ISS Holding A/S Investor Presentation Annual Results February 2008

Transcription

1 ISS Holding A/S Investor Presentation Annual Results February 2008

2 Forward-looking Statements Forward-looking statements This presentation may contain forward-looking statements. 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 as a result of uncertainties relating to the following matters, among others: the demand for the services offered by ISS, which is primarily dependent upon outsourcing trends and macroeconomic conditions, including economic growth, inflation or deflation; risks related to ISS growth strategy, including potential contingent liabilities of acquired businesses and failure to manage growth and integrate acquired businesses successfully; risks related to the substantial indebtedness including fluctuations in interest rates and limitations on additional debt to finance ISS acquisition strategy and access to capital to finance its operations; ISS ability to operate profitably, in particular under fixed-price or long-term contracts; ISS exposure to currency-related risks, particularly the value of the Danish Kroner against other currencies; complexities related to compliance with regulatory requirements of many jurisdictions as a result of ISS international operations and decentralized organizational structure; ISS dependence on its management team and qualified personnel; ISS potential liability for acts of its employees, including negligence, injuries, omissions and wilful misconduct; the threat, institution or adverse determination of claims against ISS; potential environmental liabilities; and any adverse effect on ISS operating results and cash flows from the impact of changes to laws and regulations, including health and safety and environmental laws and regulations. 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. Reference is also made to the description of risk factors in ISS Holding A/S s Annual Report 2006, which is available from the Group s website, 2 Lead Facility Services Globally

3 Agenda Key Events 2007 The Strategy Annual Results 2007 Acquisitions Other Financial Measures 3 Lead Facility Services Globally

4 Key Events 2007 Strengthened service offerings Security added as a separate pillar Strengthened geographical footprint Entry into the US and Taiwan Building up critical mass in key markets Partial refinancing completed successfully 67 acquisitions completed 2 new countries, 9 platform developers, 56 bolt-ons IPO review initiated Strengthened management structure 4 Lead Facility Services Globally

5 Strong Performance In 2007, revenue increased by 15%: 6% organic growth, from growth regions, but also mature markets 9% acquisition growth, net Resulting in an increase from DKK 55.8bn in 2006 to 63.9bn Operating margin increased from 5.8% in 2006 to 6.0% Operating profit increased from DKK 3.2bn in 2006 to 3.8bn Debt relative to EBITDA decreased Ratio decreased from 6.59 in 2006 to Lead Facility Services Globally

6 ISS Milestones Since PTP Growth from : Revenue: 38% EBITA: 45% Employees: 41% Country establishments (10 since 04) 7 1) Global GDP presence >75% Accelerated business transformation: building the Full House Enhanced sustainable organic growth Unrivalled platform for growth in fast growing markets Positioning ISS as the frontrunner in a changing industry 1) New Zealand, India, Estonia, Taiwan, Philippines, Mexico & the US. + Russia, Turkey and China 6 Lead Facility Services Globally

7 ISS Group 2007 One of the world s leading providers of facility services More than 438,000 employees in 50 countries (among Europe's 5 largest private employers) Revenue 2007: DKK 63.9 bn Operating Margin 2007: 6.0% Services Revenue Employees 4% 5% 6% 7% 2% 2% 5% 2% 4% 26% 9% 3% 5% 2% 11% 24% 54% 22% 48% 59% Cleaning Property serv. Catering Office Support FM Security N. Europe W. Europe Asia Pacific LatAm C and E. Europe US 7 Lead Facility Services Globally

8 The Strategy

9 Fragmented Market Provides Opportunities Share of Total European and American Facility Services Market (2006, bn) Total=~ 475B 100% ~ 145B ~ 100B ~ 70B ~ 60B ~ 40B ~ 60B 80 Others Evolution of market 60 Others (~100,000) Others (More than ~100,000) Others (Thousands) ISS Elior Aramark Others (~100,000) Others (~100,000) M+W Zander Jones Lang Lasalle Carillion Interserve Dalkia Emcor Amec Emcor Alfred McAlpine Washington Group International Property Management ISS Unicco Dussmann Renosol - Onyx Mitie GSF Group Wisag Penauille ABM Jani-King ONET Group ISS Cleaning ISS Prosegur G4S Securitas Security Sodexho Compass Catering Communisis Rentokil ISS Office Support Other Source: Bain & Company - Share of Total European and Americas Facility Services Market (2006, bn) 9 Lead Facility Services Globally

