Copenhagen, 11 August 2022
ISS Global A/S ISS Global A/S, CVR 21 40 83 95 Phone: (+45) 38 17 00 00
ISIN XS2013618421, ISIN XS1145526825, Buddingevej 197 Telefax: (+45) 38 17 00 11
ISIN XS1673102734, DK – 2860 Søborg www.issworld.com
ISS Finance B.V., ISIN XS2199343513 Denmark
Interim report for 1 January – 30 June 2022
Accelerating growth momentum and upgrade of 2022 outlook
Highlights
• Organic growth was 6.7% in H1 2022 (H1 2021: (0.2)%) driven by continued return-to-office trends, customers’
increased investments in the attractiveness of the workplaces and implemented price increases.
• Operating margin before other items was 4.1% in H1 2022 (H1 2021: 3.0%). The improvement was primarily
due to the execution of the turnaround initiatives in the underperforming contracts and countries.
• The rising inflation was managed tightly through price increases and cost control with a margin neutral effect.
• Free cash flow in H1 2022 was DKK (0.1) billion (H1 2021: DKK 1.3 billion). As expected, free cash flow was
negatively affected by DKK 0.4 billion of one-off payments of provisions accounted for in 2020.
• With the divestment of Portugal, the divestment programme is now considered completed. The target of
accumulated net proceeds of DKK 2 billion has been achieved.
• IAS 29 (hyperinflation accounting) was implemented in Q2 2022 for Turkey with effect from 1 January 2022.
The impact on the Group’s key financial KPIs (organic growth, operating margin and free cash flow) was
immaterial. The implementation has no influence on ISS’s underlying cash flow generation.
• Based on the performance in H1 2022, the outlook for organic growth and operating margin is upgraded.
Organic growth is now expected to be above 5% and operating margin is expected to be above 4.75%. The
outlook for free cash flow is unchanged (above DKK 1.0 billion). All metrics are before any effects of IAS 29.
For investor enquiries
Jacob Johansen, Head of Group Investor Relations
Phone: +45 21 69 35 91
E-mail: JJO@iss.biz
Kristian Tankred, Senior Investor Relations Manager
Phone: +45 30 67 35 25
E-mail: KRT@iss.biz
For media enquiries
Kenni Leth, Global Press & Media Relations
Phone: +45 38 17 66 21
E-mail: KLE@iss.biz
Contact information
ISS Global A/S
Buddi ngevej 197
DK-2860 Søborg
Tel.: +45 38 17 00 00
Fax.: +45 38 17 00 11
www.issworld.com
CVR 21 40 83 95
Copenhagen, 11 August 2022
ISS Global A/S – Interim report for 1 January – 30 June 2022
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Key figures and financial ratios
Financials
H1 2022
H1 2021
2)
2021
Results (DKKm)
Revenue 36,953 34,902 71,383
Operating profit before other items, excl. IAS 29 1,515 1,042 2,920
Operating profit before other items
1,503 1,042 2,920
Operating profit
1,045 457 1,628
Financial expenses, net (137) (287) (573)
Net profit from continuing operations
709 59 496
Net profit from discontinued operations
149 117 110
Net profit 858 176 606
Cash flow (DKKm)
Cash flow from operating activities 569 1,793 3,221
Acquisition of intangible assets and property, plant
and equipment, net
(288)
(236) (424)
Free cash flow (58) 1,309 1,900
Financial position (DKKm)
Total assets 42,617 40,608 40,357
Goodwill 15,825 14,717 15,063
Additions to property, plant and equipment 154 134 308
Equity 6,221 3,334 4,245
Net debt 9,282 10,392 9,816
Ratios H1 2022
H1 2021
2)
2021
Financial ratios (%, unless otherwise stated)
Organic growth
6.7 (0.2) 2.0
Acquisitions and divestments, net (2.0) (0.5) (0.5)
Currency adjustment and other 1.2 (2.3) (0.6)
Total revenue growth 5.9 (3.0) 0.9
Operating margin
1)
, excl. IAS 29 4.1 3.0 4.1
Operating margin
1)
4.1 3.0 4.1
Equity ratio 14.6 8.2 10.5
Non-financials H1 2022
H1 2021
2)
2021
Social data
Full-time employees 76% 75% 76%
Employees end of period, number 354,086 363,219 354,394
1)
Based on Operating profit before other items.
2)
Restated due to Chile being reclassified to continuing operations as of 31 December 2021.
Definitions, see Annual Report 2021.
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Group performance
Operating results
ISS Global A/S is an indirectly wholly owned
subsidiary of ISS A/S, a leading, global provider of
workplace and facility service solutions. ISS Global
A/S owns – directly or indirectly – the ISS Global
Group’s operating companies (together referred to
as “ISS” or “the Group”).
For further information about ISS Global A/S, see ISS
Global A/S’s Annual Report 2021, which is available
at the Group’s website, www.issworld.com.
Group revenue in the first six months of 2022 was
DKK 37.0 billion, an increase of 5.9% compared with
the same period last year. Organic growth in H1
2022 was 6.7% as the organic growth of 5.4% in Q1
2022 accelerated to 8.0% in Q2 2022. The impact
from acquisitions and divestments, net was (2.0)%,
and currency effects increased revenue by 1.2%
whereof the net impact from hyperinflation
restatement in Turkey (IAS 29) was 0.3%.
Organic growth was 6.7% in the first six months of
2022 driven by the continued recovery from Covid-
19 as customers returned to offices in large markets
leading to generally higher activity levels, especially
within Retail, Hotels, Leisure and Transportation. ISS
also saw an increase in sales to existing customers
related to investments in improving the
attractiveness of workplaces.
Portfolio revenue was positively affected by price
increases implemented globally. Price increases in
Turkey contributed by around 1%-point to Group
organic growth.
The revenue from projects and above-base services
declined organically by 3%, due to reduced demand
for ad-hoc disinfection services. Demand for projects
and above-base work was, however, maintained at a
high level and still above pre-Covid-19 levels.
Revenue from key accounts continued its strong
development and organic growth accelerated to
7.9%, driven by increased activity, return-to-office
trends and contract wins. As such, key accounts’
share of revenue increased in line with the OneISS
strategy.
During the pandemic, ISS experienced negative
organic growth for services dependent on
customers being present at workplaces, mainly food
services. In the first half of 2022, these services
increased significantly, and revenue from food
services increased by approximately 35%, primarily
driven by the US. Food services accounted for 13%
(H1 2021: 10%) of Group revenue in the first half.
Organic growth for food services in the US was more
than 75% in H1 2022.
All regions contributed to the positive development
in H1 2022. In Americas, the organic growth was
29% due to relatively higher exposure to food
services. Growth rates in Europe were strong and
improved compared to previous periods. Despite
the continued negative impact from Covid-19, the
Asia & Pacific region also reported positive organic
growth.
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Operating profit before other items excluding effect
from IAS 29 (Turkey hyperinflation) amounted to
DKK 1,515 million (H1 2021: DKK 1,042 million)
corresponding to an operating margin of 4.1% (H1
2021: 3.0%). Including the effect from IAS 29,
operating profit before other items was DKK 1,503
million and operating margin was 4.1%.
