000 

500 

0 

874 

FOCF 

Cash Conversion 

105% 

118% 

1,058 

1,739 

27 

167% 

150% 

1,942 


107% 

1,396 

2000 2001 2002 2003 2004 

Note: 

(1) The cash conversion ratio, as calculated by ISS, represents Free Operating Cash Flow as a percentage of profit before goodwill amortisation 

under Danish GAAP, or profit before goodwill impairment and write-down and amortisation of customer contracts under IFRS. In 2002, the 

cash conversion ratio was adjusted to remove the effect of a one-time gain of DKK 74 million (EUR 10 million) related to the sale of a 

minority interest in another entity. In 2003, the cash conversion ratio was adjusted to remove the effect of a tax repayment of DKK 168 

million (EUR 23 million) related to the issuance of shares to employees. 

(2) Free Operating Cash Flow, as calculated by ISS, represents cash flow from operating activities less investments in intangible assets and 

property, plant and equipment. Intangible assets do not include goodwill and customer contracts and related customer relationships and 

primarily relate to computer software. 


200% 

160% 

120% 

80% 

40% 

0% 

Cash Conversion


D. Flexible Cost Base 

28 


ISS has a flexible cost base, particularly with respect to staff costs, which, as a percentage of revenue, 

were approximately 66% in 2004. Due to the relatively high employee turnover that is characteristic of 

the facility services industry, ISS is able to reduce its staffing levels when necessary by limiting its 

hiring of new employees. In addition, as a result of its local scale and density, ISS may also be able to 

shift employees among existing customers’ contracts and locations. Moreover, according to EU law, 

when facility services contracts are lost to a competitor, the former provider may under certain 

circumstances be able to pass on-site staff to the new provider, an option which provides additional 

operational flexibility. 

Figure 8: 2004 Cost Categories and EBITA (1) 

% of Revenues 

100% 

80% 

60% 

40% 

20% 

0% 

5.6% 

20.7% 

7.8% 

65.9% 

2004 

EBITA Margin 

Other 

Cost of Goods Sold 

Employee Costs 

Note: 



goodwill 


E. Stable and Predictable Business 

Demand for cleaning services, which comprised 66% of ISS’s revenue in 2004, has historically been 

relatively resilient to economic downturns as compared with other industries. ISS believes that its 

target customers consider a basic level of cleaning and other facility services to be necessary for the 

operation of their core businesses and operations. ISS believes that it benefits from quality customer 

relationships and estimates that the average length of its customer relationships is approximately eight 

to ten years, equating to approximately 90% customer retention. ISS believes that the steady demand 

for facility services, the characteristics of its customer contracts and its relatively flexible cost base 

have contributed to the stability and predictability of ISS’s operations in the last five years.


Figure 9: Historical Revenues and EBITA Margins, 1995 – 2004 

Revenues (DKK billion) 

60 

50 

40 

30 

20 

10 

0 

4.4% 

5.1% 

9.2 10.7 11.8 

5.4% 5.3% 5.2% 

13.8 

19.8 

29 

5.1% 

28.7 

4.7% 

34.9 

5.3% 

38.0 


5.6% 5.6% 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 

Revenues EBITA Margin 

Note: 



goodwill 


F. Disciplined and Well-established Approach to Acquisitions 

ISS has a well-developed approach to acquisitions that capitalizes on the market knowledge and 

acquisition experience of its local managers and the expertise of a centralized M&A department. Since 

the beginning of 2000, ISS has acquired and integrated 375 companies in more than 30 countries. The 

total consideration for these acquisitions was more than DKK 15 billion (EUR 2.0 billion). More than 

330 of these acquisitions were of relatively small companies, with annual revenues of less than DKK 

100 million (EUR 13 million). ISS’s local management teams are responsible for the acquisition 

process from target identification through integration of the acquired businesses. ISS’s centralized 

M&A department works closely with local ISS managers to facilitate this acquisition process, including 

the negotiation of material acquisition agreements and the performing of valuation analyses. In 

addition, every acquisition is approved by ISS Management A/S’s Executive Management Board. ISS 

believes that its experienced local management teams, dedicated M&A resources and disciplined 

acquisition process allow it to understand local market conditions, identify opportunities and capitalize 

on the fragmented and consolidating facility services market. Moreover, ISS believes that its practice 

of acquiring mostly smaller companies helps to limit integration risks relating to individual acquisitions. 

In recent years, ISS has followed a strategy of selectively acquiring smaller companies, typically with 

annual revenues of less than DKK 100 million (EUR 13 million), in order to strengthen ISS’s 

competencies, enhance its service offering or establish critical mass. The volume of acquisitions has 

varied in recent years depending upon market conditions. In the years ended December 31, 2002, 

2003 and 2004, ISS made 31, 51 and 95 acquisitions respectively. ISS reduced its acquisition activity 

in 2002 to concentrate on initiatives aimed at increasing its operating margin. 

Divestments in the last three years have been limited and have focused on under-performing and noncore 

businesses. Most of these divestments have been relatively small. However, in 2002 ISS 

divested most of its aviation service operations in the United Kingdom, The Netherlands and the 

Nordic countries, with combined revenue of DKK 714 million (EUR 96 million) in 2001. In H1-2005, the 

Company divested the Health Care Operations in two separate transactions to funds advised by EQT. 

Figure 10 provides unaudited information concerning ISS’s acquisitions and divestments for the 

periods presented. Revenue presented in the table represents the prior year revenue of the acquired 

companies. 

36.2 

40.4 

6% 

5% 

4% 

3% 

2% 

1% 

0% 

EBITA Margin (%)


30 


Figure 10: Overview of Historical Acquisitions, Revenues, 2000 – 9M 2005 (DKK million) 

100% 

80% 

60% 

40% 

20% 

0% 

56 68 31 51 95 74 

2000 2001 2002 2003 2004 9M 2005 

< 100 million < 350 million < 750 million < 1,500 million 

Annualised 

Revenue of 

# of Acquisitions 

Acquisition 

2000 2001 2002 2003 2004 9M-2005 


H. Comprehensive Financial Management and Control 

31 


ISS has implemented comprehensive financial management and control procedures, which it 

considers to be an essential element of its business. Through these procedures, ISS focuses, in 

particular, on cash management. Each country operation must submit monthly cash flow forecasts to 

the head office, and ISS’s corporate treasury monitors any deviations from these forecasts on a daily 

basis. In addition, these country operations are supervised by regional managers, and controllers 

employed by the head office visit the local operations regularly to ensure compliance with ISS’s control 

procedures. 

Please see below for a detailed summary of some of the key controls and systems which are in place: 

Table 10: Overview of Key Controls and Systems in Place 

Cash Forecasting Controls 

� Country CFOs required to make a daily forecast for the following month 

� Corporate treasury monitors actual development vs. forecast and follows up on deviations 

— Country CFO must be able to explain the actual development and deviations at very short notice 

Business Controls 

� Annual strategy reviews 

� Annual budget and financial plan 

� Quarterly forecast updates to budgets 

� Monthly business reviews 

� Cash flow statement 

� Monthly income statement, balance sheet and variance analysis 

� Monthly business reporting (P&L for local business units, portfolio reporting, sales status reporting, etc.) 

� Acquisitions approvals follow predefined formats 

� Corporate control function and strong local controls 

Source: ISS


32 

Summary of Principal Terms and Conditions 

III. Summary of Principal Terms and 

Conditions


A. Description of the Financing Structure 

33 


In connection with the Acquisition, ISS Holding entered into a Senior Credit Facilities Agreement 

making available Term Facilities (Term Loan A and B), a Cash Bridge Facility, a Revolving Credit 

Facility, a Letter of Credit Facility and an Acquisition Facility. ISS Holding also entered into a 

Subordinated Bridge Facility and a PIK Bridge Facility. The rights and obligations of ISS Holding 

under the PIK Bridge Facility were subsequently assumed by its direct parent, ISS Equity and the 

proceeds of the PIK Bridge Facility have been lent by ISS Equity to ISS Holding under a Subordinated 

Shareholder Loan. ISS Holding used borrowings under the Term Facilities, the Cash Bridge Facility, 

the Subordinated Bridge Facility, cash equity contributed by EQT and GSCP, as well as proceeds from 

the Subordinated Shareholder Loan, to fund the Acquisition. 

Since the completion of the tender offer, ISS Holding and its subsidiaries have made a number of 

changes and adjustments to their capital structure. On July 27, 2005 and August 31, 2005, ISS 

Holding received dividends from ISS which it used primarily to repay outstanding amounts under the 

Cash Bridge Facility, Term Loan A and a portion of Term Loan B. ISS paid these dividends with 

proceeds from dividends it received from ISS Global and cash on hand. In addition, ISS Global 

financed its dividends to ISS from borrowings under Term Loan A, Term Loan B, and cash on hand. 

ISS Global borrowed amounts under the Acquisition Facility A and Term Loan B. Please see below 

for a summary of the pro forma capital structure of the Group as of September 30, 2005, adjusted for 

the changes described above. 

Table 11: Pro Forma Capitalization Table, as of September 30, 2005 

LTM September 30, 2005 

DKK m EUR m PF EBITDA (1) 

PF EBITDA – Capex % of Total 

Local Facilities (2) 1,393 187 0.42x 0.51x 4% 

Acquisition Facility (3) 604 81 0.61x 0.73x 2% 

Term Loan A 2,024 271 1.22x 1.48x 6% 

Term Loan B 3,679 493 2.34x 2.83x 12% 

Total Senior 7,700 1,032 2.34x 2.83x 24% 

Cash (1,493) (200) 1.89x 2.28x (4)% 

Total Net Senior 6,207 832 1.89x 2.28x 20% 

EMTN (4) 10,074 1,350 4.96x 5.98x 32% 

Subordinated Bridge Facility (5) 6,679 895 6.99x 8.44x 21% 

Net Cash Pay Debt 22,960 3,077 6.99x 8.44x 73% 

PIK Bridge Facility (6) 967 130 7.28x 8.79x 3% 

Cash Equity 7,693 1,031 9.63x 11.62x 24% 

Total Capitalization 31,620 4,238 9.63x 11.62x 100% 

Revolver (committed) (2) 1,750 235 

Revolver (uncommitted) 750 100 


(committed) 

500 67 

Acq. Facility A (committed) 1,750 235 

Acq. Facility B (uncommitted) 3,500 469 

Note: 

(1) Leverage multiples based on an estimated PF LTM September 2005 EBITDA of DKK 3,285 million and actual LTM September 2005 Capex of DKK 564 

million. 

(2) The Senior Credit Facilities Agreement allows ISS to retain up to EUR 100 million of its existing facilities which are provided on a bilateral basis 

primarily to fund local working capital requirements. As of September 30, 2005, these amounted to DKK 1,393 million. ISS expects to reduce these 

facilities by drawing on its Revolver. 

(3) Subsequent to closing (May 11, 2005), the company has made a number of acquisitions and has drawn down DKK 604 million on Acquisition Facility A. 

(4) EMTN refer to ISS Global’s European Medium Term Notes due 2010 and 2014. 

(5) The Subordinated Bridge Facility is expected to be rolled-up into a permanent financing or refinanced on or before May 11, 2006. 

(6) The PIK Bridge Facility entered into by ISS Equity, the parent of ISS Holding, is expected to be rolled into a permanent financing or refinanced on or 

before May 11, 2006. 



Table 12: Cash Balance Reconciliation, as of September 30, 2005 

34 


As of September 30, 2005 

DKK million EUR million 

Cash on Balance Sheet at ISS 1,070 143 

Cash on Balance Sheet at ISS Holding 187 25 

Other Securities 85 11 

Expected drawdown on Term Loan B 375 50 

Settlement of Warrants (56) (8) 

Estimated Fees post September 30 (168) (23) 

Total Pro Forma Cash 1,493 200 

Source: ISS Holding, PWC 

In addition to the Senior Term Facilities required to finance the Acquisition and refinance existing debt, 

the Senior Facilities include committed facilities in the form of a DKK 1,750 million (EUR 235 million) 

Revolving Credit Facility, a DKK 500 million (EUR 67 million) Letter of Credit Facility and a DKK 1,750 

million (EUR 235 million) Acquisition A Facility. The committed Revolving Credit Facility will be 

available to ISS Global and certain of its subsidiaries for general corporate purposes including working 

capital requirements. The Letter of Credit Facility will be available on an ongoing basis for general 

guarantees (primarily performance bonds) required in ISS's daily operations. The Acquisition Facility A 

will be available to fund general corporate acquisitions over the next 3 years, subject to satisfaction of 

certain conditions precedent. 

The Senior Credit Facilities Agreement also provides for uncommitted facilities in the form of a DKK 

750 million (EUR 100 million) Revolving Credit Facility and a DKK 3,500 million (EUR 469 million) 

Acquisition Facility B. Acquisition Facility B is available to fund general corporate acquisitions over the 

next 4 years, subject to satisfaction of certain criteria. 

Please see tables 13, 14 and 15 below for an overview of the committed and uncommitted Senior 

Facilities, with the associated key commercial terms of the facilities. 

Table 13: Senior Term Facilities 

Senior Term A Senior Term B (1) 

Facility Size DKK 2,000,000,000 DKK 3,675,000,000 

Drawn Amount DKK 2,000,000,000 DKK 3,675,000,000 

Drawdown DKK 800,000,000 (Drawn in SEK) 

DKK 900,000,000 (Drawn in NOK) 

DKK 300,000,000 (Drawn in CHF) 

DKK 1,650,000,000 (Drawn in GBP) 

DKK 1,650,000,000 (Drawn in EUR) 


Repayment Amortizing Bullets, two equal instalments 

At 8 years and 8.5 years 





Note: 

(1) As of September 30, 2005, ISS Holding has drawn DKK 2,250 million and the remainder was drawn by ISS Global.


Table 14: Revolving Credit Facilities and Letter of Credit Facility 

Revolving Credit Facility 

(committed) 

35 


Revolving Credit Facility 

(uncommitted) 


(committed) 

Facility Size DKK 1,750,000,000 DKK 750,000,000 DKK 500,000,000 

Drawn Amount - - Letters of Credit of approximately 

EUR 57,270,000 issued 

Currency Multi currency Multi currency Multi currency 

Maturity 7 years 7 years 7 years 

Repayment Revolving Revolving Revolving 

Prepayment Penalties None None None 

Initial Margin 2.25% 2.25% 2.25% 

Benchmark Interbank Offered Rate Interbank Offered Rate Interbank Offered Rate 

Margin Ratchet Applicable Applicable Applicable 

The aggregate amount outstanding under utilisations of the Revolving Facility (including Ancillary 

Facilities and Fronted Ancillary Facilities) and the Letter of Credit Facility and local overdraft facilities 

(excluding treasury transactions), may not at any time exceed DKK 2,500 million (EUR 335 million), 

excluding all performance bonds. 

Table 15: Acquisition Facilities 

Acquisition Facility A (Committed) Acquisition Facility B (Uncommitted) 

Facility Size DKK 1,750,000,000 DKK 3,500,000,000 

Drawn Amount DKK 604,000,000 - 

Currency Multi currency Multi currency 

Availability 3 years 4 years 


Repayment Equal instalments year 5 – 7 Equal instalments at 8 years and 8.5 years 





The acquisition facilities are subject to certain restrictions which must be met in order for the facilities 

to be drawn down. 

Equity Account 

� The Sponsors contributed Cash Equity of DKK 7,693 million into the equity account. 

Security 

The guarantee and security package for the Senior Facilities comprise guarantees from ISS Holding, 

ISS and ISS Global and a share pledge from ISS Holding over its shares in ISS. If the Senior Facilities 

were to be accelerated, it is most likely that any enforcement of the security would be by way of 

enforcement of the ISS Holding guarantee and the share pledge, enabling the sale of the ISS Group 

as a whole. 

To the extent that the senior debt is refinanced by ISS Global, and such debt is secured by ISS Global, 

then the senior lenders will rank ahead of the EMTN holders, who have an unsecured claim against 

ISS Global. Security documents entered into by ISS Global and its subsidiaries contain provisions to 

ensure that if any of the indebtedness that would otherwise be secured by them constitutes "Relevant 

Indebtedness", as defined in the Medium Term Notes, then that indebtedness is not secured by the 

relevant security document. 

The Senior Credit Facilities Agreement requires additional guarantees and security to be put in place 

as a condition subsequent.


Table 16: Companies Providing Guarantees 

Denmark 

France 

Spain 

Finland 

Norway 

Belgium 


Sweden 

UK 

Note: 

(1) Holding company 


� ISS Holding A/S (Bidco) (1) 

� ISS A/S (Target) (1) 

� ISS Global A/S (1) 

� ISS Facility Services A/S 

� ISS Holding Paris SA (1) 

� ISS Abilis France SAS 

� Integrated Service Solutions S.L. (1) 

� ISS Palvelut Oy (1) 

� ISS Facility Services AS (1) 

� ISS NV (1) 

� ISS Holding Nederland BV (1) 

� ISS Nederland BV 

� ISS Facility Services Holding AB (1) 

� ISS Facility Services AB 

� ISS UK Holding Limited (1) 

� ISS UK Limited 

� ISS Mediclean Limited 

� ISS Facility Services Limited 

36 


Pursuant to the Senior Credit Facilities Agreement, each Material Company will grant a guarantee, 

together with security over its bank accounts, trade receivables, intercompany receivables and 

intellectual property. In addition the shares in such Material Company will be pledged and in 

specifically agreed cases shares that the Material Company holds in certain of its subsidiaries will be 

pledged (although please note that ISS will not pledge its shares in ISS Global). A floating charge will 

be granted from each Material Company incorporated in England and Wales. 

