Iss A/S · OMXCOP:ISS
Iss A/S — H1 2002 Earnings Presentation
36 slides from Iss A/S's earnings presentation, Aug 20, 2002
Slide 1: ISS Investor Presentation Half-year 2002
ISS Investor Presentation Half-year 2002 20 August 2002
Slide 2: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements within the meaning of US Private Securities Litigation Act of 1995 and sim ilar laws in other countries regarding expectations to the future developm ent, in particular future sales, operating efficiencies and business
Slide 3: Agenda
Agenda • Key figures • Corporate Governance • Operations • Financials • Outlook • Appendices 3
Slide 4: Key figures
Key figures Q2 02 H1 02 • Turnover + 13% + 14% • Operating profit + 25% + 21% • Operating margin 5.7% 5.0% Operating margin Q2 2000 – Q2 2002 Operating margin H1 2000 – H1 2002 5.8% 5.2% 5.6% 5.7% 5.0% 5.0% 5.4% 4.8% 5.2% 4.6% 4.7% 5.0% 5.1% 4.4% 4.6% 5.1% 4.8% 4.2% Q2 00 Q2 01 Q2 02 H1 00 H1 01 H1
Slide 5: H1 key figures compared with consensus
H1 key figures compared with consensus *) DKKm Actual Consensus Diff. Turnover 18,983 19,065 -0% Operating profit 944 912 +4% Operating margin 5.0% 4.8% Ordinary profit before goodwill amortisation 567 561 +1% EPS before goodwill amortisation, DKK 13.3 13.1 +1% *) Consensu s is based on 15 analysts’
Slide 6: H1 key figures since 1997
H1 key figures since 1997 Turnover H 1 1997 - H1 2002 Operating profit H1 1997 - H1 2002 20,000 1,000 15,000 800 600 10,000 400 5,000 200 0 0 H1 97 H1 98 H1 99 H1 00 H1 01 H1 02 H1 97 H1 98 H1 99 H1 00 H1 01 H1 02 EPS *) H1 1997 - H1 2002 Ass et tur nover **) H1 1997 - H1 2002 15.0 25.0 20.0 10.0 15
Slide 7: H1 key figures since 1997
H1 key figures since 1997 H1 1997 H1 2002 Change CAGR Turnover, DKKm 5,757 18,983 +230% +27% Operating profit, DKKm 268 944 +252% +29% Operating margin 4.7% 5.0% +0.3% Asset turnover 14 22 Margin effect -0.3% EPS (befor e goodwill amortis ati on) 5.2 13.3 +156% +21% EPS (befor e g w amor t. and othe
Slide 8: Corporate Governance
Corporate Governance • ISS received award*) for best corporate governance in Denmark • Increased disclosure in the half-year report 2002 • Theoretical market value of outstanding stock options/warrants (per 19 August 2002): • Approx. DKK 15 million • Approx. 0.1% of the Group´s market capitalisation
Slide 9: Operations
OPERATIONS
Slide 10: Priorities in 2002
Priorities in 2002 • Continuation of the solid cash conversion • Continued working capital focus increased cash generation • Operational improvement/higher profitability • Contract trimming enhanced the quality of the portfolio • Overhead rationalisation • Profitability initiatives impacted organic
Slide 11: Operational improvements
Operational improvements • The improved operational performance reported in Q1 continued • Margin increased in all major countries in Continental Europe • Operational performance a prerequisite for further expansion • Contract portfolio trimmed • Rate of acquisitions was slowed down • Some non-core
Slide 12: Organic growth
Organic growth • Sales to existing customers developed better than expected • Sales to new customers declined as profitability measures led to greater caution when tendering • Renegotiations initiated by ISS resulted in some contract losses • Carry-over effect from contract trimming in 2001 was appr
Slide 13: Rate of acquisitions
Rate of acquisitions 8,000 60% 7,000 50% 6,000 40% 5,000 4,000 30% 3,000 20% 2,000 10% 1,000 0 0% 1998 1999 2000 2001 1.1-20.8 2002 Acquir ed turnover, D KKm Acq. T /O in perc entag e of L/Y's T/O, % 13
Slide 14: Divestments of non-core activities
Divestments of non-core activities • Kindergarten activities divested end of 2001 • The Nordic airside activities (Nordic Aero) divested in July 2002 • Security in the UK divested in August 2002 • Other minor businesses divested in 2002, e.g. • Hotel and tourism activities in France • Marintec, Belg
Slide 15: Operations by business area
Operations by business area Business area T/O Growth Operating margin DKKbn H1 2002 H1 2001 Facility Services 16.4 12% 5.6% 5.1% Damage Control 0.8 32% 5.0% 7.1% CarePartner 0.7 53% 6.5% 1.9% Aviation 0.5 (1%) (0.2%) 4.5% Food Services 0.5 22% 6.1% 5.4% Innovation 0.1 8% 9.6% 12.6% Corporate - - (0.
