CHAPTER TITLE 1
17
GROUP ANNUAL REPORT WorldReginfo - 5dedf72b-1a97-4a1b-8a5a-242337e84732 2 CHAPTER TITLE
DID YOU KNOW THAT...?
2 488,946 6,901,337 hrs 1,000,000+ m ISS employees of training annually of critical space managed by ISS
10+ million 1.8+ million Around 800 people experience our meals served key account customers Integrated Facility Services (IFS) every day
Service Futures
620,000+ 130+ 160,000+ followers on different languages visited our blog social media spoken ServiceFutures.com
Front page photo: CHARISSE TANG Management Trainee, ISS Hong Kong WorldReginfo - 5dedf72b-1a97-4a1b-8a5a-242337e84732 CASE: Strengthening our catering CONTENTS services in North America
See p. 14
OVERVIEW 2 ISS at a glance 9 Outlook 10 Letter to our stakeholders 12 Key figures and financial ratios 13 Definitions CASE: Reducing risk in critical OUR PERFORMANCE environments 16 Group performance 22 Regional performance 26 Q4 2017 See p. 28
OUR BUSINESS 30 Our business model and strategy 35 Our people 39 Our business risks CASE: GOVERNANCE Investing in our Global 44 Corporate governance 47 Internal controls relating to financial reporting Management Trainees 49 Remuneration report 53 Shareholder information See p. 42 54 Board of Directors 56 Executive Group Management
FINANCIAL STATEMENTS 61 Consolidated financial statements 108 Management statement 109 Independent auditors’ report CASE: Leading the healthcare ADDITIONAL INFORMATION 115 Country revenue and employees market in Singapore 116 Country managers See p. 58
CORPORATE RESPONSIBILITY CASE: Our CR report is available at Revolutionising facility www.responsibility.issworld.com/report2017 services with IoT
See p. 112 WorldReginfo - 5dedf72b-1a97-4a1b-8a5a-242337e84732 2 ISS AT A GLANCE
PERFORMANCE Evaluating the success of our strategy and business model, and ultimately our creation of shareholder value, requires HIGHLIGHTS 2017 measurement of specific metrics. By using the six key perfor- mance indicators (KPIs) below, we can systematically measure Group performance and the effect of our efforts to achieve our vision. Bonus plans for the Executive Group Management are also based on these KPIs.
Definitions of KPIs, see p. 13.
FINANCIAL KPIs PERFORMANCE ORGANIC GROWTH 2.4% • Organic growth supported by good performance in Continental AND REVENUE Europe and Americas that was driven by growth in our portfolio Organic growth services, start-up and expansion of Global Corporate Clients con- DKK billion % tracts and increased demand for non-portfolio services 80 5.0 79,912 DKKm • All regions delivered positive organic growth, despite expected 75 4.0 Revenue revenue reductions in Brazil, Australia, China and Sweden 70 3.0 • Revenue up 2% mainly due to organic growth and acquisitions 65 2.0 that were partly offset by a negative impact from currency effects 60 1.0 55 0.0 • IFS up 6% in local currencies, now representing 38% of Group 2015 2016 2017 revenue or DKK 30.5 billion Revenue • Key accounts represent 52% of Group revenue Organic growth Group performance, see p. 16 Regional performance, see pp. 22–25
OPERATING MARGIN • Operating margin in line with last year when adjusted for the 5.7% impact from acquisitions and divestments as well as currency effects AND PROFIT Operating margin • Operating margin supported by GREAT including procurement sav- DKK billion % ings, operational efficiencies and good performances in Continental 5.0 5.9 4,516 DKKm Europe and emerging markets, which was offset by margin Operating profit 5.7 decreases in parts of Northern Europe, Asia & Pacific and Americas 4.5 before other items • Operating profit before other items in line with last year 4.0 5.5 • Corporate costs were 0.8% of revenue, in line with our expectations
3.5 5.3 2015 2016 2017 Group performance, see p. 16 Operating pro t before other items Regional performance, see pp. 22–25 Operating margin