Given the granularity of the Group, which comprises a significant number of entities, the Arrangers 

have looked at the gross assets, revenues and EBITDA figures on a jurisdiction by jurisdiction basis to 

determine which jurisdiction is a material jurisdiction. The holding company in a material jurisdiction 

has then been identified as a Material Company. These countries include France, Spain, Finland, 

Norway, Belgium, The Netherlands, Sweden, the UK and Denmark. In addition, security includes 

share pledges over the holding company in: Hong Kong, Singapore, Austria, Germany, Portugal, 

Switzerland and Ireland. The total share pledges represent approximately 90% 6 of revenues and 

assets of the Group. 

The alternative enforcement scenario would therefore be enforcement of the share pledges on a 

jurisdiction by jurisdiction basis, so that local groups could be sold off individually. As the vast majority 

of the group's intellectual property portfolio is held by ISS, the Lenders would also look to enforce their 

intellectual property pledge from ISS in these circumstances. 

Notably, no security or guarantees were granted by ISS or its subsidiaries for the borrowings of ISS 

Holding. 

Finally, subject to agreed limits, the providers of foreign exchange treasury transactions and local 

overdraft facilities to the ISS Group will share in the senior guarantee and security package but without 

any rights of enforcement. 

The relationship between the senior secured and subordinated lenders will be governed by an 

intercreditor agreement. The equity contribution will be subordinated on terms agreeable to the senior 

and subordinated lenders. 

This Summary of Principal Terms and Conditions is for Senior Credit Facilities (the “Facilities”) made 

available to ISS Holding, for the purpose of financing the Acquisition. 

6 Note that jurisdictions report on a local GAAP basis, so only estimates are available. Average foreign exchange rates for the period January 

1 through December 31 were used to convert local revenues, assets, and EBITDA into DKK.


II. Summary of Senior Facilities 

Terms Senior Secured Credit Facilities 

37 


Borrower: ISS Holding A/S, ISS Global A/S and other members of the Group incorporated in 

approved jurisdictions which accede as borrowers. 

Amount: Term Loan A: DKK2,000m (EUR 270m), drawn down in 40% SEK, 45% NOK and 

15% CHF. 

Term Loan B: DKK3,675m (EUR 493m), drawn down in 50% EUR and 50% £ 

Revolver: DKK1,750m (EUR 235m) (committed) and DKK 750m (EUR 100m) 

(uncommitted) 

L/C Facility: DKK500m (EUR 66m) 

Acquisition Facility: DKK1,750m (EUR 235m) (Committed – Tranche A) and 

DKK3,500m (EUR 470m) (Uncommitted – Tranche B) 

Maturity: Term Loan A : 7 years 

Term Loan B : 8.5 years 

Revolver : 7 years 

L/C Facility : 7 years 

Acquisition Facility : 7 years (Tranche A), 8.5 years (Tranche B) 

Indicative Interest Rates: Term Loan A : E/L +225bps 

Term Loan B : E/L +275bps 

Revolver : E/L +225bps 

L/C Facility : E/L +225bps 

Acquisition Facility : E/L +225bps 

Amortization Schedule: Term Loan A : WAL 4.5 years 

Term Loan B : In two equal instalments at 8 years and 8.5 years 

Revolver : Bullet 

L/C Facility : Bullet 

Acquisition Facility: 

Committed : Tranche A: Amortising 

Uncommitted : Tranche B: In two equal instalments at 8 years and 

8.5 years 

Ranking: Senior 

Security: 

Share pledge over the share capital of ISS A/S in addition to security over shares, 

receivables, IP and bank accounts and floating charges from material companies 

incorporated in the UK provided in accordance with the agreed principles. 

To the extent that the senior debt is refinanced by ISS Global, and such debt is 

secured by ISS Global, then the senior lenders will rank ahead of the EMTN 

holders, who have an unsecured claim against ISS Global. Security documents 

entered into by ISS Global and its subsidiaries contain provisions to ensure that if 

any of the indebtedness that would otherwise be secured by them constitutes 

"Relevant Indebtedness", as defined in the Medium Term Notes, then that 

indebtedness is not secured by the relevant security document. 

Notably, no security or guarantees were granted by ISS or its subsidiaries for the 

borrowings of ISS Holding. 

Guarantees: From ISS Holding A/S, ISS A/S, ISS Global A/S and each material company 

(determined by reference to 5% of EBITDA, gross assets or turnover), subject to the 

agreed principles 

Call/Repayment Premium: None 

Mandatory Repayment: In full upon a change of control or a sale of all or substantially all of the assets of the 

Group. With 100% of Net IPO Proceeds until a leverage ratio of 3.5:1 is achieved 

and thereafter 50% of Net IPO Proceeds until a leverage ratio of 2.5:1 is achieved. 

From net disposal, insurance and report proceeds, and from the proceeds of a 

permitted securitisation. With 50% of Excess Cashflow for any financial year 

commencing on or after 31 December 2005 

Covenants: Standard and customary to include: minimum interest and fixed charge coverage, 

maximum leverage, maximum capital expenditure


IV. Industry Overview 

38 

Industry Overview


A. Industry Overview 

39 

Industry Overview 

The market data included in this section represent estimates taken from external sources. While ISS 

Holding has compiled, extracted and reproduced market or other industry data from external sources, 

including third party or industry or general publications, ISS has not independently verified such data. 

Where percentage ranges are presented, these ranges represent the estimated range of average 

growth rates of the relevant service in the major countries within the European facility services market. 

There can be no assurance as to the accuracy and completeness of, and ISS Holding and its 

subsidiaries take no responsibility for, such data. 

Acquisition vehicles controlled by funds advised by the Sponsors commissioned an internationally 

recognized consulting firm to prepare an independent survey of the European facility services market, 

ISS’s primary market. ISS believes that its non-European markets generally exhibit characteristics 

that are similar to the European facility services industry, although the European market may be more 

mature in certain respects. For purposes of the survey, the European facility services market was 

defined as cleaning, property, office and catering services within the broader market in Europe for 

support services that facilitate the primary operations of private and public sector entities. The facility 

services market and its various segments may be defined in a number of ways, and competitors within 

the facility services market may define the market differently.


B. European Facility Services Market 

40 


According to the independent market survey, the European facility services market had an overall 

market size of approximately EUR 230 billion in 2004 and it has had average revenue growth of 

approximately 3% per year between 2000 and 2004. The primary segments of the European facility 

services market are further described below: 

� Cleaning services. Includes cleaning of offices and facilities, including window cleaning and 

washroom services, and specialized cleaning, including services for food producers and 

processors. The European cleaning services market in 2004 was approximately EUR 41 billion and 

its historical annual revenue growth was in the range of 2% to 4% from 2000 to 2004. Although 

growth varied by country and period, certain local markets experienced lower or higher growth and 

certain mature markets experienced lower or even negative growth. 

� Property services. Includes property maintenance, security, waste management, landscaping, 

ventilation, car-park services, pest control, sewage and damage control services. Damage control 

services relate to the remediation of damage caused to property by extraordinary events, such as 

fires, floods, storms and vandalism. The European market for property services in 2004 was 

approximately EUR 160 billion to EUR 167 billion and historical annual revenue growth was in the 

range of 1% to 4% from 2000 to 2004. The primary property services market segments are: 

— Building maintenance and general property services. The value of the European building 

maintenance and general property services market in 2004 was approximately EUR 65 billion 

and historical annual revenue growth was approximately 3% from 2000 to 2003. 

— Security services. The value of the European security services market in 2004 was 

approximately EUR 30 billion and historical annual revenue growth was approximately 4% from 

2000 to 2004. 

— Waste management. The value of the European waste management market in 2004 was 


2000 to 2003 

— Damage control. The value of the European damage control services market in 2004 was 

approximately EUR 12 billion to EUR 16 billion and historical annual revenue growth was 

approximately 1% from 2000 to 2002. 

— Landscaping. The value of the European landscaping market in 2004 was approximately EUR 

7 to EUR 10 billion and historical annual revenue growth was in the range of 2% to 4% from 

2000 to 2003. 

— Pest control. The value of the European pest control market in 2004 was approximately EUR 

1 billion and historical annual revenue growth was approximately 1% from 2000 to 2003. 

� Office support services. Includes the operation of call centers, reception and mail room services 

within customer facilities, but excludes temporary staffing services where the provider does not 

manage the temporary staff. The European market for office support services in 2004 was 


2000 to 2004, with higher growth in certain local markets particularly within emerging markets. 

Catering services. Includes the operation of canteens within customer facilities, but excludes 

concessions to operate catering facilities and vending machine operations. The value of the European 

catering services market in 2004 was approximately EUR 19 billion and historical annual revenue 

growth was approximately 4% from 2000 to 2004.


C. Demand Drivers 

ISS believes that the key drivers of the demand for facility services are, amongst others: 

41 


� Macroeconomics. Within a particular country, the demand for facility services generally correlates 

with economic conditions, including growth in that country’s gross domestic product. However, the 

facility services industry is normally considered to be less sensitive to economic cycles than certain 

other industries as there is a basic demand among customers for cleaning and other facility 

services in order to maintain their facilities and operate their businesses. In addition to being 

resilient in economic downturns, economic trends tend to affect facility services providers later in a 

macroeconomic cycle. 

� Outsourcing. There is a general trend toward outsourcing of facility service functions, which has in 

the past been a driver of demand for these services. The decision to outsource is dependent upon 

customer perceptions regarding the price and quality of outsourced services. Focused facility 

services companies seek to improve service quality and reduce customer costs by creating skill, 

scale and scope benefits across the various services delivered. Within the public sector, the 

decision to outsource is also based on price and quality considerations. However, decision making 

in the public sector is additionally influenced by political considerations, which will vary from country 

to country. 

D. Industry Characteristics 

Fragmented industry. The market among small and medium sized customers for basic facility 

services is highly fragmented, and there are believed to be more than 75,000 operators in this market. 

The independent market survey concluded that about two-thirds of these operators employ fewer than 

ten people. Basic facility services, including general cleaning services, can be provided with very 

limited resources and, as a result of these low barriers to entry, it is likely that the market for basic 

facility services will continue to include a large number of smaller operators. However, within each 

market there are generally only a few providers that have sufficient resources to provide customers 

with a full-range of facility services and to service larger, multi-location customers. 

E. Industry Trends 

� Professionalisation of the facility services industry. Facility services have historically been 

delivered on a local basis and, due to the fragmented nature of the market, users have in the past 

tended to view these services as a commoditized service. However, as part of the industry 

consolidation and emergence of integrated facility services, facility services providers like ISS are 

increasingly able to differentiate their services and leverage their scope and scale to establish 

reputations and brand identities. As a result, there is an increasing division between the larger 

facility services companies with integrated facility services capabilities and providers of basic 

services to smaller customers. 

� Industry consolidation. The facility services market is undergoing consolidation as larger facility 

services providers seek to achieve economic benefits associated with the creation of operational 

scale and scope at the local, national and international level. Local benefits include the crossutilization 

of resources between sites, leveraging of overhead costs and sharing of best practices. 

At the national level, benefits accrue mainly in the form of increased credibility as a contract 

provider and more efficient management and administrative functions. At the international level, 

the service provider is able to leverage existing customer relationships across regions to gain 

further contracts, purchasing benefits and further share best practices and management 

capabilities. 

� Service integration. ISS believes that there is increasing demand for integrated facility services, 

which the independent market survey defines as the provision of multiple facility services managed 

on-site by the provider through a single point of contact. The independent market survey 

concluded that the market for integrated facility services had revenue growth of approximately 12% 

from 2000 to 2003. As integrated facility services is a relatively new trend, its penetration rate 

remains low and projected revenue growth rates are higher than the growth rate of the general 

facility services market.


42 

Industry Overview


V. Company Overview 

43 

Company Overview


A. Company Description 

44 

Company Overview 

ISS is one of the world's largest providers of facility services, with operations in 43 countries in Europe, 

South America, Asia, and Australia. ISS is Europe's largest provider of cleaning services and is one of 

the top three cleaning companies, based on revenue, in Austria, Belgium, Hong Kong, the Netherlands, 

the Nordic region (Sweden, Denmark, Norway and Finland), Singapore, Spain, Switzerland, and the 

United Kingdom. ISS has a diversified customer base of more than 100,000 public and private sector 

customers. The Company employs more than 305,000 employees worldwide and is among Europe's 

ten largest private employers as of September 30, 2005. In 2004, ISS had total revenue of DKK 40.4 

billion (EUR 5.4 billion) and EBITDA of DKK 2.9 billion (EUR 386 million). For the twelve months 

ended September 30, 2005, ISS had revenue of DKK 45.1 billion (EUR 6.0 billion) and EBITDA of 

DKK 3.3 billion (EUR 440 million). 


Revenues in 2004 

Belgium and 

Luxembourg 

5% 


Note: 

Germany 

4% 

Spain 4% 

Finland 6% 

Other 

14% 

Norway 

8% 

Denmark 

9% 

France 

19% 

UK 

14% 

Sweden 

(excluding 

Health Care 

operations) 

9% 

Figure 12: Geographical Breakdown of EBITA 

in 2004 

Sweden (excluding Health Care operations) 5% 

Belgium and 

Luxembourg 

5% 

Other 2% 

Switzerland 3% 

Austria 4% 

Spain 5% 

Finland 

9% 

Norway 

9% 

France 

23% 

Denmark 

10% 


(1) EBITA represents Earnings before Interest, Taxes, Amortization, Other Income and Expenses, and Income from Associates. Further 

amortization, which is not included herein, is amortization of goodwill under Danish GAAP or amortization of customer contracts under IFRS. 


ISS has been operating for more than 100 years. The Company began as a security company and 

began offering cleaning services in 1934. Since that time, ISS has expanded its business, both 

through organic growth and acquisitions, and its facility services currently include: 

� Cleaning services, which represented approximately 66% of 2004 revenue, include daily office 

and facility cleaning, dust control, washroom and specialized cleaning services; 

� Property services, which represented approximately 21% of 2004 revenue, include landscaping, 

damage control, building maintenance and technical services and pest control services; 

� Office support services, which represented approximately 5% of 2004 revenue, include call 

centre, reception, office logistics and access control services; 

� Catering services, which represented approximately 5% of 2004 revenue, include company 

restaurants, event catering, executive dining and corporate catering and office catering solutions 

such as coffee points; and 

UK 

16%


45 


� Integrated Facility Services, which represented approximately 3% of 2004 revenue, consist of the 

provision of multiple facility services with on-site management and a single point of contact for the 

customer. 

In recent years, ISS has increasingly offered its customers integrated facility services. By providing onsite 

management, integrated facility services are intended to relieve a customer from the need to 

supervise and manage various suppliers of facility services and to reduce its overhead costs; 

integrated facility services also allow ISS to leverage on-site labour synergies. 

Figure 13: ISS Service Overview (1) 

Facilities Services 

Cleaning Property Catering Office IFS 

Daily Office 

Cleaning 

Dust Control 

Washroom 

Services 

Specialised 

Cleaning 

Food Hygiene 

Maintenance 

Landscaping 

HVAC 

Pest Control 

Damage Control 

Operation of 

Canteens Within 

Customer 

Facilities 

Event Catering 

Call Centres 

Reception 

Services 

Office Logistics 

Access Control 

Integrated 

Facilities 

Services 

Revenue 

(’04 DKKmn) 26,429 8,252 2,003 1,822 1,230 

% of Total 

Revenue 66% 21% 5% 5% 3% 

Note: 

(1) Excludes Health Care operations, which was divested in two separate transactions in H1 2005. 


B. History 

ISS’s business dates back to 1901 with the establishment of a security company in Copenhagen. In 

1934 this company’s activities were expanded to include cleaning services. The business expanded 

into Sweden in 1946 and into Norway in 1952. Expansion continued during the 1960s and 1970s, with 

new subsidiaries in Finland, Germany, Switzerland, Belgium, the Netherlands, Austria and Spain. In 

1973 the name of the parent company was changed to ‘‘ISS”. In 1977 ISS’s common shares were 

listed on the Copenhagen Stock Exchange. By the end of the 1970s, ISS had annual revenue in 

excess of DKK 1 billion, was operating in 15 countries and had approximately 50,000 employees. By 

1989, ISS’s revenue and its number of employees had doubled. International expansion continued 

throughout the 1980s and 1990s, primarily through acquisitions in countries in which ISS had existing 

operations, but also in South America. From 1979 to 1997 ISS had operations in the United States. 

ISS established its Asian operations in the late 1990s.


Table 17: Key Historical Events 

1901 

1934 

1946 

1952 

1965 

1975 

1977 

1979 

1988 

1989 

1996 

1997 

1999 

2000 

2001 

2002 

2005 

2005 

2005 

ISS is established 

46 


Det Danske Rengøringsselskab A/S (The Danish Cleaning Company) is established as an independent subsidiary of the security 

company 

The first geographical expansion outside Denmark, into the Swedish market 

Norsk Rengjøringsselskap AS is set up in Norway 

Starts up cleaning services operations in Germany 

The consolidated revenues of the Group reaches DKK 1 billion 

ISS’s shares are listed on the Copenhagen Stock Exchange (1) 

Expands into the US through acquisition 

Acquires cleaning companies in Denmark, Norway, Sweden, West Germany and the USA. These acquisitions bring the total 

number of Group employees past 100,000 

Acquires cleaning companies in the UK, Sweden and Germany. ISS’s B-shares are listed on the International Stock Exchange 

in London 

Signs an agreement to sell ISS Inc. (ISS’s US subsidiary) to Aaxis Limited, a Montreal-listed company, simultaneously taking a 

19.5% stake in Aaxis 

Sale of ISS Inc. is completed. ISS American Depositary Receipts (ADRs) are de-listed from the New York Stock Exchange 

Acquires Abilis, the second largest European provider of cleaning and specialised services, in a DKK 3.6 billion acquisition, the 

Group's largest ever. Abilis has approximately 50,000 employees and an annual revenues in 1998 of DKK 5.2 billion 

Eric Rylberg is appointed CEO. A new five-year strategy create2005 is launched introducing the facility services concept 

Celebrates 100 year anniversary. 