10 Key Market Trends Globally Market growth continues to be supported by Sustained outsourcing trends Increasing demand for bundling of services Increasing acceptance and demand for integrated facility services Large customers are centralizing purchasing decision Emerging national, regional and international contracts The effect of macro economic development differs significantly between regions, customers and services However in general our service market is somewhat resilient (fragmentation, huge market, outsourcing potentials, availability of employees) Growth regions to outperform mature markets 10 Lead Facility Services Globally

11 The ISS Vision Lead Facilities Services Globally by leading Facility Services locally 11 Lead Facility Services Globally

12 ISS Outsourcing Proposition Integrated Facility Services Management D D Cleaning Office Property Catering Security A Support Services C C B B A A Improvement in each service area Efficiency and service excellence B Synergies between customers Know-how and best practice C Synergies between service areas Defining roles and cooperation D Synergies back office Management and coordinating 12 Lead Facility Services Globally

13 The Transition Of ISS Regions Services Customers/delivery Transition from a Northern European based to a truly global supplier of Facility Services Over the last 5 years ISS has established operations in new markets enabling servicing of international customers and to follow the international economic growth Focus on site based services but has also a certain presence in route based services in selected regions In building up the service house ISS has expanded the service offering enabling a one stop solution to the customers Transition of the way services are delivered to the customers Single services mindset is still considered core to the strategy Single service mindset has been expanded enabling ISS to optimize the delivery of bundled and integrated services Delivery through regional & international key accounts 13 Lead Facility Services Globally

14 Strategic Focus Regions Regional presence in place Ensure critical mass in each region/country Acquisitional focus on growth regions: LatAm, Asia & CEE Acquisitional focus on US Services Focus remain on being best in class in all single services Further develop integration capabilities Service expansion based on regional customers requirements Build up critical mass within office support, catering and security Customer Continue the primary focus on national accounts and delivery Further develop capabilities to support regional and international customers Key focus is site based customers Expand selective route based services 14 Lead Facility Services Globally

15 Operational Execution Operational efficiency Continue focus on the 4 key objectives 1. Cash flow 2. Operating margin 3. Profitable growth 4. Financial leverage Roll out the Service Culture - The ISS Way Further develop international key account approach Disciplined acquisition process Broaden the scope of service offerings Increase operational density Continue focus on high growth countries Focus on bolt-on acquisitions, may pursue larger acquisitions Leverage the experience of local management teams 15 Lead Facility Services Globally

16 Strategy - Conclusion Attractive market: Huge, fragmented Outsourcing, standardisation, cross border services Somewhat resilient to macro economic downturn Competitive position of ISS: Strong local presence with critical mass in key markets Fundamentals changed to make ISS more resilient 16 Lead Facility Services Globally

17 Annual Results 2007

18 ISS Strategy - Value Drivers Integrate service offerings to drive longer and more complex contracts Cross-sell services to single service clients Leverage presence in new, high-growth markets Follow the customer Improve efficiency of single services through economies of scale and best practice Harvest synergies from service integration Delivering the services as opposed to subcontracting Optimise working capital Control fixed asset investment and optimise utilisation Control acquisition process to ensure value creation Organic Growth Operating Margin Return on Capital Sustainable, long-term shareholder value creation 18 Lead Facility Services Globally

19 The Key 4 Priorities: Continued Delivery Priority 1: Cash Conversion (EBITA) Priority 2: Operating Margin % 5.8% 5.6% 5.4% 5.2% 5.8% 6.0% 5.7% 5.6% 5.6% 5.3% Priority 3: Organic Growth Acquisitive Growth 7.0% 5.0% 3.0% 1.0% -1.0% -3.0% 5.5% 10, % 8, % 6, % 1.5% 4,000 2, % Where relevant ISS A/S is used for 2005, otherwise ISS Holding A/S 20% 15% 10% 5% 0% 19 Lead Facility Services Globally

20 Continued Deleveraging On A Multiple Basis Pro Forma EBITDA Pro Forma Net Debt (season adj.) 5,000 4,800 4,600 4,400 4,200 4,203 4,303 4,593 4,752 4,866 32,000 31,000 30,000 29,000 28,000 27,000 4,000 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 26,000 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Deleveraging on a multiple basis Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 20 Lead Facility Services Globally