The increase in operating margin in the first half of
2022 was a result of the continued improvement of
the underperforming contracts and countries and
leverage from the higher revenue. This was partly
offset by additional costs related to higher-than-
normal sickness rates. Price increases implemented
as a result of increased cost inflation are generally
estimated to be margin neutral.
The margin improvement was predominantly
attributable to the development in the European
regions where the effects from improved
profitability on the Deutsche Telekom contract and
the UK contributed. The margin in the Americas
declined compared to last year due to commercial
investments in growth, a lower share of margin
enhancing deep cleaning and disinfection services
and timing effects. Furthermore, the margin in Chile
declined due to depreciations being recognised this
year, as the country has been reclassified back to
continued operations.
Other income and expenses, net was an income of
DKK 201 million (H1 2021: 458 million), due to gain
on divestments, mainly related to the waste handling
business in Hong Kong and the damage control
business in the UK.
Financial expenses, net was DKK 137 million (H1
2021: DKK 287 million). including a monetary gain of
DKK 102 million relating to hyperinflation
restatement in Turkey (IAS 29). Excluding the impact
from IAS 29, financial expenses, net was DKK 238
million. The slight decrease was mainly due to the
partial redemption of EMTNs in December 2021.
The effective tax rate in H1 2022 was 21.9% (H1
2021: 65.3%) calculated as Income tax of DKK 199
million divided by Profit before tax of DKK 908
million, positively impacted by non-taxable gains
from divestments.
Net profit from discontinued operations was DKK
149 million (H1 2021: DKK 117 million) in the first six
months of 2022, including DKK 105 million of gain
on divestment of the businesses in Portugal, Taiwan
and Russia.
Net profit was DKK 858 million (H1 2021: DKK 176
million). The improvement compared to the same
period last year was mainly due to improved
operating profit before other items and goodwill
impairment of DKK 459 million related to France in
H1 2021.
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Commercial development
In the first half of 2022, ISS saw improved
commercial momentum, which was driven by
several factors. First of all, the strict focus on
retaining existing customers paid off and adjusted
for the exit of the Danish Defence contract, the
retention rate in Q2 2022 was at the highest level
achieved in the last five years. This is underlined by
the successful extensions with global key accounts
Hewlett Packard Enterprises, a large undisclosed
global pharmaceutical customer and Danske Bank.
In all commercial processes, strong discipline on
pricing is enforced, and no uncapped inflation risk is
being accepted. During the first half of 2022, ISS has
refused a number of potential contracts as terms
regarding inflation could not be accepted.
Return-to-office trends across the world accelerated
during the period, driving increased activity levels.
This development was most pronounced within
services, where the development is reliant on people
being present in workplaces, especially food services
but also cleaning in hotels, airports and retailers.
Revenue from food services increased
approximately 35%, but it is still 18% below the pre-
Covid-19 in Q2 2019, indicating further recovery
potential.
Across the portfolio, ISS implemented price
increases to offset the rising cost inflation. In the
vast majority of contracts, ISS can pass on inflation
to customers through contractual terms.
The demand for above-base services remains at a
high level as projects and events offset some of the
negative effects from lower revenue from deep
cleaning and disinfection services. Customers’
recognition of establishing the office of the future is
driving additional commercial opportunities.
The pipeline of opportunities continues to be strong,
and the quality is increasing. The decision process is
typically longer than before Covid-19, as the
continued global uncertainties delay long-term
decisions, and several additional factors are
included in the tender processes.
Revenue from key accounts was 72% (H1 2021: 69%)
of Group revenue in the first six months of 2022 and
grew 7.9% organically. This was 120bp better than
the Group’s organic growth.
In addition to the extension of a long list of existing
contracts, ISS was awarded a new 5-year IFS contract
with a major retailer in the US in June 2022. Annual
revenue from the contract will account for around
1% of Group revenue, and it will be fully operational
during Q4 2022.
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Free cash flow
Free cash flow in H1 2022 was DKK (58) million (H1
2021: DKK 1,309 million), a reduction of DKK 1,367
million compared to the same period last year. Free
cash flow in H1 2022 was positively impacted by the
improvement in operating profit before other items,
whereas changes in working capital was less
positive. In H1 2021, Covid-19 disrupted and delayed
the holiday plans for a large number of staff across
the business and thereby created a temporary
positive effect on working capital. Generally, the
strong focus on working capital management
continued during 2022.
Cash flow from operating activities in H1 2022
amounted to DKK 569 million (H1 2021: DKK 1,793
million), a decrease of DKK 1,224 million due to less
positive contribution from changes in working
capital, and partly offset by improved operating
profit before other items.
Changes in working capital in H1 2022 was positive
mainly due to an increase in payables following the
higher activity levels, primarily within food services
with typically longer payment terms, as well as
continued strong focus on working capital
management. Receivables increased due to the
higher activity levels. Utilisation of factoring of DKK
1.1 billion at 30 June 2022 was unchanged from 31
December 2021.
Cash outflow related to restructurings accounted for
in 2020 amounted to DKK 0.4 billion (H1 2021: DKK
0.2 billion).
Cash flow from investing activities in H1 2022
amounted to DKK 277 million (H1 2021: DKK 646
million), a reduction of DKK 369 million, primarily due
to lower cash inflow from divestments compared to
the same period last year.
Cash flow from divestments of DKK 599 million
mainly related to the waste management business in
Hong Kong and Portugal. Investments in intangible
assets and property, plant and equipment, net, was
DKK 288 million (H1 2021: DKK 236 million), which
represented 0.8% of Group revenue (H1 2021: 0.7%).
The increase was a result of the higher activity level.
Cash flow from financing activities in H1 2022
amounted to DKK 133 million (H1 2021: DKK (808)
million), an increase of DKK 941 million.
Divestment programme
The strategic divestment programme continued the
good momentum with three countries being
divested in the first half of 2022, i.e. Taiwan, Russia
and Portugal. With Brunei being the only country
remaining as asset held for sale and discontinued
operations, the divestment programme is
considered completed by the end of H1 2022. The
targeted accumulated net proceeds of DKK 2 billion
during 2021 and 2022 have now been secured. The
process of divesting Brunei continues, but proceeds
are expected to be immaterial.
Capital structure
The ISS Global Group is indirectly wholly owned by
ISS A/S and is therefore part of the ISS A/S Group.
Group Treasury manages financing activities and
capital structure centrally for the ISS A/S Group as a
whole. The ISS Global Group’s financing activities
and capital structure are not assessed
independently of the ISS A/S Group.
ISS has strengthened the financial foundation
through profitability improvement, strong cash
generation and execution of the divestment
programme.
Net debt decreased to DKK 9.3 billion at 30 June
2022 from DKK 10.4 billion at 30 June 2021, primarily
due to the proceeds from divestments.
Equity
At 30 June, equity was DKK 6,221 million equivalent
to an equity ratio of 14.6% (30 June 2021: 8.2%). The
increase from 31 December 2021 was mainly a result
of Net profit of DKK 858 million and hyperinflation
(IAS 29) restatement of equity in Turkey at 1 January
2022 of DKK 768 million.
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Russia-Ukraine conflict
In February 2022, a war in Ukraine broke out
following Russia’s invasion of the country. ISS is
monitoring the developing humanitarian crisis, and
the priority is the safety and well-being of people and
customers.
ISS has no material activities in Ukraine.
Furthermore, the business in Russia, which has been
part of the strategic divestment programme since
December 2020, was divested in March 2022.