Acquires Eurogestion to expand service offering in pest control and enters the Australian market 

Sale of 100% of the Health Care operations to EQT Partners in two separate transactions 

Route101 Strategy communicated to shareholders 

ISS taken private by funds advised by EQT Partners and Goldman Sachs Capital Partners 

Note: 

(1) ISS’s shares were delisted on June 21, 2005 in connection with the Acquisition. 

C. Services Overview 

Please see below for a more detailed description of the four individual service offerings and IFS; 

1. Cleaning Services 

ISS provides daily office and facility cleaning for commercial customers, dust control and washroom 

services and specialized cleaning services. ISS’s dust control services consist primarily of the 

provision and cleaning of floor mats, as well as the provision of various other entry-way solutions. 

ISS’s washroom services include a washroom services solution, in which ISS provides technical and 

hygiene services and products, including hardware, such as soap dispensers, and consumables such 

as paper towels. ISS also provides cleaning services to customers with specialized requirements such 

as medical facilities, automotive paint shops and ‘‘clean room’’ facilities used by manufacturers of 

electronic components. Specialized services also include food hygiene services, which involve the 

cleaning of food production and preparation facilities to particular hygiene standards and consulting 

services relating to bacterial management. 

ISS offers cleaning services in all of its operations. Set forth below is unaudited information regarding 

ISS’s cleaning services revenue for the periods presented. Percentage figures represent the 

proportion of total ISS revenue for such periods.


Table 18: Breakdown of Revenues, Cleaning Services 

47 

For the Year Ended 31-Dec 

2002 2003 2004 


Revenues (1) : (unaudited) DKK (‘000) (% of total) DKK (‘000) (% of total) DKK (‘000) (% of total) 

Cleaning services: 

Other Cleaning Services 25,134 70 24,329 68 25,107 63 

Food Hygiene Services 1,058 3 861 2 930 2 

Washrooms and Dust Control 190 1 209 1 392 1 

Total Cleaning Services 26,382 74 25,399 71 26,429 66 

Note: 

(1) Excludes revenues attributable to discontinued operations. 


2. Property Services 

ISS provides Property Services, which comprise landscaping, damage control, building maintenance 

and technical services and pest control services. ISS’s landscaping services include the design, 

construction and maintenance of gardens, parks and other green areas. ISS also provides damage 

control services in which it assists customers who have incurred damage as a result of natural 

disasters, fires, floods and other extraordinary events. These damage control services include 

restoration, including the recovery of data from information technology systems and damage 

containment. ISS’s building maintenance and technical services range from janitorial services to more 

specialized services such as the maintenance of heating, ventilation and air conditioning systems. Its 

pest control services range from prevention and eradication to disinfection and hygiene consulting 

services in relation to rodents, insects, birds and other pests. 

Currently, ISS offers its property services primarily in Northern Europe, Continental Europe, and 

Australia. The following unaudited table indicates ISS’s revenue from its various property services for 

the periods presented. Percentage figures represent the proportion of total ISS revenue for such 

periods. 

Table 19: Breakdown of Revenues, Property Services 


2002 2003 2004 

Revenues (1) : (unaudited) 

Property Services: 

DKK (‘000) (% of total) DKK (‘000) (% of total) DKK (‘000) (% of total) 

Landscaping 1,839 5 2,164 6 2,804 7 

Damage Control 1,731 5 1,818 5 1,656 4 

Building Maintenance and Technical 

Services 

1,560 4 1,612 5 2,696 7 

Pest Control 677 2 907 3 1,096 3 

Total Property Services 5,807 16 6,501 19 8,252 21 

Note: 



3. Office Support Services 

ISS provides a broad range of office support services such as call centres and reception services, 

including switchboard, help desk and front desk staffing and the booking of meeting rooms. In addition, 

office services include office logistics, including mail processing, document copying, printing and 

shredding, data entry and scanning, office moves and stationery supply services. ISS also provides 

access control services, including security protection of property, assets and people.


48 


ISS offers office support services primarily in Northern Europe. Set forth below is unaudited 

information regarding ISS’s office support services revenue for the periods presented. Percentage 

figures represent the proportion of total ISS revenue for such periods. 

Table 20: Breakdown of Revenues, Office Services 

2002 


2003 2004 

Revenues (1) : (unaudited) DKK (‘000) (% of total) DKK (‘000) (% of total) DKK (‘000) (% of total) 

Office Support Services 1,021 3 1,179 3 1,822 5 

Note: 



4. Catering services 

ISS’s catering services consist primarily of the operation of company restaurants, ranging from 

production floor canteens to event catering, executive dining rooms, corporate catering and office 

catering solutions such as coffee points. 

Currently, ISS offers its catering services primarily in Northern Europe. However, ISS recently 

introduced catering services in the Netherlands, Belgium and Singapore. Set forth below is unaudited 

information regarding the catering services revenue for the periods presented. Percentage figures 

represent the proportion of total ISS revenue for such periods. 

Table 21: Breakdown of Revenues, Catering Services 

2002 


2003 2004 

Revenues (1) : (unaudited) DKK (‘000) (%) DKK (‘000) (%) DKK (‘000) (%) 

Catering Services 1,543 4 1,476 4 2,003 5 

Note: 



5. Integrated facility services 

Integrated facility services refers to the provision of two or more of the facility services described 

above, together with on-site management through a single point of contact with the customer. In 

addition, ISS’s integrated facility services may include, among other things, space management, 

relocation and move management, property management and project management services. Where it 

provides integrated facility services, ISS is able to assume responsibility for customers’ facilities, and 

manages the provision of other ISS services, as well as coordinating third party service suppliers. 

By providing on-site management, ISS believes that integrated facility services strengthen customer 

relationships by involving it in more aspects of the customer’s business. In addition, integrated facility 

services offer the opportunity to reduce customers’ overhead costs and for ISS to leverage on-site 

labour synergies. 

ISS’s provision of integrated facility services varies depending on its service offerings in a particular 

country. In general, the greatest opportunity to provide customers with integrated facility services is in 

those countries in Northern Europe in which ISS offers its full range of facility services. In some 

regions, particularly Overseas, ISS’s does not offer integrated facility services as its business in those


49 


countries remains focused almost exclusively on cleaning services. Set forth below is information 

regarding integrated facility services revenue for the periods presented. Percentage figures represent 

the proportion of total ISS revenue for such periods. 

Table 22: Breakdown of Revenues, Integrated Facility Services 

2002 


2003 2004 

Revenues (1) : (unaudited) DKK (‘000) (%) DKK (‘000) (%) DKK (‘000) (%) 

Integrated Facility Services 907 3 916 3 1,229 3 

Note: 



It is ISS’s experience that both owners and users of facilities benefit from the outsourcing of support 

services. The extent of potential cost savings generally depends on whether the customers outsource 

single services, or opt for sourcing multiple services from one individual supplier. The more services 

and the higher the level of service integration, the greater the potential savings are as it enables the 

customer to effectively reduce overhead costs and the overall facility service costs. As part of the 

service solution, ISS can manage the entire service delivery and ensure staff flexibility, quality of 

service and reliability in a cost efficient manner, whilst customers can focus on their core operations. It 

should also be stressed that the IFS market is predicted to grow the fastest of all the individual facility 

services markets over the coming years 7 . 

The transformation of the business towards integrated facility services suppliers varies by country. In 

particular some regions, Overseas and Southern Europe, the businesses remain almost exclusively a 

cleaning services which provides scope for further expansion of the IFS offering. However, within 

most Northern European countries, ISS offers a full range of integrated facility services, a trend which 

contributed to the improved margins in the region during 2004. 

The gradual transformation of ISS from a cleaning service supplier to a multi-services and IFS provider 

continued in 2004, spearheaded by those ISS organisations with the most developed facility services 

concepts e.g. Nordic countries. A number of new facility services contracts were won, some of which 

comprised a range of integrated services. These include: 

� Nordea. ISS’s contract with Nordea, a leading financial services group in the Nordic and Baltic 

regions, was signed in December 2004. Generating more than DKK 100 million annual revenue, 

the deal was one of the largest of its kind in Northern Europe covering three main areas: catering 

(canteens and restaurants on major Nordea sites), cleaning (some 400,000 metres squared of 

office space) and reception services. The deal supports ISS’s ambition to deliver Integrated 

Facility Services solutions with both a domestic and an international scope and runs for three years, 

after which it is subject to renewal. More than 270 of ISS’s employees now work at Nordea’s sites 

in the four countries, including operatives and managers transferring from Nordea to ISS. 

� Other IFS Wins. Other examples of new integrated facility services contracts in 2004 include an 

expansion of the CSC contract on a pan-European scale, Norsk Hydro in Norway, Renault/Nissan, 

ICI and Chelsea & Westminster Hospital in the UK and Seagate in Thailand. 

D. Operations 

ISS maintains a decentralized organizational structure in which the chief executive officer of each 

country’s operations typically reports directly to the ISS head office in Copenhagen. Each of the 

country organizations is separately organized and acts independently in its local market. ISS’s head 

office performs certain centralized functions, including procurement, risk management, finance, legal, 

treasury, information technology, human resources, international sales and key account management 

and supervision of mergers and acquisitions. ISS is broken up into the following regions: 

� Northern Europe; comprising the United Kingdom, Denmark, Norway, Sweden, Finland, Ireland, 

7 Source: Internationally recognised consulting firm


Iceland, and Russia. 

50 


� Continental Europe; comprising France, the Netherlands, Belgium and Luxembourg, Spain, 

Germany, Switzerland, Austria, Central and Eastern Europe (the Czech Republic, Slovenia, 

Slovakia, Hungary, Croatia and Romania), Portugal, Greece, Italy, Poland, Turkey, and Estonia. 

� Overseas; comprising Israel, China, Hong Kong, Brazil, Singapore, Australia, Thailand, India, 

Indonesia, Malaysia, Argentina, Chile, Sri Lanka, Brunei, Uruguay and New Zealand. 

In 2004, Northern Europe, Continental Europe and Overseas represented 45%, 50% and 5% of 

revenues respectively. ISS employed more than 305,000 employees as of September 30, 2005, of 

which only approximately 91 employees were in its head office. 

The following table contains information relating to sales, operating profit, margin and employees for 

each of the countries in which ISS operates.


Table 23: Unaudited Breakdown of Operations by Country (2004) 

51 


Country (1) Revenue (DKK million) Margin (%) (2) Employees (3) 

Northern Europe: 

The United Kingdom 5,537 6.6 37,890 

Denmark (4) 3,349 6.6 12,064 

Norway 3,084 6.8 7,343 

Sweden (5) 3,009 3.5 10,146 

Finland 2,441 8.0 13,303 

Ireland 300 7.9 1,998 

Greenland 123 1.4 407 

Iceland 106 7.3 591 

Total Northern Europe 17,949 6.2 83,742 

Continental Europe 

France 7,799 6.8 37,973 

The Netherlands 3,094 6.2 21,904 

Belgium & Luxembourg 2,072 5.9 9,990 

Spain 1,791 5.7 18,091 

Germany 1,568 1.7 16,462 

Switzerland 1,153 6.2 7,156 

Austria 1,150 7.9 7,063 

Central & Eastern Europe (6) 466 6.4 8,216 

Portugal 226 6.9 2,746 

Greece 193 5.8 1,602 

Italy 192 6.6 616 

Poland 67 4.3 1,924 

Total Continental Europe 19,771 6.0 133,743 

Overseas 

Israel 373 5.0 5,821 

China & Hong Kong 354 5.1 5,033 

Brazil 341 5.4 12,381 

Singapore 307 6.6 3,818 

Australia 242 11.7 487 

Thailand 93 6.9 7,726 

Japan (7) 78 2.2 488 

Indonesia 69 9.4 6,977 

Malaysia 69 7.6 2,392 

Argentina 39 (2.8) 2,304 

Chile 19 5.2 1,582 

Sri Lanka 17 0.0 5,650 

Brunei 13 24.5 161 

Uruguay 2 10.0 260 

Total Overseas 2,016 6.0 55,080 

Total Operations (8) 39,736 6.1 272,565 

Corporate - (0.5) 77 

Health Care operations (9) (divested) 619 10.3 892 

Total 40,355 5.6 273,534 

Note: 

(1) ISS’s operations in India, New Zealand, Russia, and Turkey were established in 2005. 

(2) Operating profit before other items divided by revenue based on ISS’s consolidated preliminary financials prepared in accordance with IFRS. 

(3) At end of year. 

(4) Including the Greenland and Faroe Islands. 

(5) Excluding the Swedish Health Care operations business (which had 892 employees). 

(6) Including the Czech Republic, Slovenia, Slovakia, Romania, Hungary and Croatia. 

(7) Japan was divested on September 1, 2005. 

(8) Excluding Health Care operations prior to January 1, 2005. 

(9) In 2005 the Health Care operations business was sold to funds advised by EQT Partners in two separate transactions. 


As indicated in the table above, among ISS’s more established operations, margins tend to be higher 

where ISS offers a broader range of services and has higher customer density.


52 


The shaded boxes in the following table indicate the facility services provided in each country in which 

ISS operates. As part of its strategy, ISS intends to provide, when appropriate, a full range of services 

and integrated facility services capabilities in each of its markets. 

Table 24: ISS Service Offering by Country 

Country 

Northern Europe: 

United Kingdom 

Denmark (1) 

Norway 

Sweden 

Finland 

Ireland 

Russia 

Continental Europe: 

France 


Belgium and Luxembourg 

Spain 

Germany 

Switzerland 

Austria 

Central and Eastern Europe (2) 

Portugal 

Greece 

Italy 

Estonia 

Poland 

Turkey 

Overseas: 

Israel 

China and Hong Kong 

Brazil 

Singapore 

Australia 

Thailand 

Indonesia 

Malaysia 

Argentina 

Chile 

Sri Lanka 

Brunei 

Uruguay 

India 

New Zealand 

Cleaning 

Services 

Property 

Services Office Services 

Note: 

(1) Comprising Iceland, Greenland and the Faroe Islands. 

(2) Comprising the Czech Republic, Slovenia, Slovakia, Romania, Hungary and Croatia. 


Catering 

Services 

Integrated 

Facility Services


E. Acquisition History 

53 


Consolidation of the industry is an integral part of ISS’s strategy and consequently ISS makes a large 

number of acquisitions every year in its key business areas. ISS has also done a few “platform” 

acquisitions to enter new geographies and / or areas of activities. 

In recent years, ISS has followed a strategy of selectively acquiring smaller companies, typically with 

annual revenues of less than DKK 100 million (EUR 13 million), in order to strengthen ISS’s 

competencies, enhance its service offering or establish critical mass. The volume of acquisitions has 

varied in recent years depending upon market conditions. In the years ended December 31, 2002, 

2003 and 2004, ISS made 31, 51 and 95 acquisitions respectively. ISS reduced its acquisition activity 

in 2002 to concentrate on initiatives aimed at increasing its Operating Margins. These efforts included 

contract trimming in Belgium, Denmark, France, Germany and the Netherlands in 2002 and in Brazil 

initiated in 2003, in order to rationalize ISS’s contract portfolio following a period of significant growth. 

Following completion of these projects, ISS increased its acquisition activity in 2004. ISS has 

maintained a similar acquisition pace in 2005, completing 74 acquisitions through September 30, 2005. 

ISS has a well-developed acquisition process, which relies to a large extent on its local management 

teams in order to capitalize on their local market knowledge. These local management teams are 

responsible for target identification and for most of the acquisition process through to integration of the 

acquired business. ISS’s M&A department manages the acquisition process, primarily with respect to 

valuation of the acquisition and negotiation of the material acquisition agreements, to the extent that its 

centralized resources add value. This centralized department is responsible for quality assurance with 

respect to all acquisitions. ISS’s group M&A department is more heavily involved in all larger 

acquisitions and all acquisitions are approved by the Executive Management Board of ISS 

Management A/S (“ISS Management”), and the approval of the Board of ISS Management is required 

for large or strategic acquisitions. 

Please see the following figure for an historical overview of ISS acquisitions since 2000, representing 

a total of more than 375 acquisitions; in more than 30 countries, with acquired Revenues of more than 

DKK 23 billion (EUR 3.1 billion). 

Figure 14: Approximate Acquired Revenues, Historical Overview of Acquisitions 2000 – 

9M-2005 (Approximate Acquired Full Year Revenues) 

DKK million 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 


0 

6,363 

4,384 

1,930 

1,280 

6,095 

3,150 

2000 2001 2002 2003 2004 9M 2005 

Cleaning Property Catering Office Support Integrated Facilities Services Other


54 


ISS made 95 bolt-on acquisitions during 2004, of which two had particular strategic importance: the 

acquisitions of Grupo Unica in Spain and Engel Group in Finland. Through Grupo Unica, ISS 

established a presence in Madrid and in southern Spain, where the Company previously had a weak 

or limited presence. With the acquisition of Engel, which provides cleaning, property services and 

security services, ISS strengthened the Finnish operations. A total of 74 acquisitions were made 

during the period January 1 – September 30, 2005, adding revenue of approximately DKK 3.2 billion 

on an annualised basis. 

Divestments in the last three years have been limited and have focused on under-performing and noncore 

businesses. Most of these divestments have been relatively small. However, in 2002 ISS 

divested most of its aviation service operations in the United Kingdom, The Netherlands and the 

Nordic countries. The aviation services business had revenues of DKK 714 million in 2001. In 

November 2002, ISS sold 51% of CarePartner AB, its elderly care business which operated a number 

of old age homes in the Nordic region, to a group made up of this business’s local management. In 

February 2005, ISS sold its 49% interest in the elderly care business and 100% of its Swedish Health 

Care business, which provided diagnostic and certain other medical services in Sweden, to a newly 

formed joint venture entity between EQT and ISS. At the end of June 2005, ISS sold its 49% interest 

in the joint venture entity to EQT. 

