group annual report group annual report

136 Pages·2016·10.53 MB·English

ADDITIONAL COMPANY INFORMATION 137
1155
GGRROOUUPP
AANNNNUUAALL
RREEPPOORRTT
504,816 6,149,122 hrs
ISS employees of training annually
(frontline employees)
For every
14,558 people 1.2 million

in the world, there is meals served
1 ISS employee every day
>50 million m2 >5.5 million ft2

of premises on IFS contracts of critical facilities space managed
serviced annually for our Global partners
Front page photo:
VICTOR PLANA
Building Services Engineer, ISS Switzerland
UBS
ISS AT A GLANCE 1
CASE:
User-centricity
CONTENTS
at Nordea
See p. 14
OVERVIEW
2 ISS at a glance
9 Outlook
CASE:
10 Letter to our stakeholders
12 Key figures and financial ratios
Optimising the
13 Definitions
outsourcing model
for Novartis
OUR PERFORMANCE
16 Group performance
21 Regional performance See p. 30
28 Q4 2015
OUR BUSINESS
32 Our business model and strategy
41 Our people
CASE:
GOVERNANCE
Service with
46 Corporate governance
a Human Touch
50 Risk management
54 Internal controls relating to financial reporting training (SWAHT)
56 Remuneration report
62 Shareholder information See p. 44
64 Board of Directors
66 Executive Group Management
FINANCIAL STATEMENTS
71 Consolidated financial statements
126 Management statement
CASE:
127 Independent auditors’ report
ISS, a leader
in the banking
ADDITIONAL COMPANY INFORMATION
131 Country revenue and employees industry
132 Country managers
See p. 68
CASE:
Talent management
and people
development
See p. 128
2 ISS AT A GLANCE
PERFORMANCE
We evaluate Group performance and the success of our
HIGHLIGHTS 2015 strategy and business model by measuring the KPIs set out
below. We have decided to measure these six KPIs because
we believe they give us the best indication of how well we
are driving the business forward in the desired direction and
creating value for our shareholders. For definitions of KPIs,
see p. 13.
Our business model and strategy, see pp. 35–36
FINANCIAL KPIs PERFORMANCE
Organic growth 4.4% • Strong organic growth driven by strong performance in
and revenue emerging markets, large contract launches in Europe and
Organic growth
the IFS business in general
DKK billion % DKK billion
80 5.0 3.079,579 • Revenue up by 7%DK Kr ebialliocnhing an all time high
DKKm
75 4.0 2.5Revenue • All regions delive2r.e0d positive organic growth
7D0KK billion %3.0 D2.K0K billion 1.5
80 5.0 3.0 • IFS revenue up 11D%KK biinllio nlocal currencies, now representing
6755 42..00 21..55 34% of Group re21.v.00enue or DKK 26.7 billion
60 1.0 1.0 0.5
70 3.0 2.0 Group perform1.a5nce, see p. 16
55 0.0 0.5 0.0
65 2013 2014 2015 2.0 1.5 2013 2014 2015 Regional perfo1r.0manc20e1,3 see pp2.0 1241–27 2015
60 Revenue, DKK billion 1.0 1.0 0.5 Pimropfiati rbmeefonrte o gf oboradnwdisll aimndp aciurmsteonmt earn cdo namtraocrttsis, aDtiKoKn /billion
Organic growth, %
55 0.0 0.5 0.0
2013 2014 2015 2013 2014 2015 2013 2014 2015
DKK billion % DKK billion % Pimropfiati rbmeefonrte o gf oboradnwdisll aimndp aciurmsteonmt earn cdo namtraocrttsis, aDtiKoKn /billion
O5.0perating margin 5.9 4.05.7% •1 1O0perating margiDnK Ku bpill iobny 10 bps for the second y%ear
and profit in a row 4.5 110
3.5Operating margin 100
4D.K5K billion %5.7 DKK billion •% Improvement sup4.0ported by our strategic initiativ1e00s and
5.0 5.9 43..004,533 1910s0trong performa3Dn.K5cKe b ililnion most regions, especially A9%0sia and
DKKm 3.0 80
4.0 5.5 32..55Operating profit 1800W0 estern Europe 42..55 17100
4.5 5.7 before other items • Operating profit4 2.b.00efore other items increased b1y60 009% to
