Roadshow Presentation. January 2019

Transcription

1 Roadshow Presentation January 2019

2 Forward-looking statements This presentation contains forward-looking statements, including, but not limited to, the statements and expectations contained in the Outlook section of this presentation. Statements herein, other than statements of historical fact, regarding future events or prospects, are forward-looking statements. The words may, will, should, expect, anticipate, believe, estimate, plan, "predict," intend or variations of these words, as well as other statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking statements. ISS has based these forward-looking statements on its current views with respect to future events and financial performance. These views involve a number of risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements and from the past performance of ISS. Although ISS believes that the estimates and projections reflected in the forward-looking statements are reasonable, they may prove materially incorrect, and actual results may materially differ, e.g. as the result of risks related to the facility service industry in general or ISS in particular including those described in the Annual Report 2017 of ISS A/S and other information made available by ISS. As a result, you should not rely on these forward-looking statements. ISS undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. The Annual Report 2017 of ISS A/S is available at the Group s website, 2

3 ISS at a glance A leading global provider of facility services delivering industry leading organic growth Industry leadership Industry leading growth Robust margins Strong cash flow Leading and differentiated global facility services provider Industry leading organic growth of 4-6% Robust operating margins around 5.5% 1 Strong cash of Around DKK 3.0 bn 2 (by 2021) 1) Operating margin before other items (but incl. restructuring reclassified above the line from 2019) 2) Around DKK 3 billion in constant currency 3 Based on preliminary unaudited figures

4 We are operating in a fundamentally attractive market that presents a significant growth opportunity for Key Account focused solutions Market development Customer trends Competitive landscape A USD 1 trillion outsourced FM market... of which the Key Account market is estimated to comprise 40% (USD 400 billion) Key Account growth clearly above-market which is driving a polarisation of the supply-side between large, multi-national, multi-service players and smaller, niche players Large customers are increasingly moving away from input based relationships to outcome focused, strategic partnerships Deals are becoming national or international coupled with extended service scope, focusing on consolidation, risk management and efficiency including workplace experience Technological advancements offer a competitive edge, enabling productivity of buildings and enhanced user experiences Traditional FM competitors continue to broaden service offerings and drive for integration primarily through M&A FM companies face acute strategic choices driven by technology and increased customer demand for strategic FM solutions FM incumbents required to adapt market focus, offerings and delivery models 4

5 ISS s IFS and Key Account focus has proven successful but we have significant potential to improve our commercial success Share of Group revenue by delivery type 5-year IFS cagr 1 : 8% Share of Group revenue from Global Key Accounts 5-year Global Key Account cagr 1 : 12% IFS Multi / Single YTD (YTD) 5 1)

6 ...and we continue to see strong demand for large international IFS contracts Number of contracts 1) FM 2) & Support Cleaning Property Catering Security North. Europe Cont. Europe APAC Americas Global Key Accounts (20 customers) 19 out of 20 All 19 out of out of out of 20 Northern 14 Europe out of out of out of out of 20 Latest 10 Global Key Account RFP s 3) All All Northern Europe All All 7 out of 10 Northern Europe All All 4 out of 10 6 out of Revenue split by service lines (%) 4) Group Global Key Accounts (1) Illustrates services in scope - but not necessarily across the entire customer portfolio (2) Facility Management (3) Request For Proposal (RFP) (4) Revenue split based on FY2017 6

7 We estimate the Key Account market, globally, to be worth approximately USD 400bn 1) and that ISS has a market share of below 2% Global outsourced facility services market Key Account market only ISS share (<2%) We estimate that the Key Account market constitutes approximately 40% of the one trillion USD global outsourced facility services market implying ISS has a market share below 2% of this Key Account market, globally USD 400bn Key Account market, globally 7 1) Outsourced market Sources: Frost & Sullivan, World Bank, ISS estimates

8 Key Account customers demand more and we will invest further to deliver the level and consistency of service expected Key Account customers demand more than just cost savings deep segment expertise is important and this must be leveraged across sites, countries, regions Excellence Volumes Risk Cost Concepts Talent Creating a higher value outcome 8

