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