Consequently, it is management’s assessment that
the outbreak of the war will not have a material
impact on the results of the Group’s operations and
financial position in 2022.
Hyperinflation in Turkey
Countries, where the cumulative three-year inflation
exceeds 100%, are generally considered highly
inflationary, and application of IAS 29 “Financial
Reporting in Hyperinflationary Economies” must be
considered. Based on monthly inflation data from
the Turkey Statistical Institute, Turkey exceeded this
threshold for the first time in February 2022. For the
first six months of 2022, the inflation rate in Turkey
was 42%. Consequently, ISS has implemented IAS 29
for the first time in this interim report with effect
from 1 January 2022.
The aim of IAS 29 is to ensure that consolidated
financial statements reflect the current purchasing
power by restating reported numbers based on
changes in the general price index and by applying
end-of-period exchange rates.
Overall, the implementation of IAS 29 did not have a
material impact on the Group’s profit or loss and
cash flow statements, and consequently the effect
on our three key KPIs in H1 2022 was immaterial, i.e.
organic growth and free cash flow were unchanged
and operating margin decreased 3 bps.
As the restatement for hyperinflation has no direct
influence on the underlying operations or financial
performance, including cash flow generation,
selected accounting figures are presented before
restatement to provide the best possible
transparency. This also ensures consistency
between the external reporting and the internal
management reporting and business reviews.
Throughout this interim report, commentary is
provided including and excluding the impact from
IAS 29, though for operating profit before other
items the development is explained before
restatement for hyperinflation. Likewise, our outlook
continues to be presented excluding the impact
from IAS 29.
Please refer to note 16, Hyperinflation in Turkey, for
an overview of the implementation of IAS 29 and
impact on the Group’s financial statements.
Subsequent events
Other than as set out elsewhere in this Interim
report, we are not aware of events subsequent to 30
June 2022, which are expected to have a material
impact on the Group’s financial position.
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Regional Performance
Northern Europe
Revenue amounted
to DKK 14,214
million in the first
six months of 2022,
which was an
increase of 6%
compared with the
same period last
year. Organic
growth was 5% (H1
2021: (1)%). The
effect from acquisitions and divestments, net was
neutral, while currency effects impacted growth
positively by 1%.
Organic growth was mainly driven by increased
activity levels and return-to-office trends. Price
increases implemented across the portfolio also
contributed positively. Portfolio revenue grew by
around 8%, while non-portfolio revenue declined
due to lower demand for Covid-19 related deep
cleaning and disinfection. Norway saw the strongest
growth due to the start-up of the Equinor contract
and strong recovery in the Hotels segment. Organic
growth in Denmark was negative due to the exit of
the contract with the Danish Defence by the end of
May 2022. Organic growth in the UK was broadly flat.
Operating profit before other items amounted to
DKK 631 million in H1 2022 (H1 2021: DKK 378
million) corresponding to an operating margin of
4.4% (H1 2021: 2.8%). The improvement was
primarily driven by the UK, where strong execution
of the financial turnaround improved the operating
margin, and the turnaround target of a low-single
digit run-rate margin was achieved by the end of Q1
2022. All countries in the region, except for Denmark
due to lower revenue, improved margins as a result
of leverage from higher revenue and solid cost
control. Across the region, costs related to a higher-
than-normal sickness rate partly offset the positive
margin development.
Central & Southern Europe
Revenue amounted
to DKK 11,871
million in the first
six months of 2022,
which was flat
compared with the
same period last
year. Organic
growth was 5% (H1
2021: 6%). The effect from acquisitions and
divestments, net was negative 1%, while currency
effects impacted growth negatively by 4% whereof
the net impact from hyperinflation restatement in
Turkey (IAS 29) was 1%.
Organic growth development was primarily driven
by Turkey where price increases were successfully
passed on to customers to offset underlying cost
inflation as well as solid growth in the healthcare
segment. Austria also delivered double-digit organic
growth due to the start-up of the contract with
Vienna Airport. In Germany, organic growth
improved during the period and was only slightly
negative in the first half of the year. In France,
organic growth continued to be negative as
commercial momentum is still subdued, among
others due to ISS’ industry segment exposure.
Portfolio revenue grew organically by 6% for the
region. Except for Turkey, the Central & Southern
Europe region has relatively low exposure to food
services, and therefore positive benefits from return-
to-office trends are not as pronounced.
Operating profit before other items excluding IAS 29
amounted to DKK 378 million in H1 2022 (H1 2021:
DKK 120 million) corresponding to an operating
margin of 3.2% (H1 2021: 1.0%). The improved
margin was primarily a result of the improved
profitability on the Deutsche Telekom contract,
though run-rate margin remained negative. Most
countries in the region reported margin
improvement from better operations despite
additional costs due to a higher-than-normal
sickness rate. Including the effect of IAS 29,
operating profit before other items amounted to
DKK 366 million, corresponding to a margin of 3.1%.
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Asia & Pacific
Revenue amounted to DKK 6,735 million in the first
six months of 2022, which was an increase of 9%
compared to the same period last year. Organic
growth was 3% (H1 2021: (1)%). The effect from
acquisitions and divestments, net was (1)%, while
currency effects were 7%.
Organic growth was driven by increased activity
levels from return-to-office trends improving during
the period with many countries in the region
reopening as Covid-19 restrictions were lifted during
Q2. Price increases contributed positively, and
portfolio revenue grew organically by 5% in H1 2022,
while above-base revenue declined as a result of
lower demand for
deep cleaning and
disinfection. The
strongest growth
was seen in India
and Australia within
the transportation
and infrastructure
segment as flight
traffic resumed.
Organic growth in
Hong Kong was slightly negative due to reinforced
restrictions, which was largely offset by additional
above-base revenue.
Operating profit before other items amounted to
DKK 388 million in H1 2022 (H1 2021: DKK 370
million) corresponding to an operating margin of
5.8% (H1 2021: 6.0%). The stable development
reflects the solid underlying growth and cost
discipline despite lower demand for higher margin
deep cleaning and disinfection services.
Americas
Revenue
amounted to DKK
3,873 million in the
first six months of
2022, which was an
increase of 17%
compared to the
same period last
year. Organic
growth was 29%
(H1 2021: (15)%).
The effect from
acquisitions and
divestments, net
was (16)% due the
divestment of US Specialized Services, while
currency effects impacted growth positively by 4%.
Organic growth in the Americas was primarily driven
by food services as customers returned to the
offices, supported by technology customers on the
US West Coast commencing mandatory return-to-
office programmes from the beginning of April. Food
services in the US grew organically by more than
75% in H1 2022, and revenue was at index 76
compared to pre-Covid-19 levels in Q2 2019. Growth
in the region was further supported by price
increases implemented to offset rising cost inflation
and both portfolio and above-base revenue showed
double-digit organic growth. The ramp-up of
contracts had a minor positive effect while the
contract awarded with a major retailer will ramp-up
during the second half.
Operating profit before other items amounted to
DKK 137 million in H1 2022 (H1 2021: DKK 201
million) corresponding to an operating margin of
3.5% (H1 2021: 6.1%). The decline was driven by
commercial investments in growth, including
strengthening of the organisation and mobilisation
of contract wins, a lower share of margin enhancing
deep cleaning and disinfection services and timing
effects which are expected to reverse in H2 2022. A
part of that was due to the margin in Chile being
lower as a result of recognition of depreciations this
year, as the country was reclassified back to
continued operations. The strong revenue recovery
in food delivered broadly the same margin
compared to last year as most contracts were
renegotiated to costs plus commercial models.