9 Revenue split (1/2) Total revenue DKK 80bn Customer type Key Accounts Local and regional Key Accounts Global Corporate Clients Delivery type Intergrated facility services (IFS) Multi services/single services Portfolio revenue Revenue type Non-portfolio revenue* 15-20% 40% 38% 62% 12% Intergrated Facility Services: 10 years CAGR of 12% Note: Figures as of end-2017 *Above base and project work 9

10 Revenue split (2/2) Total revenue DKK 80bn Geography Service lines Customer segment Continential Europe Northern Europe Asia & Pacific Americas Total Europe 70% Cleaning Catering Security Property Support Faciliy Managment Bus. Services & IT Public Administration Other Industry & Manufac. Healthcare 12% 7% 3% 18% 39% 14% 7% 49% 35% 31% 31% 20% 10% 11% 13% Diversified revenue base Note: Figures as of end

11 Solid and resilient business model - through the cycle Resilient organic growth Long-term track record of margin stability 10 Organic growth, % Average, % 10 Average (%) Operating margin 1), % M M ) 1) Operating profit before other items 2) LTM 11

12 Global Key Accounts (1,2) We currently have 20 Global Key Accounts which we split into 4 sub-segments Banking Pharma IT Other (1) Also referred to as Global Key Clients (2) Includes five additional, undisclosed customers 12

13 G200 FM spend by sector G200 FM spend by country G200 FM spend ISS share Prospective Global Key Accounts offer huge potential The ISS G existing or potential customers of ISS where we see a strong opportunity to drive growth Customers with global real estate portfolios within our focus sectors with a stated wish wish to increase outsourcing in a manner that aligns with our value proposition Rest of World Business Services & IT Industry & Manufacturing Food & Beverage Pharmaceuticals Other USA Spain UK NL Germany China France Australia ISS share of G200 FM wallet (2%) Our analysis suggests total annual FM spend of DKK 336 billion across our G200 customers our current share is less than 2% 13

14 Technology is enhancing our integrated, self-delivery model FMS Our integrated business intelligence platform Provides customers with a single, global portal Enables users to make and track Helpdesk requests and to deliver work order / asset management Now based on IBM s TRIRIGA platform an engine upgrade with enhanced functionality Integration Our account management tool to optimise the workforce, enhance planning capabilities, drive integration of services, develop our employees and strengthen our commercial position IoT Our platform for integrating a broad range of sensor technology, improving service delivery, optimising building usage and enhancing user experience Integrated with FMS Insight A reporting engine affording customers real-time transparency Integrated with FMS 14

15 North America remains our single biggest growth opportunity Size ISS market share G200 (2) presence % of global, outsourced FM market (1) ISS % market share of outsourced FM market (1) Estimated North American FM wallet of the G200 (2) (DKK bn) North America 27 Northern Europe 4.3 Financial Services 24 Western Europe Central Europe Asia Latin America Other Business Services & IT 18 Asia 10 Pacific 1.3 Industry & Manufacturing 15 Northern Europe 10 Central Europe 1.3 Pharmaceutical 6 Pacific 5 Western Europe 1.0 Latin America 4 Eastern Europe 0.8 Other 15 Eastern Europe 4 North America 0.3 Total 78 Africa & Middle East 2 Africa & Middle East N/A North America is the world s biggest FM market and presents a significant growth opportunity for ISS (1) Various sources and ISS analysis (2) Based on ISS analysis of annual FM spend at 200 of the world s leading corporations 15

16 Successful allocation of capital since IPO Guckenheimer case study Business case Progress Acquisition multiples 1. Improve our platform in the US 2. Enhance IFS offering to Key Accounts 3. Realise significant revenue synergies Organic growth 24% +10% insourcing +14% upselling / new business 1 EBITA margin EBITA-multiples 15.9x EBITA pre-synergy 3 9x EBITA post synergy 4 4. Leverage scale to drive cost synergies 4.9% 4.1% Pre-acquisition 3 2 FCF-yield 10% 5 We will remain disciplined in our approach to acquisitions 1) Accumulated organic growth since acquisition (1 May Oct 2018) 2) LTM as per 31 Oct ) Based on EBITA FY2016 4) Based on estimated synergies end-2018 (in line with our acquisition expectations communicated in April 2017) 5) Based on a normalised Free Cash Flow pre interest (2018 positively impacted by acquisition related cash flow impacts) 16 Based on preliminary unaudited figures