8D0KK billion %5.0 3D3.5.K0K bill2io0n13 2014 2015 5.3 32..00 20D1K3K billion2014 2015 9700the highest level331 ...i055n ISS20 1h3istory 2014 2015 895000
75 4.0 42..05 5.5 2.5 2.0 •8 0Corporate costs 2a.5mounted to 0.8% of revenue,7 0in line
2.0 60
70 3.0 32..540DKK billion 5.3 2.0 1.5 70with expectation1s.5 50
65 2.0 1.35Ope2r0a1t3ing pro2fi01t 4before2 015 210.103 2014 2015 Group performance20,1 s3ee p. 126014 2015
60 1.0 1.0DoKtKh beilrli ointems, DKK billion 0.5 Regional performance, see pp. 21–27
Operating margin, %
55 0.0 0.254 0.0
2013 2014 2015 2013 2014 2015 2013 2014 2015
13 Profit before goodwill impairment and amortisation/
impairment of brands and customer contracts, DKK billion
Cash conversion 99% • Strong cash conversion supported by continued focus on
a02nd 2c01a3sh fl20o14w 2015 Cash conversion c ash performance across the Group
DKK billion % DK1K billion % • Improvement in debtor days in 2015
5.0 5.9 4.0 110 3,7DKK0 bi6llion %
0 DKKm • Cash flow from operating activities increased by 55%
2013 2014 2015 4.5 110
3.5 100 Cash flow from driven by improvement in operating profit before other
4.5 5.7 4.0 100
operating activities items and a decrease in cash outflow from interest paid,
3.0 90 3.5 90
3.0 net and8 0tax
4.0 5.5 2.5 80 2.5 • Investm7e0nts in intangible assets and property, plant and
2.0 60
equipment, net of DKK 841 million represented 1.1% of
3.5 5.3 2.0 70 1.5 50
2013 2014 2015 2013 2014 2015 2013 2014 G20r1o5up revenue.
Cash flow from operating activities,
DKK billion DKK billion Group performance, see p. 18
4 Cash conversion, %
3
2
1
0
2013 2014 2015
ISS AT A GLANCE 3
%
5 4.3% 7
4 7
6
3 2.5% 22..55%%
6 6
5
2
1 4
2013 2014 2015 2013 2014 2015
%
6.0 60 DKK billion % 48.9 48.9
4,5 5.9
5.6% 5.6% 50
5.5% 4,0 5.7
5.5
36.6
40
3,5 5.5
NON-FINANCIAL KPIs PERFORMANCE
5.0 30
2013 2014 2015 2013 2014 2015 3,0 5.3
2013 2014 2015
Customer Net Promoter 36.7 • Score improved for the third consecutive year, reflecting
Score (cNPS) our continued efforts to drive customer focus, especially
cNPS
within our key accounts
%
104 40 • Supported by our efforts to implement account develop-
102% ment plans and the ongoing 3r0o.8ll-out 3o0f.8 our training pro-
102 30
gramme Service with a Human Touch (SWAHT)
10%0 20 • Our continuing efforts under GREAT to drive customer
958 4.3% 98% 98% 107 focus is expected to 1fu0.r1ther support our cNPS scores going
forward
946 2013 2014 2015 06 2013 2014 2015 Group performance7, see p. 18
3 2.5% 22..55%%
DKK billion 6 6
2.20 1.75% 1.75% 5
1.15 4
12.001%3 2014 2015 Em2p01lo3 ye2e01 4Net2 0P1r5omoter 56.4 • Increased 10 points – the third consecutive year of
1.0
Score (eNPS) improvement
eNPS
0.5
% • Supported by the global employee engagement survey
60..00 60 4D,K5K billion introd%5u.9ced in 2012, which ha4s8 .i9ncrea4s8e.d9 our efforts and
2013 2014 2015 focus to improve employee engagement
5.6% 5.6% 50
5.5% 4,0 • We ca5r.r7ied out our fourth global employee engagement
5.5
survey with 227,195 3re6.s6ponding employees across 45
40 3,5 countr5i.e5s. The response rate increased to 72%, up from
67% in 2014
5.0 30
2013 2014 2015 2013 2014 2015 3,0 2013 2014 201 5 Grou5.3p performance, see p. 18
%
104 40
102% Lost Time Injury 5 • Improved by 60% from the b3a0.s8eline 3fi0g.8ure of 13 in 2010,
102 30
Frequency (LTIF) to 5 in 2015, the fifth straight year of improvement
LTIF
10%0 20 • Improvement driven by our systematic approach to
5 4.3% 98% 98% 7 managing risks since1 20.0110, including implementation
98 10
of the Group HSE Management System and our global
4 7
96 06 campaigns to stay focused on HSE
3 2013 22.051%4 222..0551%%5 2013 2014 2015
Group performance, see p. 618 6
DKK billion 5