The table below provides unaudited information concerning ISS’s acquisitions and divestments for the 

periods presented. Revenue presented in the table represents the prior year revenue of the acquired 

companies. 

Table 25: ISS Acquisition History 2002- present 

Acquisitions 


2002 2003 2004 

2005 

(through September 30) 

Number of acquisitions 31 51 95 74 

Average annual Revenue of acquired companies (DKK 

62 25 64 43 

million) (1) 

Smallest acquisition (DKK million) 1 1 1 1 

Largest acquisition (DKK million) 902 217 1,443 242 

Sum of acquired revenue (DKK million) 1,930 1,280 6,095 3,150 

Acquired employees 9,871 5,255 37,057 29,493 

Divestments 

Number of divestments 15 7 8 7 

Revenue attributable to divestments 

(DKK million) (2) 

1,652 221 192 380 

Note: 

(1) Based on estimated revenue of the acquired companies made at the time of acquisition. 

(2) On an annualized basis according to revenue for the prior year 


F. Customers and Contracts 


2004, revenue derived from its ten largest customers was less than 5% of its total revenue. In 2004, 

no more than 19% of ISS’s revenue was generated in any one country, with France being the largest 

contributor to revenue. ISS’s customers operate in a number of industries, and ISS does not believe 

that its business is dependent on any particular industry segment in the private sector or particular 

authority in the public sector. 

ISS’s commercial customers range in size from small firms requiring a single cleaner to large, 

multinational organisations seeking integrated facility services. ISS is focused on developing larger 

accounts, particularly European multinational companies, with the goal of becoming their sole provider 

of integrated facility services. In addition, ISS believes that these customers may be more likely to 

require integrated facility services.


55 


For larger contracts, the quality of the service delivery is often measured against defined quality 

benchmarks stipulated in Service Level Agreements (SLA). More than 90% of ISS’s operations have 

adopted a formalised quality approach. Generally, ISS uses ISO certified quality management 

systems, and a number of countries have implemented Total Quality and Business Excellence models. 

The terms of ISS’s customer contracts vary widely by country and customer segment due to differing 

customer requirements and applicable legislation. However, ISS typically provides services under 

multi-year contracts with a stated term of between two and five years and reciprocal termination rights 

upon three to 12 months prior written notice. ISS’s commercial customer contracts typically provide 

for automatic renewal in the absence of a party’s notice to terminate the contract. 

ISS is highly focused on customer retention and, as a result, recently introduced Customer Retention 

Managers in a number of countries with the aim of improving customer churn rates even further. 

ISS also provides its services to governmental entities, primarily in Europe. The contractual 

arrangements with these entities differ from ISS’s commercial contracts in that they are generally 

subject to public procurement rules. Under these rules, facility services contracts are generally 

retendered on a regular basis. As a result, ISS must tender to maintain existing governmental 

contracts. ISS will seek to continue to provide facility services to public sector customers in the future. 

In the United Kingdom, ISS has entered into a number of arrangements with government-owned 

hospitals under Private Finance Initiative (PFI) contracts. The PFI contracts generally have a contract 

length of between five and 30 years. With respect to three projects, ISS has a joint equity investment 

in the entity providing services under the contract along with third party equity sponsors of the project. 

ISS is providing some form of facility services in each of the PFI projects, ranging from new hospital 

builds with integrated facility services to single services contracts. Under some of the PFI contracts, 

ISS has agreed that, in the event that the entity is unable to pay for ISS’s services, then ISS will 

convert its receivables from the entity into a loan. 

G. Human Resources 

The facility services industry is characterised by relatively high levels of employee turnover, as the 

industry is often considered a short-term or secondary source of employment. As a result, ISS pursues 

a number of strategies to reduce the turnover among blue collar employees, including arranging for 

more full-time and daytime work. ISS also seeks to enhance employee satisfaction and reduce 

turnover by providing multitasking jobs, encouraging career development opportunities and providing 

programs designed to promote teamwork and skills development. In 2004, the share of full-time 

employees (working 25 hours or more per week) rose to 57% from 55% in 2003. The distribution of 

employee tenure (in years) provides another perspective on employee loyalty at ISS. In 2004, 69% of 

the Group’s employees had been with ISS for more than one year. 

Figure 15: Total Number of Employees and Percentage of Full Time Employees 

# of Employees 


400,000 

300,000 

200,000 

100,000 

0 

53% 

55% 

248,500 245,000 

57% 

273,500 

2002 2003 2004 

Number of Employees Share of employees full time 

60% 

50% 

40% 

30% 

20% 

Share of Full-time 

Employees 

Reduction of employee turnover is one of the principal challenges ISS faces. ISS’s employees are 

generally members of trade unions, and employee and trade union relations have a high priority to ISS.


56 


In 1995 ISS established the European Works Counsel as an in-house forum for dialogue between ISS 

management and employee representatives across Europe. In 2004, 31 employee representatives 

from 17 countries were engaged in European Works Counsel meetings. 

While ISS generally seeks to reduce its employee turnover, the relatively high rate of turnover 

characteristic of the facility services industry provides a certain amount of operational flexibility. 

Through natural attrition ISS is able to reduce staff costs in response to fluctuations in market demand. 

As a result of its local scale and density ISS can shift employees among existing customers. EU law, 

which under certain circumstances allows ISS to pass on site staff to the new service provider when a 

facility services contract is lost, provides additional operational flexibility. 

In the last five years ISS has not experienced any material disruption to its business as the result of 

strikes, work stoppages or other labour disputes. In 2003, ISS signed a letter of agreement with the 

international service workers union UNI (Union Network International), under which ISS pledged to 

ensure good working standards in all of its countries of operation, and UNI pledged to expose 

companies in the industry that violate basic employment principles and applicable legislation. 

Table 26: Key Employee Statistics 

2002 2003 2004 (1) 

Number of Employees 248,500 245,000 273,500 

Share of Fulltime Employees (%) 53 55 57 

Staff Turnover Blue Collar Workers (%) 51 50 50 

Staff Turnover White Collar Workers (%) 18 19 24 

Total Staff Turnover (2) (%) 49 49 49 

Share of Employees with less than One Year Seniority (3) (%) - 31 31 

Share of Employees with One to Five Years of Seniority (3) (%) - 42 39 

Share of Employees with more than Five Years of Seniority (3) (%) - 27 30 

Note: 

(1) Approximate figures derived on the basis of 99% of the total number of employees. 

(2) Calculated as the number of employees who leave during the year divided by the average number of employees for the year. 

(3) At end of period. 


H. Sales and Marketing 

ISS employs approximately 1,000 persons worldwide who are engaged in ISS’s sales and marketing 

efforts. ISS’s sales and marketing effort is predominantly organized and conducted through its country 

organizations. Each country has adapted its sales and marketing efforts to the challenges of its 

individual market. 

ISS maintains a centralized corporate marketing department that coordinates ISS’s branding strategy 

and its company-wide marketing initiatives. In addition, this department is responsible for sales and 

account management relating to multinational customers and other key clients and the marketing of 

ISS’s integrated facility services to a select group of European multinational companies, comprised of 

existing and potential customers. ISS intends to continue to expand this international sales force in 

the future.


VI. Business Strategy 

57 

Business Strategy


A. Strategy 

58 

Business Strategy 

In April 2005 ISS announced its current business strategy, named "Route 101" which sets out the 

objective of achieving revenues of DKK 101 billion. Route 101 comprises a number of initiatives aimed 

at developing the Company, i.e. continue to train staff and continue to invest in group-wide systems 

and tools to support, whilst adhering to certain operational objectives. The plan does not contain a 

defined period of time for achieving DKK 101 billion revenue target. 

Consistent with this strategy, ISS intends to: (i) continue to focus on operational efficiency to maintain 

or improve its competitive position; (ii) increase its ability to deliver integrated facility services 

throughout its operations; (iii) continue to make selective acquisitions; and (iv) focus on reducing the 

Group’s financial leverage on a multiple basis. The principal elements of this strategy include the 

following: 

� Continue to focus on operational efficiency. ISS will seek to maintain and enhance operational 

efficiency by continuing its focus on three well-established and prioritized operational objectives for 

its local managers: (i) cash flow; (ii) operating margin; and (iii) profitable organic growth. 

— Cash flow. ISS’s first operational objective is to continue to maintain a relatively high rate of 

cash conversion 8 by operating in a manner that optimizes working capital. Through this 

approach, ISS expects to continue to generate positive Free Operating Cash Flow and ISS 

believes that, in a typical year, it should be able to achieve a target cash conversion ratio of 

between 90% and 95%. 

— Operating margin. ISS’s second operational objective is to maintain or increase its operating 

margin through continuous focus on costs. To reduce costs, ISS will seek to generate 

operational efficiencies by increasing its local market shares and operational densities, as well 

as through the implementation of company-wide best practices. Consistent with this approach, 

ISS has increased its operating margin, which ISS defines as operating profit before other 

income and expenses and income from associates divided by revenue, from 5.1% in 2000 to 

5.6% in 2004. 

— Profitable organic growth. ISS’s third operational objective is to continue to leverage its 

international market position and service offering in order to increase its local market positions 

and drive organic growth. To do this, ISS has introduced a wide range of initiatives, including 

dedicated management of key accounts and additional training of sales staff, to increase 

customer retention rates. ISS will also continue to focus on the cross-selling of related services, 

such as pest control and washroom services, to existing customers. Additionally, ISS has 

established a market presence and operating platforms in, and will seek to leverage the growth 

potential of, selected high-growth economies, such as Brazil, Russia, India and China. 

� Increase integrated facility services capabilities. ISS also intends to continue to broaden its 

service offering in order to eventually offer a full range of facility services in each of its markets, 

primarily through the introduction of additional services and by acquiring companies with additional 

competencies. ISS believes that integrated facility services strengthen customer relationships 

through ISS’s on-site management. In addition, integrated facility services offer the opportunity to 

reduce customers’ overhead costs and for ISS to leverage operational synergies. 

� Continue disciplined acquisition process. ISS expects to continue its well-established 

acquisition process to facilitate its strategy of increasing local scale, broadening its local service 

offering and accessing new markets. ISS will continue to focus primarily on smaller acquisitions, 

which it believes will reduce the integration risks relating to individual acquisitions and enable it to 

leverage the experience of local management teams throughout its countries of operation. To 

access new geographic markets, ISS intends to establish operating platforms in higher growth 

markets, including through acquisitions. 

� Reduce financial leverage on a multiple basis. The Group intends to reduce the financial 

leverage, in terms of debt to EBITDA, resulting from the acquisition financing, primarily through 

growth in operating profit. The Group intends to increase its operating profit through its continued 

focus on operational efficiency, organic growth and acquisitions. 

8 The cash conversion ratio, as calculated by ISS, represents Free Operating Cash Flow as a percentage of profit before goodwill 

amortisation under Danish GAAP, or profit before goodwill impairment and write-down and amortisation of customer contracts under 

IFRS.


VII. Legal Issues 

59 

Legal Issues


60 

Legal Issues 

ISS Holding mandated international and Danish legal advisors to conduct legal due diligence on the 

ISS Group in 42 countries (of which 10 were examined in significantly greater detail) based on 

information provided by the Company in a data room in response to information requests. The 

sections below are not a substitute for, nor a summary of all material issues from each country's due 

diligence report and are provided strictly for the information of potential investors but are provided 

strictly without any representation or warranty to such investors. 

� SEC Issue. Information on accounting irregularities in ISS Inc, which emerged in 1996 and led to 

the divestment of ISS Inc, have been reported to US authorities. An international legal advisor has 

carried out a number of computer searches in an attempt to identify any criminal or civil 

proceedings instituted against ISS Inc. in relation to those accounting irregularities. These 

searches did not identify any criminal proceedings against ISS Inc, nor did they show any SEC civil 

enforcement or administrative actions against ISS Inc. involving any accounting irregularities in ISS 

Inc. In addition, the searches did not identify any securities fraud class action suits or shareholder 

derivative suits involving the accounting irregularities in ISS Inc. 

� Contracts. ISS has contractual obligations under e.g. customer contracts, service agreements, 

shareholder agreements, joint venture contracts and PFI projects with public authorities or other 

third parties. Some of these agreements contain change of control provisions that were triggered 

by the Acquisition, but ISS consider these unlikely to cause any material change to the business. 

� Intellectual Property Rights. Generally, the ISS Group seems to have a well-protected 

trademark position with more than 300 identified trademarks in 29 countries, primarily registered in 

the name of ISS A/S. 

� Labour disputes. ISS does not have any significant or long-term disputes with larger labour 

organisations which on a consolidated basis may be considered a material risk to the ISS Group. 

� Litigation. The reports do not identify any litigation which, on the evidence available, is likely to 

result in any single claim in excess of EUR 3 million. 

� Environmental. ISS presently owns or operates a number of properties at which industrial 

activities or activities involving the daily handling of hazardous materials take place, including 

laundry facilities in Denmark and Norway and waste management facilities in France. The 

Company has within the last two years carried out an independent environmental assessment of 6 

sites in France which concluded that the waste management and landfill operations of ISS 

reviewed were in all material respects in compliance with applicable environmental regulations. ISS 

has not been subject to any material environmental sanctions. 

� Sweden: ISS Facility Services AB and ISS Health Care operations AB have given warranties to the 

purchaser of their Health Care operations business according to which they may become liable to 

pay compensation for any loss the purchaser might suffer as a result of future changes in the 

Swedish Health Care Operations regulation, preventing the purchaser from conducting these 

Health Care operations business acquired from the ISS companies. However, the parties have 

agreed to cap any potential liability of the ISS companies at a maximum amount of SEK100 million. 

� Financing. ISS Group has obligations under various loan and bank facilities some of which are 

secured. Some facilities are guaranteed by ISS Global. These facilities will either be refinanced, 

or brought within the scope of the exemptions agreed in the Senior Credit Facilities Agreement. 

� Pensions. ISS Group has various pension schemes in operation. Some of the pension schemes 

are currently under-funded but none of the schemes are being wound up. 

� UK PFI Projects. ISS Group participates in a number of limited recourse PFI projects in the UK as 

facilities management contractor and, in three instances, also as investor. The review undertaken 

by an international legal advisor identified various types of exposures such as the length of these 

contracts and the relatively broad representations and warranties given by the ISS UK Group in 

connection with these projects, which are to be expected in projects of this nature. Overall, there 

were no significant concerns arising from the review. 

� From the due diligence carried out and the information provided by ISS, nothing appeared that 

would indicate that the ISS Group is anything other than a well organised group of companies.


ISS Global’s EMTNs 9 

61 

Legal Issues 

On May 27, 2005, the boards of directors of ISS Holding, ISS and ISS Global received a letter from a 

Danish law firm representing certain holders of ISS Global's EMTNs. The letter stated that these holders 

had incurred losses as a result of declines in the trading price of the EMTNs following ISS Holding's 

announcement of its tender offer for the shares of ISS and the downgrading of the credit rating of ISS 

Global following ISS Holding's announcement of its intention to increase the debt leverage of ISS Global 

in the future. It also stated that such holders would scrutinize whether any action taken or contemplated 

in connection with the Acquisition, including the implementation of ISS's financing structure, was in 

violation of the Danish Companies Act. The letter also noted that if, at the time the EMTNs were offered 

and sold in 2004, either ISS Global, any of its directors or any member of its management team knew or 

should have known of the Principal Shareholders' intention to acquire ISS and the resulting changes to 

ISS Global's capital structure, there could be "serious questions of liability". 

On July 28, 2005, ISS Global received a letter from an English law firm representing certain holders of 

EMTNs requesting information concerning the structuring of the Acquisition and the offering of the notes 

and again raising the possibility of legal action. Specifically, the letter contemplated legal action in 

England to seek a declaration that the implementation of ISS's financing structure would result in a 

breach of the negative pledge covenant of the EMTNs, which restricts ISS Global issuing certain 

indebtedness represented or evidenced by securities ("Relevant Indebtedness") which is secured over 

assets of ISS Global or its subsidiaries. 

ISS's English and Danish lawyers engaged in correspondence and provided relevant extracts of finance 

documentation to these law firms, and to the group of note holders who were instructing them, and who 

were prepared to agree to confidentiality undertakings (but did not necessarily constitute all of the note 

holders who had originally instructed or had otherwise been in contact with the two law firms) (the 

"Instructing Note Holders"), in order to demonstrate why ISS Global believed that these assertions were 

incorrect. In addition, the Sponsors and ISS confirmed to these law firms and the Instructing Note 

Holders that neither ISS nor any of its subsidiaries or any of the directors or managers of any such 

entities had any knowledge of the proposed Acquisition until March 2005, as the initial contacts relating 

to the Acquisition were made in March 2005, subsequent to the offer or sale of the EMTNs. 

Following the review of these documents and the information provided to them, discussions with the 

English legal advisors to ISS Global and subsequent changes to the documents, the Instructing Note 

Holders advised ISS Global that they were satisfied that the financing arrangements under the Senior 

Credit Facilities Agreement will not result in any infringement of the terms of the EMTNs nor will these 

arrangements otherwise be unlawful. This conclusion is consistent with the Danish and English legal 

advice obtained by ISS. 

Notwithstanding the foregoing, ISS cannot assure you that holders of the EMTNs will not seek to 

institute an action or proceeding against ISS or any of its subsidiaries that could have the effect of 

impeding or delaying the transactions described herein or the flow of funds from subsidiaries to ISS, or 

that if instituted, any such action or proceeding would not be decided adversely to one or more of ISS 

or its subsidiaries. 