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Outlook
Outlook 2022
ISS Global A/S is an indirectly, wholly owned
subsidiary of ISS A/S and an integrated part of the
ISS A/S Group.
Based on the financial performance in the first six
months, the outlook for 2022 is upgraded for
organic growth and operating margin. The organic
growth accelerated in H1 with stronger than
expected return-to-office trends and continued
positive effects from the implemented price
increases. The execution of the OneISS strategy
continued and the operating margin increased as
benefits from the turnaround of the
underperforming contracts and countries were
realised.
While activity level and financial performance
developed positively in H1 2022, global macro
uncertainties remain high. In general, Covid-19
restrictions were lifted during the first half, and the
outlook for 2022 assumes continued gradual return-
to-office, but the pace is subject to uncertainty.
Organic growth is now expected to be above 5%
compared to previously “above 2%” (2021: 2.0%) as a
result of the increased activity level from
accelerating return-to-office trends and customers’
increased investments in workplaces. The continued
implementation of price increases will affect organic
growth positively and projects and above-base
revenue is still expected to be slightly lower than in
2021.
Operating margin is now expected to be above
4.75% compared to previously “above 4.5%” (2021:
4.1%). The change of outlook is a result of the
continued progress on the turnaround of the
underperforming contracts and countries as well as
leverage from the higher revenue. Cost inflation is
managed tightly through price increases and cost
reductions and the operating margin is therefore
expected to be unaffected from this.
Free cash flow is expected to be above DKK 1.0
billion (unchanged from previous expectations)
(2021: DKK 1.9 billion). The expected higher
operating profit before other items compared to
2021 will have a positive effect on free cash flow.
Inflow from changes in working capital is expected
to be neutral to slightly positive following the
positive impact from 2021.
Payments related to restructuring projects initiated
in 2020 are still expected to reduce free cash flow by
around DKK 0.5 billion.
The outlook should be read in conjunction with
“Forward-looking statements” in the table to the
below. The outlook is excluding any effects of IAS 29.
Outlook 2022
Annual report
2021
Interim report
H1 2022
Organic growth Above 2% Above 5%
Operating margin
1)
Above 4.5%
Above 4.75%
Free cash flow
Above DKK 1.0bn Above DKK 1.0bn
1)
Based on Operating profit before other items.
Forward-looking statements
This report contains forward-looking statements, including, but not
limited to, the guidance and expectations in Outlook. Statements herein,
other than statements of historical fact, regarding future event or
prospects, are forward-looking statements. The words may, will, should,
expect, anticipate, believe, estimate, plan, predict, intend or variations of
such words, and other statements on matters that are not historical fact
or regarding future events or prospects, are forward-looking statements.
ISS has based these statements on its current views with respect to
future events and financial performance. These views involve risks and
uncertainties that 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 this report 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, expect to the extent required by law.
The Annual Report of 2021 of ISS Global A/S is available at the Group's
website, www.issworld.com.
Copenhagen, 11 August 2022
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11 of 31
Management statement
C open hagen, 11 A ugust 202 2
The Board of Directors and the Managing Director
have today discussed and approved the interim
report of ISS Global A/S for the period 1 January – 30
June 2022.
The condensed consolidated interim financial
statements have been prepared in accordance with
IAS 34 “Interim Financial Reporting” as adopted by
the EU and additional requirements of the Danish
Financial Statements Act. The interim report has not
been reviewed or audited.
In our opinion, the condensed consolidated interim
financial statements give a true and fair view of the
Group's assets, liabilities and financial position at 30
June 2022 and of the results of the Group's
operations and consolidated cash flows for the
financial period 1 January – 30 June 2022.
In our opinion, the Management review includes a
fair review of the development in the Group’s
operations and financial conditions, the results for
the period, cash flows and financial position as well
as a description of the most significant risks and
uncertainty factors that the Group face.
Managing Director
Kristoff er Lykke-O lesen
Board of Directors
Jacob Aar up-Ander sen Kasper Fangel
Chair man
Corin na Refsgaard Bjørn Raast en
Copenhagen, 11 August 2022
Primary statements
13 Consolidated statement of profit or loss
14 Consolidated statement of comprehensive income
15 Consolidated statement of cash flows
16 Consolidated statement of financial position
17 Consolidated statement of changes in equity
Basis of preparation
18 1 Basis of preparation
18 2 Significant accounting estimates and judgements
Statement of profit or loss
19 3 Segment information
20 4 Revenue
20 5 Share-based payments
21 6 Other income and expenses, net
22 7 Goodwill impairment
23 8 Discontinued operations
Statement of cash flows
24 9 Changes in working capital
24 10 Free cash flow
25 11 Divestments
Statement of financial position
26 12 Assets and liabilities held for sale
26 13 Pensions and similar obligations
26 14 Provisions
Other
27 15 Government grants
28 16 Hyperinflation in Turkey
30 17 Subsequent events
Condensed
consolidated
interim financial
statements
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Consolidated statement of profit or loss
1 January – 30 June
(DKKm)
YTD 2022 YTD 2021
Revenue
3, 4, 16 36,953 34,902
Staff costs
5, 15
(23,486) (22,875)
Consumables (3,008) (2,267)
Other operating expenses (8,258) (8,003)
Depreciation and amortisation
1)
16
(698) (715)
Operating profit before other items
16 1,503 1,042
Other income and expenses, net
6
201 458
Royalty (624) (553)
Goodwill impairment
7
- (459)
Amortisation/impairment of brands and customer contracts (35) (31)
Operating profit
3 1,045 457
Financial income
16
170 45
Financial expenses
16
(307) (332)
Profit before tax 908 170
Income tax
16 (199) (111)
Net profit from continuing operations 709 59
Net profit from discontinued operations
8
149 117
Net profit
16 858 176
Attributable to:
Owners of ISS Global A/S 822 170
Non-controlling interests 36 6
Net profit
858 176
1)
Excluding Goodwill impairment and Amortisation/impairment of brands and customer contracts.