CASH CONVERSION 104% • Strong cash conversion supported by consistent efforts to ensure AND FREE CASH FLOW timely payment for work performed, focus on strong working capital Cash conversion processes and timing of collection and payments around year-end DKK billion % • Cash flow from operating activities slightly down compared to last 3.00 110 99% 98% 104% 2,699 DKKm year mainly due to an increase in other expenses paid that was partly 2.75 100 Free cash flow offset by an improved cash flow from working capital 2.50 90 • Investments in intangible assets and property, plant and equipment, net 2.25 80 increased to DKK 907 million, representing 1.1% of Group revenue
2.00 70 • Free cash flow down by 7%, impacted by an increase in other 2015 2016 2017 expenses paid that was mainly related to restructuring projects in Free cash ow support of the continued implementation of GREAT and increased Cash conversion investments in intangible assets and property, plant and equipment, net in support of business development
Group performance, see p. 16 WorldReginfo - 5dedf72b-1a97-4a1b-8a5a-242337e84732 ISS AT A GLANCE 3
“We remain confident in the ISS Way strategy – as evidenced by recent contract wins such as Deutsche Telekom and LEGO Group and the five-year extension to our partnership with Barclays” JEFF GRAVENHORST Group CEO
NON–FINANCIAL KPIs PERFORMANCE EMPLOYEE NET 62.1 • Up by 2.9 points – the fifth consecutive year of improvement PROMOTER SCORE eNPS • Supported by the launch of the Leadership Competency Framework and the continued roll-out of our Key Account Manager % Certification (KAMC) and Service with a Human Touch (SWAHT) 70 80 78% training programmes 60 78 Response rate • We carried out our sixth global employee engagement survey 50 76 with 250,697 employees responding across 44 countries. The 40 74 response rate increased to approximately 78% (2016: 73%)
30 72 2015 2016 2017 eNPS Response rate
Our people, see p. 36
CUSTOMER NET 44.0 • Up by 0.8 point – the sixth consecutive year of improvement, reflecting our continued efforts to drive customer focus, especially PROMOTER SCORE cNPS on our key accounts % • Supported by our efforts to implement account development 50 86 86% plans and improve employee engagement, through the roll-out of 40 84 Response rate our Key Account Manager Certification (KAMC) and Service with 30 82 a Human Touch (SWAHT) training programmes
20 80 • We carried out our seventh customer experience survey with 6,438 customers invited, representing almost 80% of Group 10 78 2015 2016 2017 revenue and enjoyed a response rate of 86% cNPS Response rate Our business model and strategy, see p. 33
LOST TIME INJURY • Improved over 70% from the baseline figure of 13 in 3.5 2010 – the seventh straight year of improvement FREQUENCY LTIF • Driven by our systematic approach to managing risks, includ-
8 ing the implementation of the Group HSE Management System and our global campaigns to stay focused on Health, Safety and 6 T Environment (HSE) 4
2
0 2015 2016 2017
Our people, see p. 38
WorldReginfo - 5dedf72b-1a97-4a1b-8a5a-242337e84732 4 ISS AT A GLANCE
OUR BUSINESS Our business model is based on creating value for our customers by allowing them to focus on their core business. MODEL We service and maintain their facilities, helping to create workplaces that are pleasant, safe and nurturing for their employees and visitors.
Focusing on our selected customer segments, we offer a leading value proposition based on our philosophy of providing services through our own engaged and capable employees CUSTOMERS WANT (self-performance). Moreover, we are able to provide multiple services to customers through an Integrated Facility TRANSPARENCY IN BOTH COST AND DELIVERY Services (IFS) solution. This allows us to drive convenience (one point of contact), productivity and cost efficiency. COMPLIANCE WITH THEIR REGULATORY ENVIRONMENT Our business model and strategy, see p. 30. CONSISTENCY ACROSS SITES AND SERVICES
EFFICIENCY ALONGSIDE SUSTAINABILITY AND INNOVATION
END-USER SATISFACTION DRIVEN ISS DELIVERS VIA BY GREAT EXPERIENCES PEOPLE PROCESSES TECHNOLOGY
INSIGHT@ISS
CLEANING PROPERTY SALES
FMS@ISS SOLUTION
IoT@ISS CATERING SUPPORT NEGOTIATION
TRANSITION INTEGRATION @ISS
SECURITY FACILITY MANAGEMENT OPERATION
SELF–DELIVERY OF SERVICES
INTEGRATION OF SERVICES
STRATEGIC PARTNERSHIPS
CUSTOMER SEGMENTS 1) KEY ACCOUNT SHARE 1) IFS SHARE 1)