17 Corporate Responsibility ISS widely recognised for its focus on ESG Selected metrics Net Promoter Score (NPS) Lost Time Injury Frequency Diversity Awarded Bronze Class status 79th percentile ranking for the industry Industry best score in Operational Eco-Efficiency Top quartile rank with an AA rating vs. industry at BBB Named Global Best In Class on Corporate Governance Industry best score on Health & Safety Named Leader in overall performance and Leader in both Environment and Governance separately Ranked 1st among industry peers of similar market cap Ranked 2nd out of 91 industry peers (99th percentile) 1) Series Series Male 50% Female 50% Among just ~100 companies globally included in all three key ESG indices 2) Other proof points Signatory and founding member of the UN Global Compact Chairs the UK Living Wage Service Providers Leadership Group Holds top score at Institutional Shareholder Services Inc. (ISS) for Corporate Governance 1) SUSTAINALYTIC S ASSESSMENT OF ISS S ESG PERFORMANCE AS OF NOVEMBER ) THE INCLUSION OF ISS A/S IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF ISS A/S BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. 17

18 We will ensure capital allocation is optimal Objective Comment Capital structure Capital expenditure/net working capital Maintain a strong and efficient balance sheet with an investment grade financial profile and leverage < 2.5x Meet the modest, ongoing capital needs of the business Ordinary dividend Acquisitions and divestments Targeted payout ratio of approximately 50% of net income (adjusted) Further portfolio optimisation and highly selective acquisitions 5. Additional shareholder returns Extraordinary dividends or share buy-backs 18

19 Solid investment grade capital structure Issued bonds and bank loans Maturity profile (EUR m) Leverage EMTN EMTN EMTN EMTN EUR 700m 1.125% senior unsecured Maturing 2020 EUR 500m 1.125% senior unsecured Maturing 2021 EUR 500m 2.125% senior unsecured Maturing 2024 EUR 600m 1.500% senior unsecured Maturing , RCF EMTN Revolving Credit Facility (1) EUR 1,000m Libor % Maturing Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Net debt (DKK bn) Leverage (%), rhs ISS continually reviews its financing and will remain pro-active in exploiting opportunities when relevant (1) The facility includes a margin grid where the margin is dependent on the Group's leverage. The current margin of 0.45% will decrease to 0.35% if leverage is below 2.0x and increase to 0.60% if leverage is above 2.5x. At 31 December 2017, leverage was 2.2x. In addition to the margin, an utilisation fee applies depending on the utilisation of the facility. For utilisation up to 33% the fee is 0.10%, for utilisation between 33% and 66% the fee is and 0.20%, and for utilisation above 66% the fee is 0.30% 19

20 Ownership 1) 13% 10% KIRKBI Invest A/S Artisan Partners Limited Partnership Mondrian Investment Partners Limited Others 5% (1) Latest major shareholder holdings reported by investors to ISS 20

21 Strategy Update December

22 We will now be bolder and refine our geographic footprint creating a simpler and more focused business in the process We will divest 13 countries and conclude our divestment of non-core services Israel Thailand Philippines Chile Brazil Countries to be exited Local market dominated by smaller, price-centric customers We are unable to fully leverage volumes, concepts and talent We cannot always generate attractive and sustainable returns at a commensurate risk Malaysia Brunei Czech Republic Slovenia Divestment of non-core services Entirely consistent with The ISS Way Strategy of recent years Concludes this process Estonia Slovakia Hungary Romania 22