Note
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1 January – 30 June
(DKKm)
Note YTD 2022 YTD 2021
Net profit 858 176
Other comprehensive income
Remeasurement gain/(loss) on defined benefit plans
13
365 650
Impact from asset ceiling
13
(210) (638)
Tax (40) (3)
Net total, that will not be reclassified to profit or loss in subsequent periods 115 9
Foreign exchange adjustments of foreign entities 284 38
Fair value adjustments of net investment hedges (84) (83)
Recycling of accumulated foreign exchange adjustments on country exits (40) (4)
Hyperinflation restatement of equity at 1 January
16
768 -
Tax 18 18
Net total, that may be reclassified to profit or loss in subsequent periods 946 (31)
Other comprehensive income 1,061 (22)
Comprehensive income 1,919 154
Attributable to:
Owners of ISS Global A/S 1,527 151
Non-controlling interests 392 3
Comprehensive income 1,919 154
Consolidated statement of
comprehensive income
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Consolidated statement of cash flows
1 January – 30 June
(DKKm)
Note YTD 2022 YTD 2021
Operating profit before other items 1,503 1,042
Operating profit before other items from discontinued operations
8 25 29
Depreciation and amortisation 698 715
Non-cash items related to Hyperinflation
16 (21)
-
Share-based payments
5 16 15
Changes in working capital
9 287 1,778
Changes in provisions, pensions and similar obligations (436) (378)
Other expenses paid (3) (9)
Interest received from companies within the ISS Group 41 32
Interest received, external 34 16
Interest paid, external (164) (165)
Income tax paid (156) (195)
Payments related to royalties (1,255) (1,087)
Cash flow from operating activities
16 569 1,793
Acquisition of businesses (24) (21)
Divestment of businesses
11 599 889
Acquisition of intangible assets and property, plant and equipment (309) (245)
Disposal of intangible assets and property, plant and equipment 21 9
Acquisition of financial assets, net
(10) 14
Cash flow from investing activities
16 277 646
Other financial payments, net (126) (685)
Payments (to)/from companies within the ISS Group, net 693 354
Repayment of lease liabilities (428) (462)
Transactions with non-controlling interest (6) (15)
Cash flow from financing activities
16 133 (808)
Total cash flow 979 1,631
Cash and cash equivalents at 1 Januar
y
3,427 2,741
Total cash flow 979 1,631
Foreign exchange adjustments 96 93
Cash and cash equivalents at 30 June 4,502 4,465
Free cash flow
10, 16 (58) 1,309
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Consolidated statement of financial position
30 June 30 June 31 December
(DKKm) Note 2022 2021 2021
Assets
Intangible assets
16
17,053 15,514 16,055
Property, plant and equipment and leases
16
3,160 3,182 3,273
Receivables from companies within the ISS Group 3,247 3,144 3,164
Deferred tax assets 927 899 790
Other financial assets 502 318 451
Non-current assets 24,889 23,057 23,733
Inventories 200 167 177
Trade receivables 11,068 9,828 10,406
Tax receivables 138 171 164
Receivables from companies within the ISS Group 55 83 466
Other receivables 1,733 1,505 1,491
Cash and cash equivalents 4,502 4,465 3,427
Assets held for sale
12
32 1,332 493
Current assets 17,728 17,551 16,624
Total assets 42,617 40,608 40,357
Equity and liabilities
Equity attributable to owners of ISS Global A/S 5,566 3,309 4,039
Non-controlling interests 655 25 206
Total equity
16
6,221 3,334 4,245
Loans and borrowings 15,901 17,100 16,032
Pensions and similar obligations
13
1,214 1,439 1,351
Deferred tax liabilities
16
564 324 378
Provisions
14
591 294 755
Non-current liabilities 18,270 19,157 18,516
Loans and borrowings 1,241 996 866
Trade and other payables 6,568 5,397 5,566
Tax payables 133 108 174
Other liabilities 9,472 9,526 9,749
Provisions
14
700 1,507 961
Liabilities held for sale
12
12 583 280
Current liabilities 18,126 18,117 17,596
Total liabilities 36,396 37,274 36,112
Total equity and liabilities 42,617 40,608 40,357
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Consolidated statement of changes in equit
y
1 January – 30 June
(DKKm)
Note
Share
capital
Retained
earnings
Trans-
lation
reserve
1)
Total
Non-con-
trolling
interests
Total
equity
2022
Equity at 1 January
180 4,816 (957) 4,039 206 4,245
Net profit - 822 - 822 36 858
Other comprehensive income - 115 590 705 356 1,061
Comprehensive income - 937 590 1,527 392 1,919
Transactions with non-controlling interests - - - - 57 57
Transactions with owners - - - - 57 57
Changes in equity - 937 590 1,527 449 1,976
Equity at 30 June 180 5,753 (367) 5,566 655 6,221
2021
Equity at 1 January
180 3,998 (1,012) 3,166 29 3,195
Net profit - 170 - 170 6 176
Other comprehensive income - 9 (28) (19) (3) (22)
Comprehensive income - 179 (28) 151 3 154
Transactions with non-controlling interests - (8) - (8) (7) (15)
Transactions with owners - (8) - (8) (7) (15)
Changes in equity - 171 (28) 143 (4) 139
Equity at 30 June 180 4,169 (1,040) 3,309 25 3,334
Attributable to owners of ISS Global A/S
1)
At 30 June 2022, accumulated foreign exchange losses of DKK 17 million related to discontinued operations (30 June 2021: exchange losses of DKK 17 million). In addition,
at 30 June 2022, DKK 381 million under the translation reserve relates to hyperinflation restatement of non-monetary items at 1 January 2022.
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1 Basis of preparation
IAS 29 "Financial Reporting in Hyperinflation Economies"
2 Significant accounting estimates and judgements
The condensed consolidated interim financial statements of ISS Global A/S for the period 1 January - 30 June 2022 comprise ISS
Global A/S and its subsidiaries (collectively, the Group) and have been prepared in accordance with IAS 34 "Interim Financial
Reporting" as adopted by the EU and additional requirements of the Danish Financial Statements Act.
The accounting policies adopted are consistent with those applied in the preparation of the Group’s consolidated financial
statements for the year ended 31 December 2021, except for the adoption of IAS 29 "Financial Reporting in Hyperinflation
Economies" and a number of new and amended standards, which became applicable for the current reporting period. The Group
did not have to change its accounting policies or make retrospective adjustments as a result of adopting these new and amended
standards, exce
p
t as set out below for IAS 29.
The preparation of condensed consolidated interim financial statements requires management to make estimates, judgements
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
Except for the above, and the judgements and estimates commented upon in other notes of these condensed consolidated
interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the
key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for
the year ended 31 December 2021, cf. 7.1 to the consolidated financial statements for 2021.
The report does not include all the information and note disclosures required in the annual consolidated financial statements, and
should be read in conjunction with the Group’s consolidated financial statements as at 31 December 2021.
Effective 1 January 2022, the Group has implemented IAS 29 "Financial Reporting in Hyperinflationary Economies", as management
has considered Turkey as a hyperinflationary environment. Management has based its assessment on the cumulative inflation,
which has exceeded more than 100% over three years. As a result, the financial statements of ISS Turkey for H1 2022 have been
restated for hyperinflation before the reported amounts were translated to the Group's functional currency, DKK. Comparative
figures have not been restated. The implementation impact and the applied accounting policies are disclosed in note 16,
Hyperinflation in Turkey.
In H1 2022, global macroeconomic uncertainties remained at a high level, which among others led to increasing interest rates and
rising cost and labour inflation. These developments and uncertainties have impacted certain accounting estimates and
judgements, including assumptions made by management, most significantly in relation to:
• Goodwill impairment (see note 7)
• Pensions and similar obligations (see note 13)
• Onerous contracts (see note 14)
• Hyperinflation in Turkey (IAS 29) (see note 16)
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3 Segment information
(DKKm)
Central &
Southern
Europe
Northern
Europe
Asia &
Pacific Americas
Other
countries
Total
segments
YTD 2022
Revenue
1)
11,743 14,214 6,735 3,873 275 36,840
Hyperinflation restatement of revenue
2)
128 - - - - 128
Total revenue
11,871 14,214 6,735 3,873 275 36,968
Operating profit before other items
378 631 388 137 11 1,545
Hyperinflation restatement of operating profit
before other items
2)
(12) - - - - (12)
Operating profit before other items
366 631 388 137 11 1,533
Operating profit 166 445 395 64 6 1,076
YTD 2021
Revenue
1)
11,710 13,449 6,161 3,310 285 34,915
Operating profit before other items
120 378 370 201 7 1,076
Operating profit (64) 142 264 144 4 490
Reconciliation of operating profit
(DKKm) YTD 2022 YTD 2021
Operating profit for reportable segments 1,076 490
Unallocated corporate costs (31) (33)
Operating profit 1,045 457
ISS is a leading, global provider of workplace and facility service solutions operating in more than 30 countries. Operations are
generally managed based on a geographical structure in which countries are grouped into regions. The regions have been
identified based on a key principle of grouping countries that share market conditions and cultures. Countries where we do not
have a full country support structure, which are managed by Global Operations, are combined in a separate segment “Other
countries”.