Slide 16: Facility Services
Facility Services • FS accounted for 87% of Group turnover and 88% of operating profit • Margin up from 5.1% in H1 2001 to 5.6% • Impact from margin dilutive acquisitions (TraffiCare, Ecuro and CSFM) exceeded impact from Eurogestion (consolidated from 1 April 2002) • Catering added to the Facility S
Slide 17: Business Builds
Business Builds • Margin down in Damage Control (4% of Group T/O) • Unusual weather conditions in Norway • Restructuring and start-up in the Netherlands and Germ any • Margin up in CarePartner (4% of Group T/O) • Solid performance in Health Care, treatm ent of abuse and psychiatric care • Elderly Ca
Slide 18: Operations by region
Operations by region Region T/O Growth Operating margin DKKbn H1 2002 H1 2001 Northern Europe 9.1 17% 5.6% 6.2% Continental Europe 8.9 12% 5.4% 4.0% Overseas 1.0 1% 4.7% 5.8% Corporate - - (0.5%) (0.5%) Total 19.0 14% 5.0% 4.7% 18
Slide 19: Northern Europe
Northern Europe • H1 margin down by 0.6% in Northern Europe (48% of Group T/O) • Lower margin in FS in Sweden and UK as expected, prim arily due to – Initially margin dilutive acquisitions (TraffiCare, Ecuro and CSFM) • Aforem entioned declining margins in Aviation and Dam age Control • Organic grow
Slide 20: Continental Europe and Overseas
Continental Europe and Overseas • H1 margin up by 1.4% in Continental Europe (47% of Group T/O) • Higher margin in all major countries • Organic growth in Cont. Europe negative due to profitability measures • Particularly in the Benelux, France, Germany and Switzerland • H1 margin down by 1.1% in Ov
Slide 21: Financials
FINANCIALS
Slide 22: Increased profitability
Increased profitability DKKm H1 2002 H1 2001 Change 2001 Turnover 18,983 16,712 +14% 34,852 Operating profit 944 778 +21% 1,633 Operating margin 5.0% 4.7% 4.7% Other income and expenses, net 77 0 (24) Financial expenses, net (197) (148) (309) Tax (257) (202) (402) Ordinary profit before goodwill amo
Slide 23: Stronger cash flow in Q2
Stronger cash flow in Q2 DKKm Q2 2002 Q2 2001 2001 Operating profit 548 439 1,633 Depreciation 156 134 551 Working capital / provisions (58) (358) 56 Interest payments (106) (83) (328) Tax paid (66) (90) (377) Other (8) - (25) Cash flow from operations 466 42 1,510 Investments in intangible and tang
Slide 24: H1 cash flow higher than last year
H1 cash flow higher than last year DKKm H1 2002 H1 2001 2001 Operating profit 944 778 1,633 Depreciation 304 255 551 Working capital / provisions (542) (769) 56 Interest payments (178) (152) (328) Tax paid (166) (152) (377) Other (32) 0 (25) Cash flow from operations 330 (40) 1,510 Investments in in
Slide 25: Balance sheet
Balance sheet DKKm 30.06.02 31.03.02 Ratio Goodwill/intangible fixed assets 13,116 12,069 109 Tangible fixed assets 1,641 1,649 100 Financial fixed assets 574 1,287 45 Debtors & Stocks 7,655 7,431 103 Liquid funds/securities 1,006 995 101 Total assets 23,992 23,431 102 Total equity (incl. minorities