23 A streamlined organisation will increase our focus even further whilst reducing complexity and risk Change 2017 (reported) 2017 (adjusted) Customers 50% c. 125,000 c. 1,000 Key Accounts c. 63,000 c. 1,000 Key Accounts c. 200,000 Employees c. 20% c. 490,000 c. 390, ,968 Countries Key Accounts IFS 8pp 3pp 52% 38% 60% 41% N/A 31% 23 1) Adjusted for countries and business units in the divestment pipeline (i.e. excludes acquisitions and divestments completed prior to 30 September 2018)

24 A stronger revenue base from which to accelerate organic growth 2017 restatements Higher quality revenue base with a de-risked operating profit Organic growth 2.4% Organic growth 2.8% Organic growth 3.1% Margin % Margin % Margin % -8% -12% -6% -9% -6, ,912 73,577-3,351 70,226 4,516 4, , reported Discontinued 2017 restated Business unit exits 2017 adjusted reported Discontinued 2017 restated Business unit exits 2017 adjusted 2 Revenue (DKKm) Operating profit 1 (DKKm) Divestment program expected to be completed during with net divestment proceeds in the range of DKK billion 3 1) Before other income and expenses 2) Adjusted for countries and business units in the divestment pipeline (i.e. excludes acquisitions and divestments completed prior to 30 September 2018) 3) Divestment proceeds net of divestment costs and related reorganisation 24 Based on preliminary unaudited figures

25 supported by Key Accounts Key Account characteristics Organic growth 1 Revenue profile 4 Working Capital Organic growth (%) Transition and mobilisation 2.0 Non-Key Accounts Key Accounts YTD 2018 Non-portfolio revenue 2 (%) Retention rates 2 (%) Customer baseline Savings Pre-launch settlement 1Y 2Y 3Y Baseline day 1 New contract (5yrs) 4Y Glidepath/ Efficiencies Margin profile 4 Average contract margin 5Y Price/ Inflation Contract margin Increased scope 3 Contract period (typically 5yrs) Revenue end period 6Y 7Y 8Y 9Y 10Y 11y Extended contract (5yrs) Transition and mobilisation costs on selected large Key Accounts are capitalised and amortised over the initial secured contract period Sign-on fees, if any, on some large Key Accounts are capitalised and amortised as a reduction in revenue over the initial secured contract period ISS does not capitalise any bid-related costs Payment terms Key Accounts generally demand somewhat longer payment terms but also have better payment discipline Factoring and Supply Chain Financing (SCF) among others used commercially and costs are priced into the contracts ISS carries no credit risk as any factoring is carried out on a non-recourse basis Total amount of factoring and SCF of approx % of Trade Receivables (c. 10% in Q3 2018) 1) Based on reported figures on the GREAT organisational structure reporting 2) 3-year average (FY2016 to 9M 2018) 3) Increased scope includes above base revenue, project work and cross sales 4) For illustrative purposes only 25 Based on preliminary unaudited figures

26 Our Key Account focus will drive stronger and faster growing Free Cash Flow Cash Flow dynamics Operating profit Comments EBITDA EBITA Our Key Account focus will drive stronger organic growth and a slightly higher EBITDA margin Controlled reinvestment of profit to drive higher organic growth at broadly stable EBITA margins (slightly higher depreciation) in line with medium term guidance Cash Flow Comments EBITDA Changes in working capital Other expenses paid Other CF from operations lines CAPEX Free Cash Flow 1 Impacted by industry leading growth, larger transition/mobilization and longer payment terms. Cash conversion target >90% unchanged Our transition will result in an easier to manage and more focused business with less need for restructuring No particular impact % of revenue (in line with the historical range) Stronger and faster growing Free Cash Flow (medium term around DKK 3 billion) 1) Cash flow from operations + Cash flow from investments Cash flow from acquisitions/divestments, net 26 Based on preliminary unaudited figures