1)
Including internal revenue which due to the nature of the business is insignificant and therefore not disclosed.
Effective 1 January 2022, the Group reorganised its European business into the regions Northern Europe and Central & Southern
Europe consistent with the Group’s internal management and reporting structure. As a result, the Netherlands, Belgium, Poland
and Lithuania were moved from Continental Europe to Northern Europe. Asia & Pacific and Americas remained unchanged.
Comparative figures for 2021 were restated accordingly.
2)
ISS Turkey was restated for hyperinflation in accordance with IAS 29, see note 18, Hyperinflation in Turkey.
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4 Revenue
(DKKm) YTD 2022 YTD 2021
Key accounts 26,391 23,907
Large and medium 8,39
4
8,890
Small and route-based 2,168 2,105
Revenue 36,953 34,902
5 Share-based payments
LTIP 2022
LTIP 2022
PSUs and participants (number)
Maximum PSUs under the programme at grant date 1,509,951
Total PSUs granted 1,303,211
Participants 144
Fair value (DKKm)
Grant date fair value of PSUs expected to vest 107
LTIP 2019 (vested)
In March 2022, the LTIP 2019 programme vested. Based on the annual EPS and TSR performances for 2019, 2020 and 2021, 0% of
the granted PSUs vested. After this vesting, no further PSUs are outstanding under the LTIP 2019 and the programme has lapsed.
At 30 June 2022, a total of 1,303,211 new performance-based share units (PSUs) were granted to members of the EGM (EGMB and
Corporate Senior Officers of the ISS A/S Group) and other senior officers of the Group. The programme is described in the
consolidated financial statements for 2021. Like previous grants under the LTIP, the PSUs will vest on the date of the third
anniversary of the grant, subject to achievement of certain performance targets and service criteria. Upon vesting, each PSU
entitles the holder to receive one share at no cost.
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6 Other income and expenses, net
(DKKm) YTD 2022 YTD 2021
Gain on divestments 202 471
Other income 202 471
Loss on divestments - (8)
Acquisition costs (1) (5)
Other expenses (1) (13)
Other income and expenses, net 201 458
Gain on divestments mainly related to the divestment of waste management in Hong Kong and the damage control business in
the UK. In 2021, the gain related mainly to the divestment of Kanal Services in Switzerland.
Loss on divestments in 2021, was mainly related to the divestment of the fruit baskets business in Sweden and the restoration
business in the UK.
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7 Goodwill impairment
(DKKm) YTD 2022 YTD 2021
Identified in impairment tests - 459
Goodwill impairment - 459
Goodwill
Carrying
amount
(DKKm)
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
increase
30 June 2022
937 1.0% 0.6% 2.9% 0.5% 2.5% 0.3% 5.0% 0.2% 9.5% 0.2%
31 Dec 2021
936 1.4% 0.2% 3.3% 0.2% 2.0% 0.1% 5.0% 0.1% 8.9% 0.1%
Except for Turkey and France, no impairment indications were identified. It is management’s opinion that excess values for all
other CGUs are fairly resilient to any likely and reasonable deteriorations in the key assumptions applied and presented in note
3.8 in the consolidated financial statements for 2021.
Identified in impairment tests The loss recognised in 2021 related to goodwill impairment in France.
Impairment tests
The Group performs impairment tests on intangibles, i.e. goodwill, brands and customer contracts, annually and whenever there
is an indication that intangibles may be impaired. The annual impairment test is performed as per 31 December based on
financial budgets approved by management covering the following financial year.
At 30 June 2022, the Group performed a review for indications of impairment of the carrying amount of intangibles. The
implementation of IAS 29 in Turkey as well as the increasing interest rates and the delayed realisation of business plans in France
were considered impairment indications. Consequently, these CGUs have been tested for impairment at 30 June 2022.
Margin
1)
Applied assumptions, sensitivities and carrying amounts for France are illustrated below.
Turkey
France
1)
Excl. allocated corporate costs
The implementation of IAS 29 resulted in an increase in the carrying amount of goodwill and customer contracts of DKK 0.8
billion. The impairment test at 30 June 2022 based on the updated business plan reflecting the current inflationary environment,
did not result in recognition of an impairment loss.
During the first six months of 2022, the restructuring plan continued to progress, though slower than anticipated, in part due to
exposure to certain industry segments with slow Covid-19 recovery. At the same time, interest rates and inflation rates increased
significantly. As a result, management updated the business plans to reflect the current market development. The impairment test
at 30 June 2022 based on the updated business plan did not result in recognition of an impairment loss. However, the excess
value continues to be limited.
Forecasting period Terminal period
Discount rate,
net of tax
Growth
Margin
1)
Growth
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8 Discontinued operations
Net profit/(loss) from discontinued operations
(DKKm) YTD 2022 YTD 2021
Revenue 363 696
Expenses (338) (667)
Operating profit before other items 25 29
Other income and expenses, net
1)
133 107
Royalty (7) (14)
Operating profit 151 122
Financial income/(expenses), net - 1
Net profit before tax 151 123
Income tax (2) (6)
Net profit from discontinued operations 149 117
Earnings per share from discontinued operations, DKK
Basic earnings per share (EPS) 0.7 0.7
Diluted earnings per share 0.7 0.7
Cash flow from discontinued operations
(DKKm) YTD 2022 YTD 2021
Cash flow from operating activities (9) (20)
Cash flow from investing activities (69) (82)
Cash flow from financing activities 9 (5)
Our strategic divestment programme continued the good momentum with three countries being divested in the first half of 2022,
i.e. Taiwan, Russia and Portugal. With Brunei being the only country remaining as asset held for sale and discontinued operations,
the divestment programme is now considered completed.
1)
Related to net gain from the three divestments in H1 2022, including recycling of accumulated foreign exchange adjustments.
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9 Changes in working capital
(DKKm) YTD 2022 YTD 2021
Changes in inventories (24) 11
Changes in receivables (875) 30
Changes in payables 1,186 1,737
Total 287 1,778
10 Free cash flow
(DKKm) YTD 2022 YTD 2021
Cash flow from operating activities 569 1,793
Acquisition of intangible assets and property, plant and equipment (309) (245)
Disposal of intangible assets and property, plant and equipment 21 9
Acquisition of financial assets, net
1)
(49) (4)
Addition of right-of-use assets, net (290) (244)
Total (58) 1,309
The free cash flow measure should not be considered a substitute for those measures required by IFRS and may not be
calculated by other companies in the same manner. As such, reference is made to the IFRS measures included in the condensed
consolidated statement of cash flows on p. 15.