9 EMTN’s refer to ISS’s European Medium Term Notes due 2010 and 2014.


VIII. Corporate Governance and 

Management 

62 

Corporate Governance and Management


63 

Corporate Governance and Management 

A. Board of Directors of ISS Holding, ISS, and ISS Global 

The Board of Directors of ISS Holding functions in accordance with its rules of procedure, which 

provide guidelines for the Board of Director’s work. The following table sets forth information 

concerning the directors of ISS Holding. ISS is a direct subsidiary of ISS Holding and ISS Global is a 

direct subsidiary of ISS. The membership of the Boards of Directors of ISS and ISS Global is identical 

to that of the Board of Directors of the ISS Holding. 

Table 27: Board of Directors, ISS Holding 

Name Age Position 

Leif Östling 49 Chairman 

Ole Andersen 49 Director 

Richard Sharp 49 Director and Managing Director 

Sanjay Patel 44 Director 

Christian Sinding 32 Alternate Director 

Edward de Nor 36 Alternate Director 

Leif Östling is currently the President and Group Chief Executive of Scania AB, a position he has held 

since 1994. Prior to that time, Mr. Östling held various positions within Scania, including acting 

manager of Scania’s South American operations, head of Strategic Planning, Marketing Manager in 

The Netherlands and President of Scania Nederland. He has also served as Chairman of the Board of 

the Danish company Sabroe Refrigeration, which was previously owned by EQT. Mr. Ostling is a 

member of the Board of Directors of Scania AB, AB SKF, Svensk Näringsliv and Teknikföretagen. 

Ole Andersen has been a partner of EQT Partners and head of its Copenhagen office since 

September 2003. Prior to joining EQT Partners, Mr. Andersen was employed at Enskilda Securities. 

From 1997 to 2000 he was head of the Copenhagen Branch and from 2000 to 2003 he was global 

head of Corporate Finance. From 1983 to 1997 Mr. Andersen worked for Arthur Andersen & Co., 

Skandinavisk Holding, Scandinavian Capital Partner and Alfred Berg. Mr. Andersen is currently a 

director of Contex Holding A/S, Aleris AB, Brandtex Group A/S and Copenhagen Airports A/S. Mr. 

Andersen graduated from the Copenhagen Business School with a Masters degree in Economics. 

Richard Sharp is head of the Principal Investment Area Goldman Sachs in Europe and is on the 

Board of Directors of Goldman Sachs International. Mr. Sharp joined Goldman Sachs in 1984, was 

made a partner in 1994 and became a managing director in 1996. He is a member of the Supervisory 

Board of Cognis GmbH & Co. KG Mr. Sharp received a Bachelor of Arts degree and a Master of Arts 

degree from Oxford University. 

Sanjay Patel is co-head of Private Equity in Europe for the Principal Investment Area of Goldman 

Sachs. Prior to joining Goldman Sachs in 2005 he worked with GSC Partners, holding the position of 

co-President from 1999 to 2004 when he became a Senior Advisor of GSC Partners until December 

2004. Mr. Patel previously worked in the Principal Investment Area of Goldman Sachs from 1987 to 

1997. Mr. Patel is a director of R.L. Winston Rod Company, and serves on the Advisory Boards of 

International Asset Transactions, SmartAnalyst and The View Group. Mr. Patel received a Bachelor of 

Arts degree magna cum laude and a Master of Science degree from Harvard University, and a Master 

of Business Administration degree from Stanford University. 

Alternates to the Board of Directors 

Christian Sinding is a partner in EQT Partners. Prior to joining EQT Partners in 1998 he was an 

Associate with AEA Investors Inc. in New York. Prior to his employment with AEA, Mr. Sinding was 

employed as a financial analyst with Bowles Hollowell Conner & Co. in the United States. Mr. Sinding 

is currently a director of Plantasjen ASA and Findus AB. Mr. Sinding holds a Bachelor of Science (in 

Commerce) degree from the University of Virginia, which he received with Distinction in 1994. 

Edward de Nor is a member of Goldman Sachs’ Principal Investments Area based in London with 

primary responsibility for the group’s UK and Northern European merchant banking business. Mr. De 

Nor joined PIA in 2000 in New York and moved to the London office two years later. He has held 

directorships at several companies and currently sits on the board of Autodis S.A. (an independent 

automotive wholesale distribution business). Prior to joining Goldman Sachs, Mr. De Nor was with 

Wasserstein Perella where he focused on leveraged transactions including the firm’s own merchant


64 


banking transactions. He began his investment career in 1991 in the business development area of 

IBM where he focused on developing investment strategies for emerging technologies in which IBM 

had made significant R&D investments. Mr. De Nor graduated from Texas A&M University with a BS 

in Electrical Engineering and received an MBA from Rice University’s Jesse H. Jones School of 

Administration. 

The Principal Shareholders intend to elect at least two additional directors with relevant industry 

experience. 

B. Board of Directors of ISS Management 

ISS Management is a direct subsidiary of ISS Global. The membership of ISS Management’s Board of 

Directors is identical to that of the Boards of Directors of ISS Holding, ISS and ISS Global, except that 

the Board of Directors of ISS Management includes the following directors elected by its employees: 

Karina Deacon, Executive Vice President, Head of Corporate Finance and Control of ISS 

Management; Flemming Quist, Finance Manager with ISS Management; and Tina Hilligsø, a secretary 

with ISS Management. 

C. Executive Management Board of ISS Management 

The overall strategy of the Group is determined by the members of the Board of Directors of ISS 

Holding and the Boards of its subsidiaries ISS and ISS Global. The Group’s day-to-day operations are 

managed by the Executive Management Board of ISS Management pursuant to a Management 

Services Agreement. 

On June 30, 2005, ISS entered into a Management Services Agreement with ISS Management, a 

wholly owned subsidiary of ISS Global, to which ISS Holding and ISS Equity subsequently acceded. 

Under this agreement, ISS Management provides certain operational management services for the 

subsidiaries of ISS Global and certain administrative services for ISS, ISS Equity, ISS Holding and ISS 

Global. Under the agreement, ISS Management has also assumed the obligations of ISS under its 

management and royalty agreements with the operating subsidiaries of ISS Global. However, 

decisions regarding the Group’s strategy, financing and other policy matters continue to be made by, 

and are the responsibility of, the Boards of ISS Holding, ISS and ISS Global. In order to reflect the new 

governance structure, the officers and employees of ISS were transferred to ISS 

Management effective July 1, 2005. As consideration for such management services, ISS 

Management will receive a fee agreed with the management of the subsidiaries of each country. 

ISS Management has a two-tiered board structure consisting of a Board of Directors and an Executive 

Management Board. The Board of Directors supervises the Executive Management Board’s 

performance of its duties under the Management Services Agreement. The two bodies are separate 

and do not have overlapping members. 

The following table sets forth information concerning the members of the Executive Management 

Board of ISS Management. 

Table 28: Executive Management Board, ISS Management 


Eric S. Rylberg 48 Chief Executive Officer 

Thorbjørn Graarud 53 Chief Operating Officer, Northern Europe and Asia 

Jeff Gravenhorst 43 Chief Financial Officer 

Karsten Poulsen 41 Chief Treasury Officer 

Flemming Schandorff 56 Chief Operating Officer, Continental Europe and Overseas 

Effective July 1, 2005, in connection with the execution of the Management Services Agreement, the 

executive directors of ISS were appointed to the Executive Management Board of ISS Management 

and resigned from their positions with the Executive Management Board of ISS. 

Eric S. Rylberg has been Chief Executive Officer since 2000. Mr. Rylberg joined ISS as its Chief 

Financial Officer in 1997. From 1996 to 1997 he was the Chief Executive Officer of Jacob Holm &


65 


Sons. Prior to that time he was the Chief Financial Officer of Incentive Group, a holding company for 

manufacturing and distribution activities. He received a Master of Business Economics from Aarhus 

University, Denmark and a Master of Business Administration degree from Henley Management 

College in the United Kingdom. 

Thorbjørn Graarud has been Chief Operating Officer, Northern Europe and Asia, since 2002. 

Previously, he served as a Managing Director, International, of ISS from 2000 to 2002. Mr. Graarud 

served as a Country Manager for ISS Norway from 1989 to 1999. He joined ISS in 1985. Mr. Graarud 

received a Bachelor of Arts degree in Business Economics from BI Business School, Oslo, Norway. 

Jeff Gravenhorst has been the Chief Financial Officer of ISS since October 1, 2005. Previously he 

was the Chief Financial Officer of ISS UK from 2002 to 2005. From 2000 to 2002 he was Chief 

Executive Officer and President of ALTO Copenhagen A/S, a division of Incentive A/S. From 1998 to 

1999 Mr. Gravenhorst was Vice President, Business Unit Consumer, of ALTO U.S. Inc. He also 

served as President and Chief Financial Officer of Clarke Industries Inc. and Finance Director of 

Wittenborg UK Ltd, each a division of Incentive A/S, as well as a Manager of Arthur Andersen in 

Denmark. Mr. Gravenhorst holds a Master of Science in Business Administration and Auditing from 

the Copenhagen Business School. 

Karsten Poulsen has been Chief Treasury Officer of ISS since October 1, 2005. Previously he was 

the Chief Financial Officer of ISS. Mr. Poulsen joined ISS in 1998 as its Corporate Treasurer. From 

1997 to 1998 he was Treasurer for Jacob Holm & Sons and the Deputy Treasurer for Incentive Group 

from 1996 to 1997. Prior to that time Mr. Poulsen was a Senior Vice President for Danske Bank. Mr. 

Poulsen received a Master of Science in Economics and Business Administration degree from the 

Aarhus Business School. 

Flemming Schandorff has been Chief Operating Officer since 2002. Previously, he was a Managing 

Director, International, of ISS from 2000 to 2002. Mr. Schandorff was the Chief Executive Officer of 

Kompan A/S from 1996 to 2000. He rejoined ISS in 2000, having held various positions with ISS from 

1973 to 1994. He is a member of the Board of Directors of Modulex A/S. Mr. Schandorff received a 

Diploma in Accounting and Management theory from the Copenhagen Business College. 

Please see the following figure for an overview of the organizational structure of ISS: 

Figure 16: Current Group Management Structure


D. Executive Officers of ISS Management 

66 


The following table sets forth information concerning the executive officers of ISS Management. 

Table 29: Executive Officers, ISS Management 


Gerard Brand 49 Regional Director 

Jacob Götzsche 38 International Business Director 

Søren Kongsbak 48 International Business Director 

Henrik Juul Nordenlund 43 International Director 

Jens Ebbe Olesen 43 Executive Vice President, Mergers and Acquisitions 

Stig Pastwa 38 Regional Director 

Bjørn Raasteen 41 Senior Vice President, General Counsel 

Martin Gaarn Thomsen 35 Regional Director, Asia 

Effective July 1, 2005, in connection with the execution of the Management Services Agreement, the 

executive officers of ISS were appointed to their current positions with ISS Management and resigned 

from their positions with ISS. 

Gerard Brand has been a Regional Director since 2005. Previously, he served as the Chief Executive 

Officer of ISS Nederland B.V., ISS’s Dutch operating company, and as its Chief Operating Officer. 

Prior to joining ISS, Mr. Brand worked in a variety of positions with Sodexho NL, including as a 

Corporate Catering Division Director, Director of Sodexho Health Care and as a Regional Operating 

Manager. Mr. Brand has attended vocational and business courses at the Higher Hotel College, 

Maastrict, and IBO Zeist. 

Jacob Götzsche has been International Business Director since 2004. Previously, Mr. Götzsche served 

as Senior Vice President, Mergers and Acquisitions from 2002 to 2004 and Senior Vice President, Head 

of Corporate Finance and Control from 2001 to 2002. He served as ISS’s Chief Group Controller, Head 

of Corporate Finance in 2000 and International Controller from 1999 to 2000. Mr. Götzsche joined ISS 

in 1999 from PriceWaterhouse where he was an auditor from 1994. Mr. Götzsche received a Master of 

Auditing degree from Odense University. 

Søren Kongsbak has been an International Business Director since 2004. Mr. Kongsbak served as a 

Finance Director of ISS from 2000 to 2004. From 1999 to 2000, he served as a Finance Manager of ISS 

Overseas. He joined ISS in 1997. Prior to that time he was Vice President Finance for Incentive Group. 

Mr. Kongsbak received a bachelor degree from Aarhus Business School. 

Henrik Juul Nordenlund has been an International Director since 2003. Mr. Nordenlund joined ISS in 

1999 and served with ISS Germany until 2003, including as Country Manager from 2000. Previously, Mr. 

Nordenlund was Chief Financial Officer, Business Development, of Steff Houlberg. Mr. Nordenlund 

received a graduate degree in Management Accounting from Aarhus Business School. 

Jens Ebbe Olesen has been Executive Vice President, Mergers and Acquisitions, since 1999. Mr. 

Olesen joined ISS in 1998. Prior to that time he was Chief Financial Officer of Jacob Holm & Sons from 

1991. He received a degree in Management Accounting from the Esbjerg Business School and a Master 

of Commerce degree from Kolding Business School. 

Stig Pastwa has been a Regional Director since 2004. Previously, he was ISS’s International Business 

Director for Southern Europe from 2001 to 2003 and Financial Director for Southern Europe in 2000. Mr. 

Pastwa also served as Senior Vice President of ISS’s Mergers and Acquisition department from 1998 to 

2000. He joined ISS in 1998. Prior to that time he served in various positions with A.P. Moller-Maersk, 

most recently as Chief Financial Officer of Maersk Ivory Coast. Mr. Pastwa received a PED degree from 

IMD, an ADP degree from the London Business School and a degree in Management Accounting from 

Copenhagen Business School. 

Bjørn Raasteen has been Senior Vice President and General Counsel since 2005. Previously, he was 

Assistant General Counsel since he joined ISS in 1999. Previously, Mr. Raasteen was a lawyer with the


67 


Jonas Bruun and Hjejle, Gersted & Mogensen law firms. Mr. Raasteen received a Masters of Law 

degree from the University of Copenhagen. 

Martin Gaarn Thomsen has been Regional Director, Asia, since 2005. Previously, he served as 

International Operations Director for ISS Hygiene Services from 2002 to 2004. Mr. Thomsen served as 

Vice President, Corporate Affairs and ISS Innovation from 2000 to 2002. He joined ISS in 1999 and 

served as a Business Support Manager, Business Development until 2000. Prior to that time, Mr. 

Thomsen was IS Manager for Coca-Cola Nordic Beverages. Mr. Thomsen received a Master of Science 

degree in Business Administration from Copenhagen Business School.


68 

Historical Financial Information 

IX. Historical Financial Information


A. Introduction 

69 


The consolidated financial statements for the fiscal years 2000 to 2004 of ISS included in this 

document have been prepared in accordance with the provisions of the Danish Financial Statements 

Act, and the regulations for companies listed on the Copenhagen Stock Exchange, in accordance to 

Danish GAAP. However, as required by EU regulations, ISS will prepare its consolidated financial 

statements for the year ended 31 December 2005 in accordance with IFRS. 

As required by EU regulations, ISS will prepare its consolidated financial statements for the year 

ended 31 December 2005 in accordance with IFRS. Un-audited results for the year ended December 

31, 2004, which have been adjusted to reflect the expected application of IFRS, are included in section 

F to demonstrate the expected impact of ISS's transition to IFRS. The unaudited financial information 

prepared on the basis of the expected application of IFRS included in this document are preliminary in 

nature and may not fully reflect IFRS as finally implemented by ISS. 

The consolidated results of ISS for the nine months ended September 30, for 2004 and for 2005 

respectively, are un-audited and adjusted to reflect the expected application of IFRS. 

The following definitions of certain financial measures should be noted: 

Revenues (“Revenues”), which are recorded net of VAT, duties and discounts, are comprised of the 

value of services provided. ISS recognizes revenue as services are performed for maintenance and 

service contracts. Additionally, ISS utilizes the percentage-of-completion method of accounting for 

installation contracts. Under this method, Revenues are recognized according to the ratio of costs 

incurred to estimated total contract costs. Changes in job performance, job conditions, estimated 

profitability, anticipated contract losses and final contract settlements may result in revisions to costs 

and income and are recognized in the period in which the revisions are determined. 

EBITDAR (“EBITDAR”) represents Earnings before interest, taxes, depreciation, amortization, Other 

Income and Expenses, Income from Associates, and rent. 

EBITDA (“EBITDA”), as calculated by ISS, represents operating profit before other income and 

expenses and associates, depreciation and amortization under Danish GAAP, or operating profit 

before other items, depreciation and amortization under IFRS. By using operating profit before other 

income and expenses and associates under Danish GAAP, or operating profit before other items 

under IFRS, as a starting point for the calculation of EBITDA instead of operating profit, ISS excludes 

from the calculation of EBITDA those items recorded under the line item ‘‘other income and expenses, 

net’’, in which ISS includes income and expenses that it believes do not form part of ISS’s normal 

ordinary operations, such as gains and losses arising from divestments, the winding-up of operations 

and disposals of property, as well as integration costs relating to acquisitions. 

EBITA (“EBITA”) represents Earnings before Interest, Taxes, Amortization, Other Income and 

Expenses, and Income from Associates. Amortization represents only the amortization of intangible 

assets and software. Further amortization, which is not included herein, is amortization of goodwill. 

Free Operating Cash Flow (“Free Operating Cash Flow”), as calculated by ISS, represents cash flow 

from operating activities less investments in intangible assets and property, plant and equipment. 

Intangible assets does not include goodwill and customer contract portfolios and related customer 

relationships. 

The cash conversion ratio (“Cash Conversion” or “Cash Conversion Ratio”), as calculated by ISS, 

represents Free Operating Cash Flow as a percentage of profit before goodwill amortization under 

Danish GAAP, or profit before goodwill impairment and write-down and amortization of customer 

contracts under IFRS.


B. Income Statement 

70 


ISS has enjoyed almost uninterrupted revenue and EBITA growth over the last six years. Focusing on 

a strategy of increasing its international presence and increasing its breadth of services, ISS has 

grown revenues by a 9% CAGR between 2000 and 2004. In addition, the ability to control operating 

costs has allowed the Company to increase EBITDA margins from 6.7% in 2000 to 7.2% in 2004. 