27 Capital reallocation Freeing up capital to invest for higher returns 2019 and 2020 Fully funded by divestment proceeds Free Cash Flow DKKbn Divestment proceeds, net DKKbn Net Cash Flow available DKKbn Leverage below 2.5x EBITDA 3 Disciplined investments in the business Shareholder returns Transformational projects Acquisitions Ordinary dividend Additional returns Incremental investments ( DKKm in total) to support further acceleration in organic growth fully funded by divestments (slide 28) No net impact We intend to strengthen capabilities and build scale through disciplined and selective acquisitions Payout ratio of c. 50% of Net Profit (adjusted) and at least equal to the DKK 7.70 per share paid in 2018 Payout ratio of c. 50% of Net Profit (adjusted) We intend to allocate at least 25% of net divestment proceeds to share buy-backs or extraordinary dividends Extraordinary dividends or share buy-backs 1) Free Cash Flow as is - before divestments, acquisitions and other incremental investments in transformational projects (OPEX and CAPEX/Working Capital) 2) Divestment proceeds net of divestment costs and restructuring 3) Leverage below 2.5x pro forma adjusted EBITDA, taking seasonality into account. Pro forma adjusted EBITDA calculated as EBITDA before other items as if all acquisitions and divestments had occurred on 1 January of the respective year 27 Based on preliminary unaudited figures

28 Investing in both Commercial and Operations Accelerated investment spend in 2019 and 2020 to drive stronger growth Focus on Key Account delivery capabilities Selected initiatives Technical and Catering Services Establish Strengthen Scale Accelerated roll-out of a new Facility Management System (FMS@ISS) which will become the back-bone for all other technology and data driven initiatives including performance benchmarking, IoT, AI, robotics, sensors, workforce optimisation etc. Accelerated global migration to Group standard operating systems (e.g. ERP, Procure-to-Pay, CRM, People Management) Workplace Launch of a Global Shared Services organization to drive centralization, standardization and automation across ISS Organic build-out of Technical and Catering Services including taking over in-house Facility Management organisations from blue-chip Key Accounts Technology and data Organic build-out of Strategic Workplace Management and Design capabilities by leveraging our Global Centre of Excellence established on the basis of acquiring SIGNAL in 2017 Targeted investments in accelerating the conversion of the G200 1 Potential investment (fully funded by divestment proceeds) DKK m in total Indicative split Operating Expenditure (c. 50%) Capital Expenditure / Working Capital (c.50%) 1) 200 existing or potential customers where ISS sees a particularly strong opportunity for growth 28 Based on preliminary unaudited figures

29 Reporting going forward Restated figures Restated figures will be provided in connection with the 2018 Annual Report (22 February 2019) In accordance with IFRS any single Cash Generating Unit undergoing divestment will have to be placed as Discontinued. Business units cannot be Discontinued and as such will remain part of the ongoing business until divested. The classification of countries and business units as held-for sale is expected to result in fair value adjustments around DKK 1 billion in connection with 2018 Full Year results published in February Including business units held for sale Basis for 2019 outlook Continental Europe Northern Europe Asia & Pacific Americas Total before Discontinued Operations Discontinued Operations (country exits) Total reported Restructuring Semi-annual reporting Since 2013 the GREAT organizational roll-out has resulted in an abnormal level of restructuring. The roll-out ends with France in The simplification of the business announced today is also expected to reduced the need for restructuring going ahead. As a result, all restructuring charges will from 2019 be accounted for within Operating profit before other items. From 2019 all incentive KPIs short and long term will be after restructuring From 2019 ISS will, in-line with industry practice, shift to semi-annual reporting. A trading statement will be published in connection with Q1 and Q3. Quarterly conference calls and road show activity unchanged 29 Based on preliminary unaudited figures

30 Margin profile going ahead We expect the operating margin profile to remain robust Medium term News communicated today Unchanged Operating margin 1 (prior to todays communication) Transformational projects 2 Reclassification of restructuring above the line Exclusion of discontinued operations +0.1% 5.7% -0.3% c. -0.7% c. -0.3% c. -0.3% c. -0.1% -0.1 to -0.2% In line with the historical range (average c. 5.7%) -0.1 to -0.2% Operating margin (as reported going ahead) 5.5% Around 5.5% 1) Before Other Income and Expenses, net. From 2019 restructuring will be accounted for above the line. 2) Around DKK million in combined incremental project related OPEX (c. 50%) and CAPEX/Working Capital (c.50%) during fully funded by divestment proceeds (slide 27) 30 Based on preliminary unaudited figures