Free cash flow as defined by management, cf. the 2021 Annual Report p. 122, is summarised below. Free cash flow is not a
financial performance measure established by IFRS. Accordingly, the measure and its calculation is solely presented as it is used
by management as an alternative performance measure in managing the business.
1)
Excluding investments in equity-accounted investees of DKK 39 million (positive) (2021: DKK (18) million). The negative investments in 2021 related to dividends and
disposals of equity-accounted investees.
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11 Divestments
The Group completed five divestments during 1 January - 30 June 2022 (eight during 1 January - 30 June 2021):
Company/activity Country Service type
Excluded from
profit or loss Interest
Annual
revenue
(DKKm)
Employees
(number)
Waste management business Hong Kong Technical February 100% 134 232
ISS Russia Russia Country exit April 100% 112 864
ISS Taiwan Taiwan Country exit April 100% 441 3,092
Damage control U
K
Technical
Ma
y
100% 84 91
ISS Portugal Portugal Country exit July 100% 386 3,843
Total 1,157 8,122
Divestment impact
(DKKm) YTD 2022 YTD 2021
Goodwill 149 175
Other non-current assets 161 289
Current assets 321 224
Non-current liabilities (24) (36)
Loans and borrowings (23) (121)
Current liabilities (246) (153)
Net assets disposed 338 378
Gain/(loss) on divestment, net 300 566
Divestment costs 46 71
Consideration received 684 1,015
Cash in divested businesses (86) (60)
Cash consideration received 598 955
Contingent and deferred consideration 38 -
Divestment costs paid (37) (66)
Divestment of businesses (cash flow) 599 889
Divestments subsequent to 30 June 2022
The Group completed no divestments from 1 July to 31 July 2022.
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12 Assets and liabilities held for sale
Businesses classified as held for sale
Profit or loss effect
13 Pensions and similar obligations
14 Provisions
(DKKm)
L
ega
l
an
d
labour-
related cases
Self-
insurance
Restruc-
turings
Onerous
contracts Other YTD 2022 YTD 2021
Provisions at 1 Januar
y
237 261 375 330 513 1,716 1,926
Foreign exchange adjustments (3) 13 - 6 10 26 13
Additions 11 74 - - - 85 133
Used during the yea
r
(25) (79) (163) (167) (49) (483) (407)
Unused amounts reversed (10) (2) (5) (19) (9) (45) (90)
Reclass (to)/from other liabilities - (1) (7) - - (8) 226
Provisions at 30 June 210 266 200 150 465 1,291 1,801
Non-current 36 129 94 71 261 591 294
Current 174 137 106 79 204 700 1,507
Onerous contracts In H1 2022, the provision decreased DKK 180 million mainly due to the exit from the Danish Defence contract,
which was completed by the end of May 2022.
In H1 2022, divestment of businesses classified as held for sale at 31 December 2021 resulted in recognition of a net gain of DKK
335 million in profit or loss. The net gain was recognised in Other income and expenses, net (DKK 202 million (gain)) and Net
profit from discontinued operations (DKK 133 million (gain)). Recycling of accumulated foreign exchange adjustments recognised
in equity had a positive impact on the net gain of DKK 35 million, mainly related to Taiwan.
At 31 December 2021, five businesses were classified as held for sale comprising four countries (discontinued operations) and
the waste management business in Hong Kong.
Restructurings Execution of restructuring projects initiated following Covid-19 continued in the first six months of 2022 and
resulted in payments of DKK 163 million mainly in Germany, France and Spain.
For interim periods, the Group’s defined benefit obligations are based on valuations from external actuaries carried out at the
end of the prior financial year taking into account any subsequent movements in the obligation due to pension costs,
contributions etc. up until the reporting date. For interim periods, actuarial calculations are only updated to the extent that
significant changes in applied assumptions have occurred. Based on an overall analysis carried out by management, it is
determined whether updated actuarial calculations should be obtained for interim periods.
At 30 June 2022, the overall evaluation carried out by management resulted in updated actuarial calculations being obtained for
Switzerland, the UK and Germany, due to market fluctuations, which had impacted interest rates, inflation rates and asset values.
The updated calculations led to recognition of actuarial gains of DKK 1,233 million, which were largely offset by impact from loss
on plan assets of DKK 868 million and asset ceiling of DKK 210 million. The net gain of DKK 155 million was recognised in other
comprehensive income with a resulting decrease in the defined benefit obligation.
In H1 2022, we completed the divestment of three countries (Taiwan, Russia and Portugal) and the waste management business
in Hong Kong. As a result, only Brunei remained classified as held for sale at 30 June 2022.
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15 Government grants
Covid-19 related grants
(DKKm) YTD 2022 YTD 2021
Wage subvention 22 309
Sick pay compensation 13 9
Social security contribution - 5
Other - 1
Recognised in Staff costs 35 324
13 56
In the first six months of 2022, the Group received Covid-19 related grants to compensate costs related to e.g. employees on
furlough, social security contribution and sick pay compensation mainly in Denmark, Hong Kong and Sweden. As the grants
compensate costs already incurred, they are recognised as a reduction of staff costs.
Hereof included in Other receivables as of 30 June
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16 Hyperinflation in Turkey
Accounting impact of hyperinflation restatement in Turkey
(DKKm)
YTD 2022
(excl. IAS 29)
Non-
monetary
items Profit or loss
Re-
translation
(end rates)
Total
adjustments
YTD 2022
(reported)
Statement of profit or loss
Revenue 36,825 - 223 (95) 128 36,953
Depreciation and amortisation (674) (26) - 2 (24) (698)
Other costs (34,636) - (202) 86 (116) (34,752)
Operating profit before other items 1,515 (26) 21 (7) (12) 1,503
Other income and expenses, net 201 - - - - 201
Royalty (624) - - - - (624)
Amortisation of customer contracts (31) (4) - - (4) (35)
Operating profit 1,061 (30) 21 (7) (16) 1,045
Financial income 68 115 (13) - 102 170
Financial expenses (306) - (7) 6 (1) (307)
Profit before tax 823 85 1 (1) 85 908
Income tax (163) (35) (1) - (36) (199)
Net profit from continuing operations 660 50 - (1) 49
709
Net profit from discontinued operations 149 - - - - 149
Net profit 809 50 - (1) 49 858
Statement of cash flows
Operating profit before other items 1,515 (26) 21 (7) (12) 1,503
Depreciation and amortisation 674 26 - (2) 24 698
Non-cash items related to hyperinflation - - (21) - (21) (21)
Other cash flow items (1,619) - - 8 8 (1,611)
Cash flow from operating activities 570 - - (1) (1) 569
Cash flow from investing activities 275 - - 2 2 277
Cash flow from financing activities 133 - - - - 133
Free cash flow (non-IFRS) (59) - - 1 1 (58)
Financial ratios (%)
Organic growth (non-IFRS) 6.72 - - - - 6.72
Operating margin 4.10 (0.07) 0.06 (0.02) (0.03) 4.07
Countries, where the cumulative three-year inflation exceeds 100%, are generally considered highly inflationary, and application of
IAS 29 “Financial Reporting in Hyperinflationary Economies” must be considered. Based on monthly inflation data from the Turkey
Statistical Institute, Turkey exceeded this threshold for the first time in February 2022. For the first six months of 2022, the inflation
rate in Turkey was 42%. Consequently, ISS has implemented IAS 29 for the first time in this interim report with effect from 1
January 2022.