21 Key Figures - Strong Performance DKKm % Revenue 55,772 63,922 8,150 15% Operating profit before other items 3,234 3, % - Operating margin before other items 5.8% 6.0% 0.2 Operating profit 3,019 3, % Pro Forma Net Debt 27,714 29,972 2,258 8% Pro Forma EBITDA 4,203 4, % PF Net Debt / PF EBITDA 6.59x 6.16x - Organic growth 5% 6% - Acquisitions, net 15% 9% 21 Lead Facility Services Globally

22 Solid Revenue Growth Across All Regions 50% Organic Acquisition, net Total, incl. currency 40% 30% 20% 10% 0% 7% 4% 2% Nordic 7% 6% 12% Western Europe 31% 16% 13% Central & Eastern Europe 20% 19% 33% 15% 30% 41% 6% 15% 24% Asia LatAm US Pacific FX: 1% -1% 2% -6% -4% - 3% Effect of currency adjustments is not shown separately, but included in Total 22 Lead Facility Services Globally

23 Platform In Emerging Markets Grows Revenue: DKK 63.9bn 2007 Actual 8% 2% 4% 2% Org. Growth: DKK 3.4bn 2007 Actual 19% 5% 4% 10% Acq. Growth: DKK 4.5bn 2007 Actual 15% 2% 6% 7% 92% 81% Rest of Group Asia Latin America Central & East Europe 85% 23 Lead Facility Services Globally

24 Improvement In Operating Margin Across Regions Operating Profit before Other Items 10% % 6% 4% 7.0% 6.4% 6.4% 6.2% 7.4% 6.3% 6.6% 6.2% 6.2% 6.4% 5.8% 5.6% 4.8% 2% 0% Nordic Western Europe Central & Eastern Europe Asia LatAm US Pacific 26% 59% 2% 4% 2% 2% 5% % of 2007Revenue 24 Lead Facility Services Globally

25 Revenue & EBITA - Successful Regional Transition Revenue 2005 DKK 46.4bn 3% 1% 1% 1% 30% +38% Nordic West Europe Asia Pacific LatAm 2007 DKK 63.9bn 2% 5% 2% 2% 4% 26% 64% Central & East Europe US 59% EBITA 2005 DKK 2,650m 63% 2% 1% 2% 1% 31% Nordic +45% West Europe Asia Pacific LatAm Central & East Europe US For comparison reasons, figures for ISS A/S are used 2007 DKK 3,835 5% 2%2%1% 4% 58% 28% 25 Lead Facility Services Globally

26 Employees - Successful Regional Transition ,800 4% 6% 1% 15% +41% Northern Europe ,000 5% 2% 11% 9% Employees 16% West Europe Asia Pacific LatAm Central & East Europe 3% 22% 48% 58% US For comparison reasons, figures for ISS A/S are used 26 Emerging markets: Revenue, from 5% in 2005 to 8% in 2007 EBITA, from 4% in 2005 to 8% in 2007 From 26% of all employees in 2005 to 36% in Lead Facility Services Globally

27 Successful Service Transition In 2007 Service by Type Service by Delivery 7% 6% 5% 4% 15% 22% 54% 16% 24% 47% FM Security Office support Catering Property Cleaning Key Accounts Other Single Services Multi Services IFS 27 Lead Facility Services Globally

28 Outlook 2008: Continued Execution Of Strategy The Group will continue its strategic direction, focusing on Broadening integrated facility services and strengthening single service excellence Strengthening the global Corporate Client organisation Roll out the Service Culture The ISS Way -programme Focus on key operational objectives Cash flow Operating margin Profitable organic growth Deleveraging on a multiple basis Making acquisitions to increase local scale and broadening service competencies For 2008 it is expected that (1) Revenue will increase by more than 10% Operating margin will be maintained at current level The outlook set out above should be read in conjunction with Forward-looking statements on page 2 of this presentation (1) At the prevailing currency rates and including acquisitions and divestments up to 27 February Lead Facility Services Globally

29 Acquisitions

30 Acquisition Strategy To Create Value Build the IFS house - existing / new services Strategic fit Growth - invest in growth areas and services Respond and adapt to local demand Our values - in compliance with our ethical standards Value creation Improve EBITA margin - higher margin service, synergies Boost organic growth - growth area, service or cross-sell Multiple arbitrage - sufficiently attractive price and return Resources - management and capital Manageable Internally - ISS country performance Externally - are the risks acquired manageable 30 Lead Facility Services Globally