31 Medium term financial targets We expect an acceleration of The ISS Way Strategy to yield stronger financial results Organic growth Operating margin 1 Free Cash Flow 2 4-6% (from 2019 onwards) Around 5.5% (incl. restructuring) (equivalent to around 5.7% excl. restructuring) Around 3.0 DKKbn 3 (by 2021) Industry leading organic growth delivered through sharper focus further strengthened commercial capabilities and value creating investments Robust operating margins in-line with the historical range Margin upside generated through an improving business mix (IFS and Key Account) will be reinvested in further competitiveness and growth Our transition will lead to a stronger and more stable Free Cash Flow which grows in-line with revenue 1) Operating margin before other items 2) Cash flow from operations + Cash flow from investments Cash flow from acquisitions/divestments, net 3) Around DKK 3 billion in constant currency 31 Based on preliminary unaudited figures

32 Q Highlights

33 Highlights Q Financial Highlights Commercial Highlights Strategic Highlights Total revenue growth of -0.7% (Q2 2018: -1.6%) including -4.1% impact from currency and divestments Organic revenue growth of 3.4% (Q2 2018: 3.2%) Operating margin of 6.1% (Q3 2017: 6.3%) Cash conversion of 91% (Q2 2018: 97%) or 95% excluding mobilisation of Deutsche Telekom Net profit (adjusted) of DKK 684 million (Q3 2017: DKK 764 million) Financial leverage of 2.9x (Q3 2017: 2.7x) or 2.7x excluding currency impacts We are committed to maintaining the nominal ordinary 2018 dividend (paid in 2019) at least equal to 2017 (DKK 7.70 per share) Total Key Accounts now represents 56% of Group revenue Revenue from Global Key Accounts decreased 3% in the first nine months of 2018 in local currency corresponding to 13% of Group revenue (H1 2018: 12%) Revenue from Integrated Facility Services (IFS) increased 9% in the first nine months of 2018 in local currency corresponding to 40% of Group revenue (H1 2018: 39%) Continued strong commercial momentum. Recent key contract developments include the win of TSB bank and a company in the retail segment in the UK as well as an extension of Nordea (Nordic) and Post Nord (Nordic) Transition and mobilisation of Deutsche Telekom on track Pipeline remains strong Efficiency initiatives focusing on overhead costs through consolidation, centralisation and automation have been successfully initiated in the UK with early margin benefits continuing to be expected from Q Ongoing divestment of non-core activities in the Netherlands (set to close in November) and Hygiene and Prevention business in France We remain committed to delivering our strategy - The ISS Way. On 10 December 2018, we will host an investor call to provide a Strategy Update. Details will be available on the Investor section of in due course 33

34 Northern Europe 30% of Group Continental Europe 39% of Group Regional performance Q % organic growth (vs. 5% in Q2 2018) 6.4% operating margin (1) (vs. 6.8% in Q3 2017) Strong growth in Turkey driven by the Healthcare segment as well as price increases contract launches and non-portfolio demand in especially Spain as well as strong growth in Turkey driven by the Healthcare segment and successful build-up of self-delivery catering capabilities in Austria Partly offset by revenue reduction from DXC Technology and an international bank in EMEA Continued strong margin performance across several countries in the region was more than offset by large key account contracts phasing in and out as well as continued underperformance non-core activities in the Netherlands (divestment set to close in November 2018) YTD 2018: 5.6% (YTD 2017: 5.9%) 1% organic growth (vs. 0% in Q2 2018) 8.1% operating margin (1) (vs. 8.6% in Q2 2017) Strong growth in Denmark and Norway driven by key account contract launches and nonportfolio revenue as well as project work in the UK Important Key Account extensions and expansions in Sweden Partly offset by revenue reduction from DXC Technology, HP Inc, the EMEA region with an international bank and the UK Ministry of Defence Decrease mainly due to large key account contracts phasing in and out and our investments in building-out Technical Services credentials YTD 2018: 6.2% (YTD 2017: 6.9%) (1) Operating profit before other items and corporate costs 34