2.20
1.75% 1.75%
1.15 2013 2014 2015 4 2013 2014 2015
1.0%
1.0
0%.5
6.0 60 DKK billion % 48.9 48.9
4,5 5.9
0.0
2013 2014 2015
5.6% 5.6% 50
5.5% 4,0 5.7
5.5
36.6
40
3,5 5.5
5.0 30
2013 2014 2015 2013 2014 2015 3,0 5.3
2013 2014 2015
%
104 40
102% 30.8 30.8
102 30
100 20
98% 98% 10.1
98 10
96 0
2013 2014 2015 2013 2014 2015
DKK billion
2.0
1.75% 1.75%
1.5
1.0%
1.0
0.5
0.0
2013 2014 2015
4 ISS AT A GLANCE
OUR BUSINESS
Our business model is based on creating value for our
MODEL customers by allowing them to focus on their core business.
We service and maintain their facilities, ensuring
that they are safe, efficient and pleasant places for our
customers to pursue their own purpose.
CUSTOMERS WANT
Focusing on our selected customer segments, we offer
TO FOCUS ON THEIR CORE BUSINESS
a leading value proposition based on our philosophy of self-
TO ENSURE COMPLIANCE delivery of our chosen services. Moreover, we are able to
provide multiple services to customers through an integrated
TO SAFEGUARD THEIR BUSINESS
facility services (IFS) solution. This allows us to drive conve-
TO MAXIMISE UPTIME OF THEIR FACILITIES nience (one point of contact), productivity and cost efficiency.
TO MANAGE RISK
Our business model and strategy, see p. 32
TO PROTECT THE VALUE OF THEIR ASSETS
CONVENIENCE AND CONSISTENCY
SUSTAINABLE/TRANSPARENT COST SAVINGS ISS DELIVERS VIA
END-USER SATISFACTION
PEOPLE PROCESSES TECHNOLOGY
CLEANING PROPERTY SALES INSIGHT@ISS
SOLUTION
FMS@ISS
CATERING SUPPORT NEGOTIATION
SIM@ISS
TRANSITION
SECURITY FACILITY
MANAGEMENT OPERATION
SELF–DELIVERY OF SERVICES
INTEGRATION OF SERVICES
STRATEGIC PARTNERSHIPS
CUSTOMER TYPE CUSTOMER SEGMENTS DELIVERY TYPE
61% Key accounts 31% Business Services & IT 34% Integrated facility
30% Large & Medium 13% Industry services (IFS)
6% Small & Manufacturing 15% Multi-services
3% Route based 12% Public Administration 51% Single-services
11% Healthcare
8% Retail & Wholesale
7% Transportation
& Infrastructure
18% Other
Focus on larger customers Diversified customer portfolio Increasing IFS share (34%)
61% Key accounts 31% Business Services & IT 34% Integrated facility
30% Large & Medium 13% Industry services (IFS)
6% Small & Manufacturing 15% Multi-services
3% Route based 12% Public Administration 51% Single-services
11% Healthcare
8% Retail & Wholesale
7% Transportation
& Infrastructure
18% Other
ISS AT A GLANCE 5
OUR STRATEGIC
Our vision
INITIATIVES “We are going to be the world’s greatest service organisation.”
MAKE US GREAT Our strategy
The ISS Way is all about optimising the customer experience
through the alignment of our organisation behind a set of
common business fundamentals and scale benefits.
GREAT is our primary vehicle for accelerating our strategy
implementation, hence a principal driver moving us towards
realising our vision.
GREAT INITIATIVES STATUS 2015 OBJECTIVE
• Acceleration of leadership training and continued roll-out of our training
programme Service with a Human Touch (SWAHT), now live in 35 countries and
implemented on 479 key accounts
EMPOWERING PEOPLE • Continued focus on HSE through global safety campaigns three times a year
THROUGH LEADERSHIP
• eNPS of 56.4, up 10 points from 2014
Our business model and strategy, see p. 36
Our people, see p. 41
• Mapped customers segments equivalent to two-thirds of our revenue including the
Nordics, United Kingdom, Australia, Spain, Germany, Belgium and France (partly)
• Revenue from strategic customers (key accounts and large/medium) accounts for
OPTIMISING OUR 91% (2014: 87%) E
U
CUSTOMER BASE
• cNPS of 36.7, up from 31.2 in 2014 L
A
V
Our business model and strategy, see p. 36

