I. Table of Contents - ISS

tatiana\Bank Book\Public Bank Book\FINAL ISS PUBLIC Bank IM - Press Release to EMTN_1.doc 9 Nov 2005 10:32 29/91
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
Company Characteristics
5.6% 5.6%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Revenues EBITA Margin
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
Source: ISS
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 (%)