35 Americas 12% of Group Asia Pacific 19% of Group Regional performance Q % organic growth (vs. 5% in Q2 2018) Growth supported by most countries in the region and especially by contract launches in Australia, Hong Kong and Indonesia Partly offset by revenue reduction from DXC Technology and HP Inc China starting to deliver positive organic growth again following a period of deliberate strategic structural adjustments to our operating model 6.5% operating margin (1) (vs. 7.6% in Q3 2017) Development driven mainly by large key account contracts phasing in and out as well the ongoing normalisation of high margins in Singapore YTD 2018: 6.2% (YTD 2017: 7.5%) 0% organic growth (vs. 5% in Q2 2018) Continued strong growth from Guckenheimer and key account contract launches in the US as well as solid growth in Chile and Mexico Offset by revenue reduction from DXC Technology and HP Inc contract losses and limited new wins in Brazil as well as the impact from a tough non-portfolio comparable in H % operating margin (1) (vs. 2.5% in Q3 2017) Margin supported by Guckenheimer integration synergies and IFS performance in the US Partly offset by large key account contracts phasing in and out As expected, the margin remains impacted by operational challenges in the Specialised Services division in the US, where turnaround initiatives are ongoing YTD 2018: 3.0% (YTD 2017: 2.9%) (1) Operating profit before other items and corporate costs 35

36 Continued strong commercial momentum Key contract maturity profile Key contract developments during Q Large Key Accounts (1) : Expiry 2018 Expiry 2020 Expiry Expiry 2019 Expiry % 6% 3% 5% 5% Non-Key Accounts 48% Other Key Accounts 32% Company in the retail segment Group revenue, 2017 (DKK 80 bn) (1) Existing Global Corporate Clients and Key Accounts with revenue above DKK 200m in 2017 (excl. confirmed losses by year-end 2017) 36

37 Q organic growth drivers (DKK m) 3.4% 4.5% , % 19,641 18, % Q reported FX Acquisitions, divestmensts, net 1) Q adjusted HP-I, DXC & EMEA region of International Bank Non-portfolio revenue Other portfolio revenue Q reported (1) Any acquisitions or divestments completed after 30 June 2017 are included within the Q adjusted revenue but only for the equivalent period of time that they impact the Q reported result. 37

38 Q operating profit drivers 1) (DKK m) 6.32% -27 bps % -33 bps -13 1, % 1, ,189 Q reported FX Acquisitions, divestmensts, net 2) Q adjusted Continental Europe Northern Europe Asia & Pacific Americas Corporate Costs (1) Operating profit before other items (2) Any acquisitions or divestments completed after 30 June 2017 are included within the Q adjusted operating profit but only for the equivalent period of time that they impact the Q reported result. Q reported 38

39 Income Statement DKK million Q3 Q3 Δ 9M 9M Δ Revenue 19,641 19,777 (136) 58,711 59,245 (534) Operating expenses (18,452) (18,528) 76 (55,810) (56,042) 232 Operating profit before other items 1,189 1,249 (60) 2,901 3,203 (302) Other income and expenses, net (176) (81) (95) (445) (292) (153) Operating profit 1,013 1,168 (155) 2,456 2,911 (455) Financial income and expenses, net (155) (143) (12) (464) (392) (72) Profit before tax 858 1,025 (167) 1,992 2,519 (527) Income taxes (213) (261) 48 (508) (642) 134 Net profit (adjusted) from continuing operations (119) 1,484 1,877 (393) Net profit/(loss) (adjusted) from discontinued operations (97) (57) (40) Net profit (adjusted) (80) 1,387 1,820 (433) Goodwill impairment (1) (28) - (28) (681) - (681) Amortisation and impairment of brands and customer contracts (117) (131) 14 (352) (393) 41 Mainly DKK 166 m related to the implementation of GREAT in France, Sweden and the US, as well restructuring related to upstart of efficiency initiatives in the UK DKK million Q Q Net interest expense (121) (100) Amortisation of financing fees (6) (16) Other (4) (16) (16) FX (12) (11) Financial income and expenses, net (155) (143) Effective tax rate of 25% (Q3 2017: 25.5%) in line with the underlying effective tax rate going ahead (previousely 26%) Gain of DKK 39 m related to translation effects (DKK/ARS) Goodwill impairment mainly related to the remeasurement and subsequent divestment of non-core activities in the Netherlands Income tax effect (1) Net profit (reported) (95) 437 1,501 (1,064) Adjusted EPS, DKK (2) (0.4) (2.3) Adjusted EPS from continuing operations, DKK (3) (0.6) (2.1) (1) Including goodwill impairment from discontinued operations (2) Calculated as Net profit (adjusted) divided by the average number of shares (diluted) (3) Calculated as Net profit from continuing operations (adjusted) divided by the average number of shares (diluted) (4) Includes recurring items for example interest on defined benefit obligations and local banking fees 39