R
E
• A new, delayered and strengthened Group organisational structure implemented D
L
to extract benefits of the changes made in our country organisations O
H
• Two new global roles created – a Group Chief Operating Officer to drive customer
E
FIT-FOR-PURPOSE retention and operational excellence, and a Group Chief Commercial Officer to R
ORGANISATION drive new sales and key-account customer growth A
H
S
Our business model and strategy, see p. 37
G
N
• IFS share of Group revenue increased to 34% (2014: 30%) TI
A
• Acquisition of GS Hall in 2015, which has improved our technical service offering in Europe E
R
• Focus on development of further tools leveraging both our best practices and technology C
READY TO
DELIVER IFS Our business model and strategy, see p. 37
• Procurement programme phase I and II completed with cost savings of DKK 350–
450 million to be achieved during 2014–2018
• Phase III in progress targeting additional cost savings of DKK 100 million
STRIVING FOR • Business Process Outsourcing (BPO) covering certain finance and accounting pro-
EXCELLENCE cesses completed in the Nordic region and launched in the Netherlands, Belgium/
Luxembourg and Australia
• Continued roll-out of commercial best practices and technology platforms
Our business model and strategy, see p. 38
6 ISS AT A GLANCE
North America

OUR GLOBAL 4,161 DKKm
revenue
PRESENCE
5%
of Group
15,355
employees
We are a true global player with
a leading market position. We
leverage our global presence in order
to meet the growing demand from
multinational corporations for the
delivery of Integrated Facility Services
(IFS) across borders. Our IFS revenue
share has grown significantly and our
ability to deliver IFS is key to serving
global customers and grasping new
local market opportunities. We are
well-positioned in emerging markets
(see p. 131), where we generate 25%
of our total revenue (2014: 24%).
Regional performance, Latin America
see pp. 21–27
3,609
DKKm
revenue
Country revenue and employees,

see p. 131 4%
of Group
44,178
employees
2015 WESTERN EUROPE NORDIC ASIA
KEY Organic 4% Organic 1% Organic 11%
FIGURES growth: (2014: 0%) growth: (2014: 2%) growth: (2014: 8%)
Operating 6.3% Operating 7.8% Operating 7.8%
margin: (2014: 6.2%) margin: (2014: 7.5%) margin: (2014: 7.3%)
IFS share: 37% IFS share: 26% IFS share: 28%
(2014: 34%) (2014: 23%) (2014: 27%)
BUSINESS • Organic growth mainly driven by • Organic growth supported by • Strong organic growth with
HIGHLIGHTS Germany, Switzerland, Turkey and Sweden, Norway and Denmark double-digit growth rates in most
the United Kingdom and mainly driven by IFS contract countries
launches and expansions, including
• Growth supported by IFS contract • Growth mainly driven by contract
Danske Bank and the Danish State
launches, including Vattenfall, launches and stronger demand for
Railways (DSB)
Swisscom, UBS and Bankia non-portfolio services
• Increased margin supported
• Margin increase supported by • Improved margin mainly supported
by strategic initiatives mainly in
strong performances in the IFS by one-off income in Singapore
Norway and Finland
divisions and Global Corporate and strong performance in
Clients contracts in Germany, the • Denmark and Sweden once again Indonesia
United Kingdom and Switzerland delivered stable high margins
• Contract wins within the
• Integration of GS Hall progressed • Several significant contract wins, Healthcare segment in China,
well and self-delivery within including the Danish Broadcasting Singapore, Taiwan and with
technical services increased Corporation (DR), PostNord and the Huawei in China
Norwegian Armed Forces
• Significant contract wins, including
UBS and Homerton Hospital
ISS AT A GLANCE 7
Nordic Eastern Europe
14,738 1,580
DKKm DKKm
revenue revenue