31 Acquisitions Key Transactions (1) Revenue, DKKm Country establishments Sanitors, USA 1,822 Topman & Fealty, Taiwan 188 Platform developers Carlos Rocha, Spain (Catering) 408 Adviance, UK (Building Maintenance) 207 Hunt & Ondes, Belgium (Pest Control) 59 Caterhouse, UK (School Catering) 102 SMV, Brazil (Building Maintenance) 99 CMC, Turkey (Call Centre) 60 Hanyang, China (Facility Services) 35 Ryvola, CZ / Slovakia (Building Maintenance) 78 Shivas, India (Catering) 39 Others, incl. small and medium, total of 56 acquisitions 1,443 Total 4,540 Note: (1) Unaudited approximate figures based on information available at the time of acquisition. 31 Lead Facility Services Globally

32 Acquisition Track Record - Pricing Discipline 9, (DKK million) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, x 8.0x 6.5x 6.2x 9.5x 7.2x 7.5x 7.2x 9.9x 8.6x 8.3x 8.3x 7.8x 7.3x 7.9x 6.8x Revenue acquired All acquisitions Price/EBITA Bolt-On acquisitions Price / EBITA 0 32 Lead Facility Services Globally

33 Other Financial Measures

34 Other Financial Measures Pro Forma Adjusted EBITDA Pro Forma calculation (1) DKKm 12 months ended 31 December 2007 Adjusted EBITDA 4,680 Estimated PF adjusted EBITDA of acquired and divested businesses 186 Estimated PF Adjusted EBITDA 4,866 Note: (1) The calculations of pro forma adjusted EBITDA are based in part on management estimates and the unaudited internal management accounts of the acquired businesses. These numbers have not been, and cannot be, audited. The Pro Forma EBITDA is based on Last Twelve Months figures. 34 Lead Facility Services Globally

35 Other Financial Measures (cont.) Pro Forma Capital Structure December 31, 2007 Capitalization (1) DKKm (2) % of Total Cash and securities (2,664) (8%) Other Indebtedness 318 1% Senior Facilities 17,306 49% EMTNs 7,161 20% Total Net Senior Debt 22,121 62% Senior Subordinated Notes 3,385 9% Second Lien 4,474 13% Total Net Cash Pay Debt 29,980 84% Shareholders Funding (3) 5,459 16% Minorities 59 0% Total (4) 35, % Notes: (1) This Capitalization table reflects the Capitalization Table included in ISS Holding A/S s Interim Report January December (2) Converted to DKK as per exchange rate of December 31,2007. (3) Equity contribution at the date of the take-over amounted to DKK 7,693 millions. Reduction of Shareholders Funding relates to accounting items. (4) The Total amount in the above table differs from the total capitalization, Consolidated As Adjusted, in ISS Holding A/S s Interim Report January December Lead Facility Services Globally

36 Pro Forma Credit Ratios Pro Forma Credit Ratios FY 2007 PF Net Cash Pay Debt / PF EBITDA Seasonality adj. PF Net Cash Pay Debt/ PF EBITDA 6.16x 6.16x PF Net Senior Debt (incl. EMTNs) / PF EBITDA 4.55x PF Net Senior Debt (excl. EMTNs) / PF EBITDA 3.07x 36 Lead Facility Services Globally

37 Continued Deleveraging On A Multiple Basis Net Debt / Pro Forma Adj. EBITDA 7.50x 7.25x 7.00x 7.28x 7.28x 7.28x 7.42x 7.26x 7.09x 7.10x 6.75x 6.50x 6.25x 6.00x OM (end '05) 6.74x 6.88x 6.68x 6.57x 6.59x 6.54x 6.40x 6.27x 6.16x Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Net Debt / PF Adj. EBITDA Seasonality Adj. Net Debt / PF Adj. EBITDA 37 Lead Facility Services Globally

38 Refinancing July Sources & Uses SOURCES EURm USES EURm ISS Global A/S - Senior Term Loan B9 1,000 FS Funding A/S - Senior Term Loan B Second Lien 600 Repayment of Acq. Facilities 450 Repayment of FRNs acc. Interest and Call Premium 26 Repayment of 2014 EMTNs 362 (77.9% repaid at rate 93) - acc. Interest 11 Cash on Balance Sheet 16 Transaction Fees 25 Total Sources 1,740 Total Uses 1, Lead Facility Services Globally

39 Maturity Of Credit Facilities 18,000 16,000 14,000 DKK millions 12,000 10,000 8,000 6,000 4,000 2, Senior EMTNs Second Lien High Yield 39 Lead Facility Services Globally

40 ISS Holding A/S Investor Presentation Annual Results February 2008