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 71/91
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Historical Financial Information
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
Source: ISS
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%