Table 30: Consolidated Income Statement 


DKK million 2000 2001 2002 2003 2004 9M 2004 9M 2005 

Net Revenues 28,719 34,852 37,984 36,165 40,355 29,398 34,157 

Growth Rate % 45.0% 21.4% 9.0% (4.8)% (3) 

11.6% 

Staff Costs (20,457) (24,365) (25,705) (24,414) (26,577) (19,547) (22,673) 

Cost of Goods Sold (1,670) (2,422) (2,825) (2,686) (3,146) (2,234) (2,681) 

Other (4,670) (5,881) (6,841) (6,446) (7,736) (5,509) (6,377) 

Total Operating Expenses (26,797) (32,668) (35,371) (33,546) (37,459) (27,290) (31,731) 

Whereof Operational Leasing Costs (1) 503 768 1,121 1,154 1,272 na na 

EBITDAR 2,425 2,952 3,734 3,773 4,168 na na 

EBITDAR % 8.4% 8.5% 9.8% 10.4% 10.3% na na 

Whereof Operational Leasing Costs (1) (503) (768) (1,121) (1,154) (1,272) na na 

EBITDA 1,922 2,184 2,613 2,619 2,896 2,108 2,426 

EBITDA % 6.7% 6.3% 6.9% 7.2% 7.2% 7.2% 7.1% 

Depreciation and Amortisation (2) (468) (551) (603) (587) (617) 444 482 

EBITA 1,454 1,633 2,010 2,032 2,279 1,664 1,944 

EBITA % 5.1% 4.7% 5.3% 5.6% 5.6% 5.7% 5.7% 

Other Income and Expenses (3) (24) 5 (75) (69) (18) (19) 

Note: 

(1) Operational leasing costs available at fiscal year end only. 

(2) The amounts exclude amortisation of goodwill. 

(3) Please note that the organic growth rate was flat, assuming no contract trimming would have occurred in 2003. 


Revenue Growth 

The revenue growth from 2000 to 2004 was to a large extent driven by acquisitions. However, organic 

growth was also a reliable source of growth, apart from in 2003 when revenues declined by 4.8%. The 

decline in 2003 is explained by the divestment of the Elderly Care business and Aviation business in 

2002, engagement in an active contract trimming program to terminate unprofitable contracts, 

currency fluctuations and overall challenging market conditions. Table 38 below provides further 

explanation on the breakdown of Revenues growth attributed to acquisitions, foreign exchange 

movements, organic growth, and contract trimming. 

Table 31: Breakdown of Revenue Growth 

2000 2001 2002 2003 2004 

Total revenue growth % 45% 21% 9% (5)% 12% 

� Foreign Exchange 3% (1)% 0% (3)% (0)% 

� Acquisitions, net 35% 18% 8% (0)% 11% 

� Organic Growth 7% 4% 1% (2)% 1.5% 


In general, the company experienced an overall positive development in organic growth rates in 2004 

vs. 2003. Negative organic growth continued in Germany (13)% and the Netherlands (5)% during 

2004, due to a combination of reasons including company specific issues and general market pricing 

competition.


71 


The two major revenue contributing countries the UK (14% of 2004 revenues) and France (19% of 

2004 revenues), both had positive organic growth in 2004 of 5% and 6% respectively. 

Figure 17: 2004 Organic Growth and Operating Margin (1) by Country 

15.0% 

10.0% 

5.0% 

0.0% 

-5.0% 

-10.0% 

-15.0% 

10% 

8.0% 

Finland 

8% 

Spain 

5.7% 

6% 6.8% 6.6% 

5% 

5.9% 

6.6% 6.8% 6.2% 

2% 

0% 

France 

UK 

Organic Growth EBITA Margin 

Belgium & 

Luxembourg 

Note: 

(1) EBITA Margin in accordance with the expected application of IFRS 

(2) Sweden organic growth and EBITA Margin includes Health Care operations 


Operating Costs 

Operating expenses as a percentage of revenues have remained fairly stable in the period of 2000- 

2004, accounting for 93% to 94% of revenue. ISS’s cost base is flexible, as in 2004 approximately 

71% of total operating costs constituted staff costs, including salaries and wages, pensions, and other 

employee-related expenses. In 2004, 57% of the personnel were full time employees 10 . Furthermore, 

according to EU law, when facility services contracts are lost to a competitor, the former provider may 

under certain circumstances be able to pass on-site staff to the new provider, an option which provides 

additional operational flexibility. 

Staff costs have declined steadily during the period from 71.2% in 2000 to 65.9% of Revenues in 2004. 

The development is mainly explained by a change in mix of services offered by ISS, resulting in 

subcontracting of some services, thereby decreasing staff cost but increasing cost of goods sold. In 

2004, staff costs increased by 8.9% to DKK 26,577 million compared to 2003. This increase was 

primarily attributable to an increase in the average number of employees of 21,206 (or 8.6%). Cost of 

goods sold increased from 5.8% in 2000 to 7.8% of Revenues in 2004. 

Other operating expenses have increased from 16.3% of Revenues in 2000 to 19.2% in 2004, 

principally due to the increased cost in connection with operating leases. Over the last few years ISS 

has actively strived to shift from capex to operational leases (which consist of leases and rentals of 

properties, cars - and other equipment), which are included in the operating expenses. Other operating 

expenses also include expenses for detergents, uniforms, expensed service equipment, subcontractor 

costs as well as other selling, distribution and administrative expenses, including management salaries, 

clerical and administrative overhead, professional services, costs associated with marketing and 

Revenues efforts and costs associated with the Company’s information systems. 

10 Works more than 25 hours a week. 

Denmark 

-1% 

Norway 

-5% 

The 

Netherlands 

-6% 

(2) 

Sweden 

4.7% 

-13% 

Germany 

1.7%


Figure 18: Average Number of Employees & Staff Costs 2000-2004 11 

Average Number of 

Employees 


280,000 

270,000 

260,000 

250,000 

240,000 

230,000 

EBITDA Margins 

71.2% 

253,200 

69.9% 

259,800 

67.7% 67.5% 65.9% 

256,573 

72 

246,073 


267,279 

80% 

70% 

60% 

50% 

40% 

2000 2001 2002 2003 2004 

Average No. Employees Staff Costs as % of Revenues 

The adjusted EBITDA margins (normalised for non-recurring items) have been stable around 7.0% 

since 1998, with the exceptions of 2000 and 2001 when EBITDA margins fell to 6.7% and 6.3% 

respectively. ISS also incurred costs in 2001 due to the restructurings of the Aviation business 

following the 9/11 event 12 . When adjusting for operational leases, which have increased over the last 

few years due to the Company’s strategic decision to reduce the assets on its balance sheet while 

increasing operational leases, EBITDAR margins have increased from 8.4% in 2000 to 10.3% in 2004. 

This is a direct result of the Company’s increased focus on profitability, illustrated by the active 

trimming of non-profitable contracts, and streamlining of the operations. 

Figure 19: Historical Adjusted EBITDAR and EBITDAR Margin 2000-2004 13 

EBITDAR 

5,500 

4,500 

3,500 

2,500 

1,500 

500 

-500 

8.4% 8.5% 

2,425 2,952 

Note: 2004 EBITDAR is not pro-forma adjusted 


9.8% 

3,734 

10.4% 

3,773 

10.3% 

4,168 

2000 2001 2002 2003 2004 

EBITDAR EBITDAR Margin 

Taxes 

ISS was up until 2004 jointly taxed with a number of wholly owned Danish and foreign subsidiaries. 

The Danish income tax payable is allocated between the jointly taxed Danish companies based on 

their proportion of taxable income (full absorption including reimbursement of tax deficits). The jointly 

taxed companies are included in the Danish tax on account scheme. The foreign companies in the 

Group are subject to taxation in their local jurisdictions. As of 2005, the joint taxation has only included 

fully owned Danish subsidiaries. 

11 Represents average number of employees from January 1 through December 31. 

12 Source: ISS A/S Annual Report, 2001, p.25. 

13 Adjusted before impact from Other Income and Expenses relating to items regarded by management as non-recurring. 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

Staff Costs as % of 

Revenues 

EBITDAR Margin


C. Balance Sheet 

Table 32: Summary Historical Balance Sheets 

73 



DKK million 2000 2001 2002 2003 2004 9M 2005 

Goodwill 9,522 12,022 12,669 12,465 15,494 16,006 

Customer Contract Portfolio and Related 

Customer Relationships 

- - - - - 1,570 

Software / Other Intangible 57 108 194 164 175 149 

Tangible Assets 1,362 1,663 1,509 1,469 1,793 1,857 

Financial Assets 383 704 625 595 873 1,299 

Fixed Assets 11,324 14,497 14,997 14,693 18,335 20,881 

Acc. Receivable and Other Current assets 5,516 6,899 6,524 6,411 7,634 8,830 

Current Liabilities (6,022) (7,435) (7,401) (7,486) (8,843) (9,747) 

Net Working Capital (506) (536) (877) (1,075) (1,209) (917) 

Capital Employed 10,818 13,961 14,120 13,618 17,126 19,964 

Provisions (736) (966) (1,097) (1,093) (1,227) (1,736) 

Net Borrowings / Interest Bearing Debt (4,357) (6,317) (5,604) (4,784) (7,463) (14,516) 

Minority Interests (47) (57) (88) (108) (100) (58) 

Net Assets 5,678 6,621 7,331 7,633 8,336 3,654 

In Percentage of Revenues: 

Fixed Assets 39.4 41.6 39.5 40.6 45.4 

Net Working Capital (1.8) (1.5) (2.3) (3.0) (3.0) 

Capital Employed 37.7 40.1 37.2 37.7 42.4 

Net Assets 19.8 19.0 19.3 21.1 20.7 

Note: 

(1) Value of interest rate swap is included in NIBD in FY 2003 (DKK 0 million) and FY 2004 (DKK 294 million) and non-amortised loan costs in 

FY2003 (DKK 11 million) and FY2004 (DKK 17 million). 

(2) 2000 – 2004 data based on Danish GAAP, while 30 September 2005 is based on IFRS. 


Fixed Assets 

The majority of the fixed assets is goodwill accounting for ca. 84% of total fixed assets in 2004. 

Goodwill and other fixed assets increased significantly from 2000-2004 due to acquisitions but also in 

relation to Revenues (from 39% of revenues in 2000 to 45% in 2004). Years 2000 and 2001 

experienced strong growth in Goodwill while growth stagnated in 2002-2003 as the group focused on 

contract trimming and on integrating already acquired companies. ISS will as from January 1, 2005 

adopt IFRS rules, which require ISS to recognise more intangible assets before the residual value is 

assigned to goodwill. For ISS this means that customer contracts and relationships will be recognised 

in the balance sheet. The carrying value of goodwill will be reduced accordingly. Customer contracts 

and relationships will be amortised while goodwill is not amortised under IFRS. Instead goodwill must 

be tested for impairment. 

Tangible assets include land, buildings and cleaning equipment. The level of tangible assets has also 

increased in the period from 2000-2004 in connection with the acquisitions of companies and general 

corporate growth. As previously mentioned, ISS is aiming at leasing its equipment if possible as 

operating leases and thus the items included on the balance sheet to a large extent relate to assets 

with no active lease market e.g. specialized vehicles. Financial assets mainly include deferred tax 

assets and investments in associated companies.


74 


Current Assets 

Current assets (less liquid funds) amounted to 18.9% of revenues in 2004, which is a decline 

compared to 2000 when it accounted for 19.2%. This relative decline in current assets has been driven 

by accounts receivables, which represent approximately 84% of total current assets. The number of 

days of revenues outstanding has been stable in 2004 but is lower than the higher levels in 2001 (49 

days) and 2002 (47 days). 

Inventories comprise mainly raw materials, supplies and finished goods. Contract work in progress has 

increased in the period 2000-2004 with the exception of 2003 when it decreased. The increase is 

related to management focusing more on integrated facility services, and also the fact that contracts 

are increasing in size and scope. 

Current Liabilities 

The majority of current liabilities relate to employee-related liabilities such as accrued salaries and 

holiday allowances. Trade payables increased in the period 2000-2004, but the increase is in line with 

the development of cost of goods sold and other operating expenses, hence current liabilities in 

relation to revenues have remained stable. Current liabilities have been impacted by an increase in 

prepayments from customers, as the company has continuously focused on generating cash flows. 

Total Non-Current Liabilities 

Provisions include pensions, deferred tax liabilities, and other provisions. As the company operates in 

various countries, there are different forms of pension schemes. The Group contributes to defined 

contribution plans as well as defined benefit plans. As of September 30, 2005, the Company had 

pension and similar obligations on its balance sheet equal to DKK 802 million, which comprise pension 

in relation to the defined benefit plans 14 . Provisions increased in the first nine months of 2005 due to 

adoption of IFRS regarding actuarial losses related to pensions. Other provisions include labour 

related items, self insurance, acquisitions and other which combined, have remained stable at around 

1.4% - 1.6% of revenues during 2000-2004 under Danish GAAP. 

14 ISS contributes to defined contribution plans as well as defined benefit plans. The majority of the pension plans are funded through payments 

of annual premiums to independent insurance companies responsible for the pension obligation towards the employees (defined contribution 

plans). In these plans ISS has no legal or constructive obligation to pay further contributions irrespective of the funding of these insurance 

companies. Pension costs related to such plans are recorded as expenses when incurred. For further information about ISS's pension 

program, please refer to the Mercer Pension Report.


D. Cash Flow Statement 

Table 33: Cash Flow Statement 

75 



DKK million 2000 2001 2002 2003 2004 9M-2004 9M-2005 

EBITA (1) 1,454 1,633 2,010 2,032 2,279 1,664 1,944 

Depreciation and Amortisation (2) 468 551 603 587 617 444 482 

EBITDA 1,922 2,184 2,613 2,619 2,896 2,108 2,426 

Share-based Payment - - - - - 6 3 

Changes in Working Capital (125) 52 412 319 186 (618) (1,097) 

Changes in Provisions (10) 4 (98) (36) (91) (19) (49) 

Other inc. and Exp. Net Payment (3) (25) (67) (19) (76) (43) (162) 

Payments Related to Integration Cost - - - - - (15) (77) 

Operating Cash Flow before Interest and 

Tax 

1,784 2,215 2,860 2,883 2,915 1,419 1,044 

Net Interest Paid (225) (328) (333) (215) (334) (255) 261 

Corporate Tax Paid (294) (377) (263) (323) (602) (355) (497) 

Operating Cash Flow 1,265 1,510 2,264 2,345 1,979 809 808 

Capex Net (391) (452) (525) (403) (583) (417) (398) 

Free Operating Cash Flow 874 1,058 1,739 1,942 1,396 392 410 

Acquisitions of Businesses (3,003) (3,098) (1,898) (1,065) (3,886) (3,524) (1,937) 

Divestment of Businesses (1) 13 16 20 36 33 828 

Investments in Financial Assets, Net (21) (180) 269 29 (53) (888) 365 

Cash flow After Investments (2,151) (2,207) 126 926 (2,507) (3,987) (334) 

Financial payments, net 916 2,131 (782) 556 3,358 3,277 4,270 

Proceeds – issuance of share capital 1,042 789 569 25 793 - - 

Purchase/disposal of own shares 12 - (5) - (30) (30) - 

Dividend Paid to Shareholders - - - (88) (177) (177) (5,830) 

Options and Warrants Settled - - - - - - (163) 

Minority Interests (16) (15) (5) (8) (6) (4) (10) 

Cash flow from Financing Activities 1,954 2,905 (223) 485 3,938 3,066 (1,733) 

Net Change in Cash (197) 698 (97) 1,411 1,431 (921) (2,067) 

Cash conversion % (3) 105% 118% 167% 150% 107% 

Note: 






(3) In 2002, the cash conversion ratio was adjusted to remove the effect of a one-time gain of DKK 74 million (EUR 10 million) related to the 

sale of a minority interest in another entity. In 2003, the cash conversion ratio was adjusted to remove the effect of a tax repayment of DKK 

168 million (EUR 23 million) related to the issuance of shares to employees. 


The table above reflects the strong cash generative aspect of ISS’s business model. In addition to 

growth in EBITDA, Free Operating Cash Flow has been improved by a continuously declining working 

capital level and relatively low maintenance investments requirements. Average cash conversion has 

consistently been above 100% over the last six years and the company aims to achieve a target cash 

conversion ratio of between 90-95% going forward.


Capex and Operating Leases 

76 


As illustrated in Figure 20, capital expenditures have averaged 1.3% of Revenues between 2000 and 

2004. 

Figure 20: Capex 2000-2004 

DKK million 

700 

600 

500 

400 

300 

200 

100 

0 


1.4% 

391 

1.3% 

452 

1.4% 

525 

1.1% 

403 

1.4% 

2000 2001 2002 2003 2004 

Capex Capex as % of Revenues 

Please see below for a summary of operating leasing payments and maintenance Capex from 2000- 

2004. ISS has certain off-balance sheet liabilities, primarily contingent liabilities relating to operating 

leases, which consist of leases and rentals of properties, vehicles (primarily cars) 15 and other 

equipment. On January 1, 2005 ISS entered into a new global car fleet lease framework agreement for 

three years, including an option for extension for a subsequent three-year term. The framework 

agreement contains an option for ISS to terminate the underlying country agreement or the entire 

global commitment upon four weeks’ notice prior to the end of a calendar quarter and subject to ISS’s 

payment of a termination fee. The majority of the underlying agreements have a duration of three to 

five years. The disclosed contingent liability includes ISS’s total leasing commitment assuming no 

early termination of the agreement. The total expenses under operating leases in the income 

statement amounted to DKK 1,272 million in 2004 compared to DKK 1,154 million in 2003. 