Slide 26: Operating capital employed
Operating capital employed DKKm 30.06.02 30.06.01 31.12.01 Operating capital employed Fixed assets 15,331 12,248 14,497 Goodwill and shares in ass. companies (13,012) (10,315) (12,031) Non-int. bearing current assets 7,655 6,573 6,899 Provisions and current non-int. bearing liabilities (8,638) (7,03
Slide 27: Outlook
egrated Service Solutions ~ oe
Slide 28: Outlook 2002
Outlook 2002 - Please refer to “Forward-looking statements” on page 2 • Including acquisitions/divestments announced prior to 20 August 2002 and assuming that exchange rates remain at current levels: • Increase in turnover of approx. 9-11% • Operating margin of approx. 5.3% • Goodwill amortisation e
Slide 29: Appendices
APPENDICES
Slide 30: ISS Today
ISS Today ISS co untries: Argentina Australia Austria Belgium/Luxembourg Brazil Brunei China and Hong Kong Croatia Czech Republic Denmark/Greenland/Iceland Finland • More than 260,000 employees in 38 countries France Germany (Among Europe’s 10 largest private employers) Greece Hungary Indonesia Irel
Slide 31: Country performance 2001
Country performance 2001 DKKm Turnover Margin Organic growth Employees France 5,820 6.5% 2% 37,759 UK 4,531 4.8% 5% 36,341 Denmark 4,175 5.7% 4% 14,816 The Netherlands 3,631 1.8% 5% 29,883 Sweden 3,443 7.6% 17% 16,349 Norway 2,629 6.4% 3% 7,462 Germany 1,980 3.7% -5% 17,988 Belgium & Luxembourg 1,85
Slide 32: Cash flow track record
Cash flow track record DKKm 2001 2000 1999 1998 1997 CAGR Cash flow from operating activities 1,510 1,265 732 695 584 27% Investments in fixed assets, net 452 391 (63) 235 275 13% Free cash flow 1,058 874 795 460 309 36% Free cash flow per share 25.4 22.2 23.5 15.5 10.4 25% Free cash flow in % of or
Slide 33: Service continuum
Service continuum The integrated services performed by ISS are characterised by: • One point of contact on customer side • Potential for operational efficiency and synergies • Low capital intensity • People intensive • Flexible Property Services Cleaning Office Support Services Construction Catering
Slide 34: Facility Services versus single service
Facility Services versus single service Value is created if the benefit of removing interfaces and cross utilising people are higher than the ”inefficiency” of not having “sufficient” scale advantages in all single services Customer Customer ISS Facility Services Services Property Services Services
Slide 35: Analysts
Analysts The analysts below follow ISS on a regular basis Nam e Telepho ne num ber E-m ail ad dr ess Den mar k Alfred Berg Carsten D ehn +45 33 96 19 29 carsten.dehn@ alfr edberg.dk Carnegie Carsten Leth +45 32 88 02 72 cjleth@ car negi e.dk Dans ke Sec uriti es Lars H eindor ff +45 33 64 92 27 lars
Slide 36: Contacts
Contacts • ISS A/S Bredgade 30 DK-1260 Copenhagen K Denmark www.issworld.com • IR contacts: Phone: +45 38 17 63 30 Fax: +45 33 91 06 17 e-mail: ir@group.issworld.com 36