19% 2%
of Group of Group
34,142 17,502
employees employees
Asia
10,104
DKKm
revenue

13%
of Group
190,306
employees
Pacific
4,478
DKKm
revenue

6%
of Group
Western Europe 12,407
40,894 DKKm employees
revenue

51%
of Group
190,753
employees
PACIFIC NORTH AMERICA LATIN AMERICA EASTERN EUROPE
Organic 5% Organic 0% Organic 5% Organic 2%
growth: (2014: 10%) growth: (2014: 1%) growth: (2014: 10%) growth: (2014: (0)%)

Operating 5.7% Operating 4.2% Operating 4.0% Operating 6.3%
margin: (2014: 5.0%) margin: (2014: 3.6%) margin: (2014: 4.8%) margin: (2014: 6.8%)
IFS share: 35% IFS share: 37% IFS share: 28% IFS share: 39%
(2014: 33%) (2014: 36%) (2014: 25%) (2014: 36%)
• Growth mainly driven by • Organic growth positively • Organic growth mainly driven • Organic growth mainly driven
existing IFS portfolio con- impacted by contract launches by IFS contracts and stronger by existing contracts and con-
tracts within the remote site and strong performance from demand for non-portfolio ser- tract wins in Slovakia, Russia
resource, healthcare and Global Corporate Clients vices in Chile as well as price and Slovenia
aviation division in Australia contracts increases in Argentina
• Margin reduced mainly due
• Margin improved mainly due • Growth impacted by contract • Brazil impacted by the nega- to contract losses and scope
to the remote site resource exits and losses tive economic environment, reductions
and aviation divisions contract losses and scope
• Improved margin due to • Contract wins with multina-
reductions, which reduced the
• Contract wins within the strong performance from the tional companies mainly in
organic growth and margin
resource and health divisions, IFS division and impact from the Retail & Wholesale and
as well as contract expansion strategic initiatives • Improved margins in Mexico Pharmaceuticals segments
with Melbourne airport and Chile following implemen-
• Contract wins in the aviation
tation of strategic initiatives
• Large contract lost in Q3 in the division and an IFS contract
remote site resource segment with Rolls-Royce
8 ISS AT A GLANCE
CREATING VALUE FOR OUR
SHAREHOLDERS IS OUR PRIORITY
We are intent on creating value for our shareholders by future performance, or in the form of highly selective
maximising the cash flow growth from our business in acquisitions that meet strict strategic and financial crite-
a sustainable fashion over the short and longer term. We ria. We have a stated intention of maintaining financial
wish to maintain a strong and efficient balance sheet and leverage below 2.5x pro forma adjusted EBITDA, taking
to strike an optimal balance between reinvesting capital seasonality into account. Thereafter, we see healthy
back into our business and returning surplus funds to our potential to return additional funds to shareholders,
shareholders. above and beyond our dividend policy target.
Our dividend policy targets a pay-out ratio of approximately In 2015, Profit before amortisation/impairment of acqui-
50% of Profit before amortisation/impairment of acquisi- sition-related intangibles increased to DKK 2,785 million
tion-related intangibles. Where we see clear opportunities (2014: DKK 1,816 million) allowing the Board to propose
to create value and drive improved organic growth and/or a dividend for 2015 of DKK 7.40 per share (2014: DKK
improved margins, we will commit capital to our business. 4.90), equivalent to a pay-out ratio of approximately
This may come in the form of regular investment in our peo- 50%. The increase was supported by significant improve-
ple, our processes and our technology. It may come in the ments in operating profit and financial expenses, net.
form of certain restructuring initiatives designed to enhance
Shareholder
Maximise growth and
returns sustainability of cash flow
Selective and value-accretive
investment
Cash flow
• Service enhancements
growth
• Restructuring/
efficiency initiatives
• Acquisitions
Investment Shareholder returns
Operating
in the • Targeted pay-out ratio (50%)
margin
business • Special dividends and/
or share buy-backs
People
Organic
Processes
growth
Technology