Table 34: Historical Overview of Operational Leases 

DKK million 2000 2001 2002 2003 2004 

Operational Leasing Expenses 503 768 1,121 1,154 1,272 

Operational Leasing as % of Revenue 1.8% 2.2% 3.0% 3.2% 3.2% 

Capex 391 452 525 403 583 

Capex as % of Revenue 1.4% 1.3% 1.4% 1.1% 1.4% 


Working Capital 

In recent years, there has been an increased focus on the optimisation of working capital with 

particular emphasis on the reduction of outstanding debtors as expressed in average receivable days 

for a given period and reporting entity. The Company has been and will continue to be focused on 

creating a faster and more effective process in all of its operations; from the time the initial contact with 

the customer is established until the customer's payment is registered in the Group's bank account. 

This is achieved through the improvement of internal paper-flows, the use of information technology 

and the optimisation of procedures for following up on outstanding debtors. This has resulted in a 

reduction in receivable days for the Group as a whole every fiscal year since the end of fiscal year 

2001 which has been the key driver behind the Cash Conversion reaching consistently more than 

15 The company has the ability to terminate its vehicle leases with six months notice in each individual country. 

583 

1.6% 

1.4% 

1.2% 

1.0% 

0.8% 

0.6% 

0.4% 

0.2% 

0.0% 

% of Net Revenues


77 


100% in recent years. However, this reduction in working capital requirements is to some extent offset 

by the growth of the Company in Continental European and International markets where average 

receivable days are typically less favourable than in Northern Europe. In September 2005 average 

receivable days were 62 days in Continental Europe, while in Northern Europe the average receivable 

days were 32 days. When comparing September 2005 average receivable days of individual countries 

within Europe the range varies from 16 days in Finland to 94 days in Italy. 

Figure 21: Development in Receivable Days Outstanding, 2000-2004 

Note: 

Receivables Days Outstanding 

45 

49 

47 

2000 2001 2002 2003 2004 

(1) Defined as (Accounts Receivable) divided by ((Revenue for the total number of months plus VAT) divided by 30 days) 


E. Seasonality 

The demand for traditional facility services is generally stable and there appears to be limited 

seasonality in the quarterly revenue development over the historical period. However, some of the 

services ISS provides experience seasonality. In particular, demand for the landscaping and pest 

control services of property services segment are significantly higher in the summer months than in 

the fall and winter, which may cause Revenues to be higher in the second and third quarter of the year 

and lower in the first and fourth quarters. However, given the impact by the timing of acquisitions in 

particular 2000 and 2001, makes it very difficult to compare quarterly revenue development, hence no 

direct conclusions can be drawn. 

Figure 22: ISS Revenues, 2001-Q3 2005, by Quarter 

DKK million 

25,000 

20,000 

15,000 

10,000 


5,000 

0 

Q1 Q2 Q3 Q4 

8,153 

8,559 

8,804 

9,336 

9,300 

9,683 

9,521 

9,480 

8,917 

9,013 

8,931 

9,304 

45 

9,244 

9,743 

10,411 

10,957 

FY01 FY02 FY03 FY04 FY05 

10,845 

44 

11,677 

11,635


78 


For the EBITA margin, there is a clear trend of higher profitability in the second and third quarter since 

certain countries have their high-season in summer when the high-margin jobs not within contracts 

positively impact EBITA margins. ISS tends to incur higher staff costs in the fourth quarter of the year 

due to the payment of bonuses, the additional payment under 13 month salary arrangements and 

higher pension contributions. Furthermore, during the summer season labour costs are lower due to 

increased use of temporary staff. 

Figure 23: ISS EBITA Margin, 2001-Q3 2005, by Quarter 

% of Revenues 


12.0% 

10.0% 

8.0% 

6.0% 

4.0% 

2.0% 

0.0% 

4.2% 

5.1% 

5.5% 

3.9% 

4.3% 

5.7% 

6.1% 

5.1% 

4.6% 

6.0% 

6.3% 

5.6% 

4.5% 

6.1% 

6.3% 

5.6% 

Q1 Q2 Q3 Q4 

4.5% 

5.9% 

6.6% 


Figure 24: ISS Working Capital, 2001-Q3 2005, by Quarter 

% of Sales 


5.0% 

2.5% 

0.0% 

(2.5)% 

(5.0)% 

(7.5)% 

(0.4)% 

0.8% 

0.1% 

(1.5)% 

(0.3)% 

0.3% 

(0.2)% 

(2.3)% 

(1.6)% 

(0.8)% 

(1.3)% 

(3.0)% 

(2.4)% 

(1.5)% 

(1.3)% 

(3.0)% 

Q1 Q2 Q3 Q4 


ISS’s working capital requirements are generally higher during the first half of the year and lower 

during the second half of the year. In the first quarter, working capital development is usually negative, 

primarily due to low Revenues and a corresponding low Accounts Receivable in Property services / 

Landscaping. Working capital then worsens in Q2, primarily due to an increase in Accounts 

Receivable due to higher Revenues in Q2 than Q1 from Property services / Landscaping. Working 

Capital for Q3 is approximately at same level as Q2, but is influenced by high Accounts Receivable 

from generally higher activity in Cleaning Services. Working Capital is at its lowest point in Q4, which 

primarily is due to the Company proactively collecting cash before year-end. However, the Q4 working 

capital is also affected by the high payables which partly is due to tax withholding and VAT due for 

payment in the beginning of the following year, and partly due to timing of payments around year end. 

In the nine month period from January 1, 2005 to September 30, 2005, cash outflow from changes in 

working capital amounted to DKK 1,097 million (EUR 147 million). In the three month period from 

October 1, 2004 to December 31, 2004, cash inflow from changes in working capital was DKK 805 

million (EUR 108 million). 

(1.0)% 

(2.1)% 

(2.0)%


79 


Figure 25: ISS Operating Cash Flow before Interest and Taxes, 2001-Q3 2005, by Quarter 

DKK million 


3,000 

2,000 

1,000 

(1,000) 

49 

215 

567 

1,384 

36 

638 

874 

1,312 

240 

451 

876 

1,316 

217 

422 

801 

1,475 

Q1 Q2 Q3 Q4 


ISS’s Operating Cash Flow tends to be lower in the first quarter of its fiscal year due to a number of 

cash payments relating to, among other things, pension contributions, insurance premium payments, 

holiday payments and the payment of bonuses earned in the prior year. ISS’s operating cash flow is 

typically positive in the second quarter of its fiscal year, and typically becomes increasingly positive 

throughout the year and is usually highest in the fourth quarter of its fiscal year, when it collects 

revenue recognized in the third quarter of its fiscal year. 

F. Overview of Impact of Transition to IFRS 

ISS has historically prepared its consolidated financial statements according to Danish GAAP, 

however as previously mentioned, since January 1, 2005 the Company has shifted to prepare its 

consolidated financial statements in accordance with International Financial Reporting Standards 

(IFRS), as required by EU regulation. The conversion to IFRS will be prepared according to the set of 

special standards in place for first-time adoption of IFRS. In general Danish GAAP and the associated 

accounting principles applied by ISS previous years is not that far from the IFRS requirements. Please 

see below for an overview of one of the main differences between Danish GAAP and IFRS, which is 

related to the treatment of goodwill. 

� IFRS requires an acquirer to recognise the target’s identifiable assets, liabilities and contingent 

liabilities that satisfy the relevant recognition criteria at their fair values at the acquisition date. The 

following customer-related intangible assets are relevant to ISS; customer contract portfolios and 

related customer relationships. These types of intangible assets have previously not been 

recognised by ISS, where goodwill and software were the only intangible assets recognised i.e. 

these intangible assets have previously been included in goodwill. 

� The part of the purchase price which cannot be allocated to these intangible assets, which will be 

amortised assuming they have definite life, will be allocated to goodwill. The goodwill will no longer 

be subject to amortisation but rather impairment tests. Previously ISS has amortised goodwill over 

a period of the useful life of up to 20 years. 

� Under Danish GAAP the share of profit from associates is recognised before tax and the related 

tax is disclosed as corporate tax. Going forward profit from associates will be disclosed net of taxes. 

� Under IFRS, costs related to integration of acquired companies will not be included in the 

calculation of goodwill but will be charged to the income statement under Integration Costs when a 

legal or constructive obligation occurs. Costs related to integration in the acquiring ISS Company 

will be reclassified from "Other income and expenses, net” to "Integration Costs". 

In order to facilitate an understanding of the expected impact from the IFRS transition, the bridge to 

the 2004 IFRS Pro Forma Numbers Income Statement is presented below. As illustrated the impact of 

the shift to IFRS, will be limited on the reported EBITA and EBITDA. 

(91) 

581 

554


80 


Table 35: IFRS implication on 2004 Income Statement 

DKK million Actual 2004 IFRS Adj. Unaudited IFRS 2004 

Revenues 40,355 40,355 

Operating Expenses (37,459) (18) (37,477) 

EBITDA 2,896 (18) 2,878 

EBITDA % 7.2% 7.1% 

Depreciation and Amortisation (617) (617) 

EBITA 2,279 (18) 2,261 

EBITA % 5.6% 5.6% 

Other Income and Expenses, Net (69) 32 (37) 

Integration Costs - (142) (142) 

Share of Profits from Associates 39 (6) 33 

Operating Profit 2,249 (134) 2,115 

Net Finance Cost (343) 8 (335) 

Profit Before Tax And Goodwill Impairment 1,906 (126) 1,780 

Income Taxes (598) 44 (554) 

Profit Before Goodwill Impairment 1,308 (82) 1,226 

Goodwill Amortisation (1,217) 1,217 - 

Tax Effect of Goodwill Amortisation 59 (59) - 

Goodwill Impairment and Write-Down (344) (344) 

Customer Contracts Amortization FY04 (78) (78) 

Tax effect of Goodwill Impairment and Write-Down 33 33 

Net profit for the year 150 687 837 

Note: 




Set forth below is a reconciliation of EBITDA to Adjusted pro forma EBITDA to give effect to 

acquisitions and divestments during the twelve months ended September 30, 2005; 

� Pro Forma Effect of Acquisitions. The incremental EBITDA of entities acquired during the 12 month 

period to September 30, 2005, for the period in which such entities were not part of the Group. The 

amount of incremental EBITDA is based on ISS’s estimate, at the time of acquisition, as to the EBITDA 

to be generated by such acquired entities prior to the acquisition by ISS. 

� Pro Forma Effect of Health Care Operations Business. Reported EBITDA of entities divested 

during the 12 month period to September 30, 2005. The disposal of the Health Care operations 

business and ISS’s interest in CarePartner represented DKK 76 million (EUR 10 million) of EBITDA 

for the 12 month period. The remainder represents other minor divestments. 

Table 36: Pro Forma EBITDA, Twelve Months Ended September 30, 2005 

DKK million 

LTM 

September 

2005 

Acq during LTM 

(pro forma) 

Divestments during 

LTM (pro forma) 

Adj. Health Care 

operations 

Pro forma 

September 

FY05 

Revenues 45,114 1,973 (250) (487) 46,350 

Operating Expense (41,918) (1,791) 233 411 (43,065) 

EBITDA 3,196 182 (17) (76) 3,285 

EBITDA % 7.1% 9.2% 6.8% 15.6% 7.1% 

Depreciation and Amortisation (1) (655) (43) 4 14 (680) 

EBITA (2) 2,541 139 (13) (62) 2,605 

EBITA % 5.6% 7.0% 5.2% 12.7% 5.6% 

Note: 








G. Current Trading Update 

81 


Results of Operations - Nine Months Ended September 30, 2005 Compared to Nine Months 

Ended September 30, 2004 

The comments below relate to ISS’s unaudited consolidated interim income statements for the nine 

months ended September 30, 2004 and the nine months ended September 30, 2005, prepared in 

accordance with IFRS for interim reporting. 

Revenue. Revenue increased DKK 4,759 million, or 16%, from DKK 29,398 million in the nine months 

ended September 30, 2004 to DKK 34,157 million in the nine months ended September 30, 2005. 

Organic growth was 3% and net growth from acquisitions was 13%. Currency adjustments were 

insignificant in the first nine months of 2005. 

Table 37: Revenue Growth, 9M 2005 versus 9M 2004 

(Percentage, rounded) 9M 2004 9M 2005 

Organic Growth 1% 3% 

Acquisitions, net 9% 13% 

Foreign Currency Adjustments (1)% 0% 

Total 9% 16% 

Note: 

(1) In accordance with the announcement of certain business changes in Stock Exchange Release dated February 1, 2005. The calculation of 

organic growth does not include the discontinued German hospital services. Discontinuation of the German hospital services business 

accounted for less than 1% on Group level. 


Staff costs. Staff costs increased DKK 3,126 million, or 16%, from DKK 19,547 million in the nine 

months ended September 30, 2004 to DKK 22,673 million in the nine months ended September 30, 

2005. This increase was due primarily to an increase in the overall number of employees as a result of 

acquisitions made in the second half of 2004 and the first nine months of 2005. Staff costs as a 

percentage of revenue was essentially unchanged at 66.4% for the nine months ended September 30, 

2005 compared to 66.5% in the nine months ended September 30, 2004. 

Cost of sales. Cost of sales increased by DKK 447 million, or 20%, from DKK 2,234 million in the nine 

months ended September 30, 2004 to DKK 2,681 million in the nine months ended September 30, 

2005. This increase was due primarily to acquisitions made in the second half of 2004 and the first 

nine months of 2005. Cost of sales as a percentage of revenue amounted to 7.8% in the nine months 

ended September 30, 2005 compared to 7.6% in the nine months ended September 30, 2004. 

Other operating expenses. Other operating expenses increased DKK 868 million, or 16%, from DKK 

5,509 million in the nine months ended September 30, 2004 to DKK 6,377 million in the nine months 

ended September 30, 2005. This increase was due primarily to acquisitions made in the second half of 

2004 and the first nine months of 2005. Other operating expenses as a percentage of revenue 

remained unchanged at 18.7% for the nine months ended September 30, 2004 and September 30, 

2005. 

Depreciation and amortization. Depreciation and amortization increased DKK 38 million, or 9%, from 

DKK 444 million in the nine months ended September 30, 2004 to DKK 482 million in the nine months 

ended September 30, 2005. Depreciation and amortization, as a percentage of revenue, amounted to 

1.5% and 1.4% in the first nine months of 2004 and 2005, respectively. 

Operating profit before other items. Due to the factors discussed above, operating profit before 

other items increased DKK 280 million, or 17%, from DKK 1,664 million in the nine months ended 

September 30, 2004 to DKK 1,944 million in the nine months ended September 30, 2005. Operating 

profit before other items as a percentage of revenue, i.e., operating margin, was 5.7% for the nine 

months ended September 30, 2005 unchanged compared to the nine months ended September 30, 

2004.


82 


Other income and expenses, net. Other income and expenses was a net expense of DKK 18 million 

in the nine months ended September 30, 2004 and a net expense of DKK 19 million in the nine 

months ended September 30, 2005. ISS’s gain on the sale of its health care operations was included 

in other income and expenses for the nine months ended September 30, 2005. The sale took place in 

two steps. When ISS sold its health care operations and its 49% interest in CarePartner to a joint 

venture between ISS and EQT, ISS realized a gain of DKK 131 million. At the end of June 2005, when 

ISS sold its interest in this joint venture to EQT, ISS realized a further gain of DKK 106 million. 

ISS’s decision to discontinue its hospital cleaning services business in Germany through a phase-out 

of the remaining customer contracts resulted in a DKK 35 million provision for termination costs, 

primarily redundancy payments. An announced downsizing of ISS’s damage control activities led to a 

charge of DKK 17 million and ISS anticipates that it will incur further costs up to a total of DKK 30 

million relating to downsizing of these activities in Denmark, Norway and Sweden. 

Other income and expenses, net, for the first nine months of 2005 also included DKK 173 million in 

costs relating to the Acquisition, including professional and advisory fees, a stay-on bonus for the 

Executive Management Board and certain key employees of ISS Management A/S and settlement of 

the Executive Management Board’s bonus accounts. Following the Acquisition, the settlement of 

warrants and options was recognized directly in equity in the amount of DKK 159, net of tax. 

Integration costs. Integration costs decreased in the nine months ended September 30, 2005 to DKK 

37 million from DKK 72 million in the nine months ended September 30, 2004. Integration costs for the 

nine months ended September 30, 2005 primarily related to redundancy payments and rental 

obligations with respect to the acquisition of the Engel Group in Finland, Groupe F2E in France, Nobis 

Beteiligungen in Germany and Vandezande in Belgium. In 2005, integration costs are expected to 

include the estimated DKK 250 million cash effect of the restructuring activities included in the 

business plan. 

Operating profit. Due to the factors discussed above, operating profit increased DKK 314 million, or 

20%, from DKK 1,574 million in the nine months ended September 30, 2004 to DKK 1,888 million in 

the nine months ended September 30, 2005. 

Share of profit from associates. Share of profit from associates decreased DKK 11 million, or 65%, 

from DKK 17 million in the nine months ended September 30, 2004 to DKK 6 million in the nine 

months ended September 30, 2005. This decrease was due primarily to the sale of ISS’s 49% interest 

in CarePartner to a newly formed joint venture entity in which ISS retained a 45% interest. As a result 

of the sale, the results from CarePartner were no longer included in share of profit from associates, but 

were consolidated on a proportional basis in ISS’s financial statements from February 2005. 

Accordingly, CarePartner contributed DKK 11 million in the nine months ended September 30, 2004 

compared to DKK 1 million in the nine months ended September 30, 2005. 

Net finance costs. Net finance costs increased DKK 106 million, or 46%, from DKK 232 million in the 

nine months ended September 30, 2004 to DKK 338 million in the nine months ended September 30, 

2005, due primarily to higher net debt incurred in connection with acquisitions. 