Under IAS 29, ISS is required to restate the accounting figures of the Group's subsidiary in Turkey to reflect the purchasing power
at the end of the reporting period. This means that the income statement, equity and non-monetary items of the financial position
are restated to reflect the purchasing power as at 30 June 2022. Monetary items such as receivables, payables, loans and
borrowings are not subject to restatement as these items already reflect the purchasing power on 30 June 2022.
Furthermore, IAS 29 requires (in combination with IAS 21 “The Effects of Changes in Foreign Exchange Rates”) that transactions of
the Turkish subsidiary in Turkish lira for the reporting period shall be translated into DKK by using the exchange rate at 30 June
2022.
In accordance with the requirements of IAS 29, comparative figures have not been restated.
Inflation restatement
The table below shows the accounting impact of the hyperinflation restatements for the period 1 January - 30 June 2022:
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16 Hyperinflation in Turkey (continued)
(DKKm)
YTD 2022
(excl. IAS 29)
Non-
monetary
items Profit or loss
Re-
translation
(end rates)
Total
adjustments
YTD 2022
(reported)
Statement of financial position
Goodwill 15,229 596 - - 596 15,825
Customer contracts 544 194 - - 194 738
Capitalised software 468 2 - - 2 470
Property, plant and equipment and leases 3,076 84 - - 84 3,160
Other assets 22,424 - - - - 22,424
Total assets 41,741 876 - - 876 42,617
Other comprehensive income 293 768 - - 768 1,061
Other equity elements 5,111 49 - - 49 5,160
Total equity 5,404 817 - - 817 6,221
Deferred tax liabilities 505 59 - - 59 564
Other liabilities 35,832 - - - - 35,832
Total equity and liabilities 41,741 876 - - 876 42,617
Financial position
Profit or loss
Cash flows
Inflation restatement
Based on the above, and the resulting negative impact on Income tax of DKK 36 million, Net profit increased DKK 49 million for the
first six months of 2022 as a result of the implementation of IAS 29.
Equity increased DKK 817 million mainly as a result of the opening restatement of non-monetary items of DKK 768 million and the
restatement effect from changes in the price index in the first six months of 2022.
The impact on the Group's cash flow statement of the restatement for IAS 29 was insignificant.
The restatement of the Group’s revenue had a net positive impact of DKK 128 million due to DKK 223 million stemming from the
increase in the price index of 17% in the first six months of 2022, partly offset by the impact from re-translation to exchange rates
at 30 June 2022 of DKK (95) million.
Overall, the implementation of IAS 29 did not have a material impact on the Group’s statement of profit or loss and cash flows, and
consequently the effect on our three key KPIs was immaterial, i.e. organic growth (non-IFRS) and free cash flow (non-IFRS) were
unchanged and operating margin decreased 3 bps.
On the other hand, the restatement for inflation significantly increased the Group’s goodwill (DKK 596 million) and customer
contracts (DKK 194 million) due to values carried from the acquisition of Rönesans in 2021 and the original acquisition in Turkey in
2005.
Furthermore, the Group’s value of property, plant and equipment and leases increased moderately (DKK 84 million) due to the
inflation restatement, which was based on assumed average useful lives of 3-5 years. As a result, depreciation and amortisation
were recalculated, which led to higher costs in the profit or loss.
Operating profit before other items was negatively affected with DKK 12 million, as the inflation restatement of property, plant and
equipment and leases led to higher depreciation and amortisation for the period (DKK 24 million). This more than offset the net
positive impact from inflation restatement and re-translation.
Financial expenses, net was positively impacted by DKK 102 million reflecting the restatement of non-monetary items for the
inflation development in the first six months and the offset of inflation restatement of profit or loss items in the same period.
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16 Hyperinflation in Turkey (continued)
§ Accounting policy
Inflation restatement
Price index
Retranslation from TRY to DKK
17 Subsequent events
Other than set out elsewhere in these condensed consolidated interim financial statements, we are not aware of events
subsequent to 30 June 2022, which are expected to have a material impact on the Group’s financial position.
Non-monetary items, which are carried at historical cost, such as goodwill, customer contracts and property, plant and equipment,
including right-of-use assets and deferred tax, have been restated for the effect of inflation based on changes in the price index
for the period from initial recognition to 30 June 2022 or to the date of disposal, where relevant. The restatement of non-monetary
assets was made effective from the time, the items were initially recognised, which was no earlier than 2005, when ISS first entered
Turkey through an acquisition.
When restating the non-monetary items, a monetary gain or loss occurred. The effect relating to the change in the price index for
the reporting period has been recognised in the profit or loss under financial income except for the tax effect, which has been
recognised under income tax. The effect relating to the period prior to 1 January 2022 has been recognised in other
comprehensive income under equity.
Management has assessed whether the restatement of goodwill, customer contracts and property, plant and equipment, including
right-of-use assets, represents an indication of impairment to ensure that the restated amounts do not exceed the recoverable
amounts of the assets, see note 7, Goodwill impairment.
Profit or loss All transactions in the period have been restated to reflect changes in the price index from the time of transaction to
the end of the reporting period, with the exception of depreciation and amortisation. The latter have been recalculated based on
the inflation-adjusted costs of intangible assets and property, plant and equipment, including right-of-use assets. The recalculation
has been made based on the normal useful lives of the relevant assets based on the Group’s accounting policy, cf. note 2.1 in the
consolidated financial statements for 2021.
Cash flow statement Operating profit before other items includes a non-cash effect from the inflation restatement, which has been
eliminated in the line Non-cash items related to hyperinflation.
The financial statements of the Turkish subsidiary, including effects of inflation restatement, have been translated into DKK
applying the TRY/DKK exchange rate at the reporting date as opposed to the Group’s normal practice of translating the profit or
loss using the exchange rate at the transaction date or an average exchange rate for the month. The TRY/DKK exchange rate
decreased from 50.53 at the beginning of 2022 to 42.95 at 30 June 2022. The average TRY/DKK exchange for the reporting period
was 45.99.
Monetary items such as receivables, payables, loans and borrowings are not subject to restatement for the effects of inflation as
these items already reflect the purchasing power at the reporting date.
Comparative figures Since the Group’s functional currency, DKK, is a non-hyperinflationary currency, IAS 29 does not require
restatement of comparative figures in the year of implementation. Consequently, comparative figures in this interim report have
not been restated.
Restatement for hyperinflation of the accounting figures of the Turkish subsidiary has been based on the development in the
consumer price index provided by the Turkish Statistical Institute.
Equity includes the opening effect of restating non-monetary items. Further, the Turkish subsidiary has been restated for the
effects of inflation based on the changes in the price index for the reporting period and recognised in other comprehensive
income with set-off within financial income in the profit or loss.
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Our global footprint
ISS is a leading, global provider of workplace and facility service solutions. In
partnership with customers, ISS drives the engagement and well-being of people,
minimises the impact on the environment, and protects and maintains property.
ISS brings all of this to life through a unique combination of data, insight and
service excellence at offices, factories, airports, hospitals and other locations
across the globe. In 2021, Group revenue was DKK 71.4 billion.
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