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ISS delivered 6.2% organic growth in 2011

Pressmeddelande   •   Mar 05, 2012 08:00 CET

Today, ISS A/S announced full year financial results for 2011 and published its annual report. The results demonstrate industry leading organic growth and all time high operating profit before other items:

ISS delivered the highest organic growth in more than a decade, accelerating the or-ganic growth for the third year in a row

The operating profit before other items of DKK 4,388 million is the highest ever reported by ISS. The operating margin was 5.7%

Robust cash conversion of 93%

Successful implementation of several large national and international IFS contracts

ISS ended 2011 with 534,519 employees globally – adding almost 12,000 new jobs across the world during the year

Jeff Gravenhorst, ISS Group CEO, said:
"We see our strong performance in 2011 as a clear sign that ISS is on the right track implementing The ISS Way strategy both with customers and employees. ISS exists to provide services, and we have now built a platform enabling ISS to deliver a full range of services across the world. The fact that we accelerated growth for the third consecutive year and achieved the highest organic growth in more than a decade, is a clear proof point that both new and existing customers are happy with the services delivered by ISS. In 2011, we successfully converted several large global contract wins into well-implemented long-term contracts."

Group Performance
Group revenue amounted to DKK 77.6 billion in 2011, an increase of 5% compared with 2010, driven by organic growth of 6.2% and a positive effect from exchange rate movements of 1% which was offset by negative net effect from acquisitions and divestments of 2%.

The organic growth of 6.2% in 2011, which is the highest organic growth rate in more than 10 years, was a continuation of the positive organic growth trend seen in 2009 and 2010, fuelled by the start-up of several large Integrated Facility Services (IFS) contracts. North America, Latin America and Asia all delivered double digit organic growth rates.

Operating profit before other items increased by 2% to DKK 4,388 million – the highest level in the history of ISS. The operating margin (operating profit before other items as a percentage of revenue) was 5.7% in 2011 compared with 5.8% in 2010.

The operating margin in 2011 was supported by strong margins in Switzerland, the United Kingdom, Turkey, and the Asia region in particular. This was offset by the negative impact resulting from challenging economic conditions in the Mediterranean region, operational challenges in the Netherlands and the start-up of large national and international IFS contracts. In order to adapt to the challenging economic conditions in mainly the Mediterranean region we responded with a strict operational focus including exiting some contracts.

Net loss improved from a loss of DKK 532 million in 2010 to a loss of DKK 507 million in 2011, and was positively impacted by growth in revenue and higher operating profit before other items. The net loss of DKK 507 million is impacted by financial expenses of DKK 2.8 billion due to the capital structure of the company and approximately DKK 1 billion in non-cash expenses related to goodwill impairment and amortisation of intangible assets as well as DKK 111 million related to exit pro-cesses.

The cash conversion for 2011 was 93%, as a result of a strong cash flow performance especially in Western Europe, despite the negative effect from the strong organic growth and a slight increase in debtor days.

Emerging markets, comprising Asia, Eastern Europe, Latin America, Israel, South Africa and Tur-key where ISS has more than half of its global workforce, delivered organic growth of 13% and represent 19% of total revenue and 37% of total organic growth for the Group. In addition to boosting organic growth, the emerging markets delivered an operating margin of 6.9% in 2011, well above most mature markets.

During 2011, ISS focused on customer needs, deploying best practices globally and aligning the organisation behind the consistent delivery of excellence. ISS continued to drive excellence focusing on customer segments, services and business system dimensions to enhance our ability to deliver on our value propositions.

The Business Services & IT segment remained the largest customer segment in 2011 representing 28% compared with 26% in 2010. The share of revenue from the Public Administration segment decreased from 16% in 2010 to 14% in 2011, affected by austerity measures reducing public spending in many countries while revenue from Industry & Manufacturing increased from 14% in 2010 to 15% in 2011, positively impacted by large contract wins such as BMW in Germany. The revenue share from Healthcare remained unchanged at 11%.

In December, Henrik Andersen, former CEO of ISS in the United Kingdom, replaced Jakob Stausholm as new Group CFO. In addition, Harry Klagsbrun and Jennie Chua were elected new members of the Board of Directors and replaced Peter Korsholm and Jørgen Lindegaard. The Board wishes to thank Jakob, Peter and Jørgen for their contribution to ISS.

Outlook
In 2012, ISS will maintain focus on the key operational objectives; (i) cash conversion, (ii) operating margin and (iii) organic growth.

The outlook for 2012 is based on expectations of challenging macroeconomic outlook and difficult market conditions in Europe – in particular certain Mediterranean countries. We expect a continued strong growth in emerging markets. ISS experienced a strong positive trend in organic growth in 2011 following the start-up of several large Integrated Facility Services (IFS) contracts leading to organic growth of 6.2% for the Group. A sound development in the contract portfolio in late 2011 is expected to ensure a continuation of the organic growth rate which in 2012 is expected to be in the 4–6% range.

In 2011, ISS achieved an increase in operating profit before other items compared with 2010. However, the operating margin was slightly below the level realised in 2010. In 2012, the operating margin is expected to be around the level realised in 2011.

ISS will continue to prioritise cash flow and focus on managing the absolute level of debt supported by a continued low level of acquisition spending and continued robust cash conversion, which in 2012 is expected to be around 90%.

Ole Andersen                               Jeff Gravenhorst

Chairman of the Board                  Group CEO

Telephone conference
ISS will host a conference call on Monday, 5 March 2012 at 10:00 CET (09:00 UK time).

Dial-in-numbers:
+45 32 72 76 25 (Denmark)

+44 (0) 1452 555 566 (UK)

Conference ID: 54199475

Live webcast
The conference call will also be available on live webcast. In order to listen to the conference call and view the presentation simultaneously, please visit http://inv.issworld.com/events.cfm

For media enquiries
Kenth Kærhøg, Head of Group Communications, +45 38 17 62 05

For investor enquiries
Barbara Plucnar Jensen, Head of Group Treasury, +45 38 17 62 60

ISS Facility Services AB är Sveriges och Nordens största tjänsteföretag med 12 000 respektive 46 000 medarbetare. Svensk omsättning är 5 miljarder SEK och kommer från en mängd tjänsteområden som bl a facility management, städtjänster, mat och dryck, kontorstjänster, fastighetstjänster och transporttjänster. ISS Facility Services AB ingår i ISS A/S som ägs av EQT och Goldman Sachs. Koncernen har 530 000 anställda i mer än 50 länder, vilket gör oss till världens fjärde största privata arbetsgivare. www.se.issworld.com

About the ISS Group The ISS Group was founded in Copenhagen in 1901 and has grown to become one of the world’s leading Facility Services companies. ISS offers a wide range of services such as: Cleaning, Catering, Security, Property and Support Services as well as Facility Management. Global revenue amounted to DKK 78 billion in 2011 and ISS now has more than 530,000 employees and local operations in more than 50 countries across Europe, Asia, North America, Latin America and Pacific, serving thousands of both public and private sector customers. For more information on the ISS Group, visit www.issworld.com.

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