Historically, ISS has swapped the interest on its EMTNs from fixed into floating rates. At the end of 

June 2005, ISS settled the interest rate swaps relating to ISS Global’s EUR 850 million 2010 EMTNs 

and partially settled the interest rate swaps relating to ISS Global’s EUR 500 million 2014 EMTNs. The 

closing of these swaps generated proceeds of DKK 782 million, of which DKK 268 million was accrued 

interest. A gain of DKK 514 million will be recognized in ISS’s income statement under finance costs 

over the remaining term of the EMTNs. 

Profit before tax, goodwill impairment and write-down and amortization of customer contracts. 

As a result of the foregoing factors, profit before tax and goodwill impairment and write-down and 

amortization of customer contracts increased DKK 197 million, or 14%, from DKK 1,359 million in the 

nine months ended September 30, 2004 to DKK 1,556 million in the nine months ended September 30, 

2005.


83 


Income taxes. Income taxes increased DKK 17 million, or 4%, from DKK 418 million in the nine 

months ended September 30, 2004 to DKK 435 million in the nine months ended September 30, 2005. 

Adjusted to exclude the one-time tax-free gain resulting from the divestment of the health care 

operations and certain non-deductible costs relating to the Acquisition and related financing, the 

effective tax rate (defined as income taxes relative to profit before tax, goodwill impairment and writedown 

and amortization of customer contracts less share of profit from associates) was 32.0% in the 

nine months ended September 30, 2005. In the nine months ended September 30, 2004, the effective 

tax rate was 30.7% and was positively impacted by a reversal of a tax provision. 

Until 2004, ISS maintained joint taxation with its wholly owned Danish subsidiaries and certain of its 

wholly owned foreign subsidiaries. Due to changes in the applicable laws, ISS withdrew from this joint 

taxation arrangement with its foreign subsidiaries with effect from January 1, 2005. As a result of this 

withdrawal, ISS is subject to re-taxation of tax-deductible losses realized in its foreign subsidiaries. 

However, according to the applicable transitional rules, ISS may repay this tax liability gradually over 

future years as these foreign subsidiaries achieve positive taxable income. Because ISS has 

historically recognized provisions to cover the eventual re-taxation of deferred taxes, ISS’s withdrawal 

from joint taxation with its foreign subsidiaries is not expected to lead to a higher income tax expense 

in its income statement. 

Profit before goodwill impairment and write-down and amortization of customer contracts. 

Profit before goodwill impairment and write-down and amortization of customer contracts increased 

DKK 180 million, or 19%, from DKK 941 million in the nine months ended September 30, 2004 to DKK 

1,121 million in the nine months ended September 30, 2005. 

Goodwill impairment and write-down. Goodwill impairment and write-down was DKK 180 million in 

the nine months ended September 30, 2005 compared to DKK 159 million in the nine months ended 

September 30, 2004. Goodwill write-down was DKK 5 million in the nine months ended September 30, 

2005 and related mainly to the sale of a business in Sweden. Impairment charges during the same 

period consisted of DKK 93 million relating to ISS’s business in Germany, DKK 64 million relating to 

ISS’s damage control activities in Sweden, DKK 10 million relating to ISS’s damage control activities in 

The Netherlands and DKK 8 million relating to ISS’s business in Italy. 

Amortization of customer contracts. Amortization of customer contracts increased DKK 94 million, 

from DKK 43 million in the nine months ended September 30, 2004 to DKK 137 million in the nine 

months ended September 30, 2005. Customer contract portfolios and related customer relationships 

are separated from goodwill for acquisitions carried out after January 1, 2004. 

Tax effect of goodwill impairment and write-down and amortization of customer contracts. The 

tax effect of goodwill impairment and write-down and amortization of customer contracts, which is 

presented separately in the income statement to show the effective tax percentage before goodwill 

impairment and write-down and amortization of customer contracts, was DKK 20 million in the nine 

months ended September 30, 2004 and DKK 42 million in the nine months ended September 30, 2005. 

This increase mainly related to an increase in acquired customer contract portfolios and related 

customer relationships. 

Net profit for the period. As a result of the foregoing factors, net profit for the period increased DKK 

87 million, or 11%, from DKK 759 million in the nine months ended September 30, 2004 to DKK 846 

million in the nine months ended September 30, 2005. In the nine months ended September 30, 2005, 

DKK 836 million was attributable to the equity holders of ISS and DKK 10 million to minority interests. 

In the nine months ended September 30, 2004, the comparative figures were DKK 745 million and 

DKK 14 million, respectively. 

EBITDA. As a result of the foregoing factors, EBITDA increased DKK 318 million, or 15%, from DKK 

2,108 million in the nine months ended September 30, 2004 to DKK 2,426 million in the nine months 

ended September 30, 2005.


84 


Historical Cash Flow—Nine Months Ended September 30, 2004 and September 30, 2005 

The following table sets forth ISS’s cash flow statement data for the nine months ended September 30, 

2004 and September 30, 2005. This data is derived from ISS’s unaudited consolidated interim cash 

flow statements for the nine months ended September 30, 2004 and the nine months ended 

September 30, 2005, prepared in accordance with IFRS for interim reporting. 

Table 38: Cash Flow Data, 9M 2005 versus 9M 2004 

(DKK million) 9M 2004 9M 2005 

Cash Flow Statement Data: 

Cash flow from operating activities 809 808 

Cash flow from investing activities (4,796) (1,142) 

Cash flow from financing activities. 3,066 (1,733) 


Cash flow from operating activities. Net cash flow from operating activities for the nine months 

ended September 30, 2005 was DKK 808 million compared to DKK 809 million for the nine months 

ended September 30, 2004. The Group has had a cash conversion of more than 100% at year-end for 

six consecutive years. Whilst the group expects a positive working capital movement in the fourth 

quarter of 2005 the working capital movement for the year is expected to be impacted by the year-end 

falling on a weekend and the expectation of a cash conversion below the level of previous years. 

During the nine months ended September 30, 2005, working capital used was DKK 1,097 million, 

compared to DKK 618 million for the nine months ended September 30, 2004. Interest paid, net, 

represented a cash inflow of DKK 261 million. In June 2005 ISS Global partially settled the interest 

rate swaps, which were hedging the coupon payments on ISS Global’s EMTNs. This resulted in a net 

cash inflow of DKK 782 million, of which DKK 268 million were accrued interest. This was partially 

offset by the DKK 301 million coupon payment in September 2005 on the EMTNs expiring in 

September 2010. Interest paid used DKK 255 million of cash for the nine months ended September 30, 

2004. 

Income taxes paid, net, used DKK 497 million in cash for the nine months ended September 30, 2005 

compared to DKK 355 million for the nine months ended September 30, 2004. This increase was 

primarily due to additional tax payments of approximately DKK 92 million relating to the years 2001 

and 2002. 

Cash flow from investing activities. Net cash flow from investing activities represented an outflow of 

DKK 1,142 million in the nine months ended September 30, 2005. During this period, acquisitions of 

businesses used DKK 1,937 million in cash. This outflow was offset by proceeds from divestments, 

primarily DKK 749 million from the sale of ISS’s health care operations. Investments in intangible 

assets and property, plant and equipment, net, were DKK 398 million during the period, representing 

1.2% of revenue. Investments in financial assets, net, were an inflow of DKK 365 million of cash in the 

nine months ended September 30, 2005. This inflow was primarily due to the sale of marketable 

securities. 

Net cash flow from investing activities represented an outflow of DKK 4,796 million in the nine months 

ended September 30, 2004. During this period, acquisitions of businesses used DKK 3,524 million of 

cash. These comprised the acquisition of the Engel Group in Finland, Grupo Unica of Spain and a 

number of smaller acquisitions, including a facility management company and a catering company in 

the United Kingdom. Investments in intangible assets and property, plant and equipment, net, were 

DKK 417 million, equivalent to 1.4% of revenue, in the nine months ended September 30, 2004. 

Investments in financial assets, net, represented the investment of DKK 888 million in surplus cash. 

Cash flow from financing activities. Net cash flow from financing activities represented an outflow of 

DKK 1,733 million in the nine months ended September 30, 2005. This amount reflected DKK 4,270 

million of cash received following an increase in indebtedness, which was offset by the payment of 

dividends to shareholders in the amount of DKK 5,830 million, payments to minority interests of DKK 

10 million and payments made upon the settlement of options and warrants in the amount of DKK 163 

million.


85 


Net cash flow from financing activities represented an inflow of DKK 3,066 million in the nine months 

ended September 30, 2004. This amount reflected cash received following an increase in 

indebtedness of DKK 3,277 million, which was partly offset by the payment of dividends to 

shareholders in the amount of DKK 177 million, payments to minority interests of DKK 4 million and 

the purchase of treasury shares in the amount of DKK 30 million.


X. Appendices 

86 

Appendices


Appendix A: Consolidated Income Statement, ISS 

Table 39: 9M Income Statements, IFRS (unaudited) 

Amounts in DKK million 9M 2004 9M 2005 

Revenue 29,398 34,157 

Staff costs (19,547) (22,673) 

Cost of sales (2,234) (2,681) 

Other operating expenses (5,509) (6,377) 

Depreciation and amortization (444) (482) 

Operating profit before other items 1,664 1,944 

Other income and expenses, net (18) (19) 

Integration costs (72) (37) 

Operating profit 1,574 1,888 

Share of profits from associates 17 6 

Net finance costs (232) (338) 

Profit before tax, goodwill impairment and write-down and amortization of 

customer contracts 1,359 1,556 

Income taxes (418) (435) 

Profit before goodwill impairment and write-down and amortization of customer 

contracts 941 1,121 

Goodwill impairment and write-down (159) (180) 

Amortisation of customer contracts (43) (137) 

Tax effect of goodwill charges and amortization of customer contracts 20 42 

Net profit for the period 759 846 

Attributable to: 

Equity holders of the Company 745 836 

Minority interests 14 10 

Net profit for the period 759 846 

87 

Appendices


Appendix B: Consolidated Cash Flow Statement, ISS 

Table 40: 9M Cash Flow Statement, IFRS (unaudited) 

Amounts in DKK million 9M 2004 9M 2005 

Operating profit before other items 1,664 1,944 

Share-based payments 6 3 

Depreciation and amortization 444 482 

Changes in working capital (618) (1,097) 

Changes in provisions (19) (49) 

Interest paid, net (255) 261 

Income taxes paid, net (355) (497) 

Payments related to other income and expenses, net (43) (162) 

Payments related to integration costs (15) (77) 

Cash flow from operating activities 809 808 

Acquisition of businesses (3,524) (1,937) 

Divestment of businesses 33 828 

Investments in intangible assets and property, plant and equipment, net (417) (398) 

Investments in financial assets, net (888) 365 

Cash flow from investing activities (4,796) (1,142) 

Financial payments, net (1) 3,277 4,270 

Purchase of treasury shares (30) - 

Dividend paid to shareholders (177) (5,830) 

Warrants and options settled - (163) 

Minority interests (4) (10) 

Cash flow from financing activities 3,066 (1,733) 

Total cash flow (921) (2,067) 

Cash and cash equivalents at beginning of period 2,243 3,121 

Total cash flow (921) (2,067) 

Foreign exchange adjustments 2 29 

Cash and cash equivalents at end of period 1,324 1,083 

Note: 

(1) Proceeds from bank debt less repayment of bank debt. 

88 

Appendices


Appendix C: Consolidated Balance Sheet, ISS 

Table 41: Assets, IFRS (unaudited) 

89 

As of September 30, 

Amounts in DKK million 2004 2005 

Goodwill 15,091 16,006 

Customer contracts 997 1,570 

Software and other intangible assets 158 149 

Total intangible assets 16,246 17,725 

Land and buildings 152 241 

Plant and equipment 1,531 1,616 

Total property, plant and equipment 1,683 1,857 

Investment in associates 86 126 

Receivables from associates - 164 

Other securities and investments 57 32 

Other receivables 261 167 

Deferred tax assets 542 810 

Total financial assets 946 1,299 

Total non-current assets 18,875 20,881 

Inventories 224 291 

Trade receivables 6,529 7,425 

Contract work in progress 192 226 

Other receivables 355 310 

Prepayments 523 361 

Income tax receivable 111 217 

Securities 950 85 

Liquid funds 1,321 1,070 

Total current assets 10,205 9,985 

Total assets 29,080 30,866 

Table 42: Equity and Liabilities, IFRS (unaudited) 


Amounts in DKK million 2004 2005 

Total equity attributable to equity holders of the parent 7,893 3,654 

Minority interests 102 58 

Total equity 7,995 3,712 

Pensions and similar obligations 660 802 

Deferred tax liabilities 487 639 

Other provisions 251 295 

Total provisions 1,398 1,736 

Long-term debt 9,685 14,368 

Total non-current liabilities 11,083 16,104 

Current portion of other provisions 350 371 

Current portion of long-term debt 1 4 

Interest-bearing loans and borrowings 1,205 1,299 

Prepayments from customers 145 304 

Trade payables 1,442 1,468 

Income tax payable 393 441 

Tax withholding, VAT etc. 2,025 2,327 

Accrued wages and holiday allowances 2,794 3,045 

Other payables and accrued expenses 1,647 1,791 

Total current liabilities 10,002 11,050 

Total liabilities 21,085 27,154 

Total equity and liabilities 29,080 30,866 

Appendices


Appendix D: Consolidated Balance Sheet, ISS Holding 

90 

Appendices 

Note: 

Unaudited Consolidated Preliminary Interim Balance Sheet and Purchase price allocation 

The process of identifying and determining the fair values to be assigned to the acquired identifiable 

assets and liabilities and contingent liabilities assumed in the acquisition of ISS has not yet been 

completed. Accordingly, the unaudited consolidated preliminary interim balance sheet is based on 

initial accounting and provisional values. 

The preliminary purchase price allocation and calculation of goodwill are based on the carrying 

amount of the acquired net assets of ISS as of the Acquisition Date, adjusted for certain known events 

and transactions. These adjustments to the carrying amounts of the acquired net assets as of the 

Acquisition Date include: 

� a reduction of long-term debt to reflect the market price of ISS Global's debt obligation under its 

EMTNs as of the Acquisition Date, resulting in a DKK 1,811 million reduction of long-term debt, which 

includes reversal of DKK 389 million related to gains on interest rate swaps hedging the fixed interest 

rate of the EMTNs; 

� a DKK 107 million increase in pension obligations based on actuarial calculations updated in certain 

countries in connection with the preparation of the unaudited consolidated interim financial statements 

of ISS as of and for the nine months ended September 30, 2005; 

� recognition of transaction-related obligations of DKK 382 million regarding the settlement of options 

and warrants and certain obligations assumed by ISS as a direct consequence of the Transactions; 

and 

� the tax impact from the above adjustments. 

Additional fair value adjustments must, however, still be made in respect of the assets acquired and 

liabilities and contingent liabilities assumed, which are to be recognized under the following headings: 

� customer contract portfolios and related customer relationships; 

� software and other intangible assets; 

� property, plant and equipment; 

� financial assets; 

� current assets; 

� pensions (with the exception of the DKK 107 million adjustment mentioned above); and 

� other provisions as well as contingent liabilities. 

Furthermore, any other identifiable intangible assets must be recognized at fair value as of the 

Acquisition Date, including the value of ISS's brands and non-contractual relationships, etc. In 

particular, adjustments related to the amount to be recognized in respect of customer contract 

portfolios and related relationships and brands and other intangible assets are expected to be 

significant. Such fair value adjustments may have an impact on the recognized deferred tax assets 

and liabilities. As amounts to be recognized in respect of certain of these intangible assets must be 

amortized over their expected useful lives, ISS Holding will also experience a significant increase in its 

consolidated non-cash expenses and a corresponding decrease in its consolidated net profit or 

increase in its consolidated net loss and thereby a reduction of equity. In addition, the tax impact of the 

above adjustments may be significant. 

The amounts to be recognized when the purchase price allocation and goodwill calculation are 

finalized will deviate significantly from those recognized in this unaudited consolidated preliminary 

interim balance sheet as of September 30, 2005. Furthermore, ISS Holding cannot give any assurance 

that such adjustments will not also result in increases in the ISS Holding’s consolidated expenses and 

corresponding decreases in its consolidated net profit or increases in its consolidated net loss and 

thereby a reduction of equity.


Table 43: Assets, IFRS (unaudited) 

91 


Amounts in DKK million 2005 

Goodwill 28,236 

Customer contracts 1,570 

Software and other intangible assets 149 

Total intangible assets 29,955 

Land and buildings 241 

Plant and equipment 1,616 

Total property, plant and equipment 1,857 

Investment in associates 126 

Receivables from associates 164 

Other securities and investments 32 

Other receivables 167 

Deferred tax assets 727 

Total financial assets 1,216 

Total non-current assets 33,028 

Inventories 291 

Trade receivables 7,425 

Contract work in progress 226 

Receivables from Affiliated Companies 1 

Other receivables 316 

Prepayments 361 

Income tax receivable 296 

Securities 85 

Liquid funds 1,257 

Total current assets 10,258 

Total assets 43,286 

Table 44: Equity and Liabilities, IFRS (unaudited) 


Amounts in DKK million 2005 

Total equity attributable to equity holders of the parent 7,673 

Minority interests 58 

Total equity 7,731 

Pensions and similar obligations 802 

Deferred tax liabilities 1,041 

Other provisions 295 

Total provisions 2,138 

Long-term debt 15,699 

Total non-current liabilities 17,837 

Current portion of other provisions 371 

Current portion of long-term debt 4 

Interest-bearing loans and borrowings 7,162 

Debt to Affiliated Companies 738 

Prepayments from customers 304 

Trade payables 1,478 

Income tax payable 441 

Tax withholding, VAT etc. 2,327 

Accrued wages and holiday allowances 3,045 

Other payables and accrued expenses 1,848 

Total current liabilities 17,718 

Total liabilities 35,555 

Total equity and liabilities 43,286 

Appendices

I. Table of Contents - ISS

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