40 Cash Flow DKK million Q3 Q3 Δ 9M 9M Δ Operating profit before other items 1,189 1,249 (60) 2,901 3,203 (302) Operating profit from discontinued operations (4) 4 (8) Depreciation and amortisation (5) (31) Changes in provisions, pensions and similar obligations (50) (9) (41) (156) (146) (10) LTM Cash conversion of 91% (95% excl. Deutche Telekom) driven by the transition and mobilisation of Deutsche Telekom as well as timing of collections and payments Outflow of DKK 74m (Q3 2017: DKK 5m) related to the transition and mobilisation of Deutsche Telekom Year-over year decline on the back partly driven by a strong Q Changes in Working Capital, DKK m 49 Cash flow from Operations 1,316 1,422 (106) 3,245 3,596 (351) Share based payments 18 (15) Changes in working capital (223) 49 (272) (2,295) (1,746) (549) Other expenses paid (177) (133) (44) (318) (290) (28) Net interest paid/received (114) (32) (82) (310) (220) (90) Income taxes paid (119) (176) 57 (583) (653) 70 Cash flow from operating activities 701 1,115 (414) (226) 694 (920) Cash flow from investing activities (304) (237) (67) (679) (2,106) 1,427 Cash flow from financing activities (556) (25) (531) (1,087) 883 (1,970) Q Q Q Q Q DKK 70m related to the first annual coupon payment on the 10-year EUR bond issued in August 2017 (switch from quarterly to annual interest payments) CAPEX of DKK 257m or 1.3% of revenue (Q3 2017: DKK 238m) due quarterly timing differences and slightly higher investments in technology Total cash flow (159) 853 (1,012) (1,992) (529) (1,463) Free Cash Flow (1) (426) (960) 2 (962) - of which relates to Deutsche Telekom transition and mobilisation cost (74) (5) (69) (137) (30) (107) Reduction driven mainly by changes in Working Capital and lower Operating profit including negative FX effects (1) Cash flow from operating activities + (Cash flow from investing activities less acquisition/divestment of businesses, net) 40

41 Outlook 2018 Organic Growth: % (2017: 2.4%) Operating Margin: Around 5.6% excl. acquisitions, divestments and FX (2017: 5.65%) Cash Conversion: Above 90% (2017: 104%) Impact on total revenue from divestments, acquisitions and foreign exchange rates in 2018 We expect a negative impact on revenue growth from development in foreign exchange rates of approx % 1) We expect divestments and acquisitions to have a net impact of 0% to -1% on the revenue growth in ) 1) The forecasted average exchange rates for the financial year 2018 are calculated using the realised average exchange rates for the first ten months of 2018 and the average forward exchange rates (as of 1 November 2018) for the last two months of ) Includes divestments and acquisitions completed by 31 October 2018 (including in 2017). 41

42 Appendix 42

43 Key commercial developments since Q Global Key Accounts A new customer in the Business Services & IT segment An extension and expansion of our relationship with Vattenfall for 7 years Extension of our partnership with UBS for 7 years Regional and Local Key Accounts A new customer in the Business Services & IT segment in the UK An extension and expansion of our relationship with NSW schools in the Pacific for 5 years Extension of our relationship with Swisscom for 5 years Total new revenue of approx. 1.5% of Group (DKK 80bn) 43