ISS A/S

Bredgade 30
DK-1260
Copenhagen K
Denmark
Telephone: (+45) 38 17 00 00
Fax: (+45) 38 17 00 11
Web site: http://www.iss-group.com

Public Company
Incorporated: 1901
Employees: 270,000
Sales: EUR 4.68 billion (DKr 34.85 million) (2001)
Stock Exchanges: Copenhagen London
Ticker Symbol: ISS
NAIC: 551112 Offices of Other Holding Companies; 561210 Facilities Support Services; 561330 Employee Leasing Services; 561720 Janitorial Services; 621610 Home Health Care Services

ISS A/S runs the largest cleaning business in the world. It has more than 270,000 employees in 36 countries in Europe, Asia, and Latin America. ISS is unusual among cleaning companies in that it maintains friendly relationships with trade unions, and offers its blue collar employees something of a career ladder. The group claimed to reap such rewards as low turnover and better quality service through these progressive practices. ISS looks to specialized areas such as cleaning hospitals and semiconductor assembly facilities for its fastest growth; the group also has a few auxiliary enterprises such as caring for the aged.

Company Origins

ISS grew out of a small security firm established in Copenhagen in 1901. The company created an important new subsidiary, Det Danske Rengorings Selskab A/S (The Danish Cleaning Company, or DRS), in 1934. At first, DRS had 43 employees and just two customers. Then, in 1943, the company ventured out of Denmark and established offices in Sweden. Soon, the group had 2,000 employees. A Norwegian subsidiary, Norsk Rengjorings Selskap a.s., was established in 1952.

In 1963, a cleaning supplies company, Darenas, was formed. The group expanded into Germany in 1965 and Switzerland in 1967. The next year saw the acquisition of cleaning companies in the United Kingdom as well as the Netherlands. The cleaning services business continued its geographic expansion, reaching Austria and Spain in 1971. The same year, ISS acquired part of Servi Systems Oy, Finland’s largest cleaning and environmental services group. Soon afterward, ISS began doing business in Brazil.

A Global Group in 1973

The scale of the international holdings of ISS led to a restructuring of the company in 1973. The parent company was renamed ISS-International Service System A/S, and the firm took on a new corporate identity.

The growth of ISS was more than a matter of simple corporate expansion. The company had begun changing the entire cleaning industry, which before had been highly fragmented, carried out by hundreds of undifferentiated businesses and thousands of underappreciated workers. ISS prided itself on its wages and training, according to the Financial Times. Moreover, the Economist noted that the company’s policy with respect to its labor force was designed to enhance motivation: ISS typically sent cleaners out in mobile groups of two or three rather than isolating them at specific sites, thus promoting a sense of pride and teamwork among their employees.

ISS Group achieved consolidated turnover of DKr 1 billion in 1975. The group set up a catering subsidiary in Norway in the same year. In 1976, the ISS Center for Service Management was established near Copenhagen. In 1977, ISS Group shares debuted on the Copenhagen Stock Exchange. The company was also expanding its cleaning operations to Greece.

ISS took a major stake in a New York facilities management firm, the Prudential Building Maintenance Corp., in 1979. This was soon renamed ISS Inc., and by 1987 it had operations across the United States. ISS Group bought out the remaining shares of this company in 1990.

ISS launched an employee stock ownership plan in 1986. A number of cleaning companies in Scandinavia, West Germany, and the United States were acquired in the late 1980s, bringing total group employment to more than 100,000. At the same time, a number of the diversified enterprises that ISS had entered in the 1970s were sold off. ISS wanted to be the “Rolls Royce of cleaning,” Waldemar Schmidt later told Director after becoming CEO.

Expansion Continues in the 1990s

ISS entered the Hungarian cleaning market in 1990 via a joint venture. Slovenia followed in 1991. ISS acquired control of Sweden’s ASAB Group in 1991, as well as Evon Beheer B.V., a Dutch hospital services company. Expansion continued to the south in 1992 with the addition of cleaning operations in Portugal. ISS also acquired control of the largest private cleaning services business in Finland, Servi Systems Oy.

ISS acquired the U.S.-based National Cleaning Group in 1993 for $93.5 million. This made ISS North America’s largest cleaning business, with annual sales of $950 million. With more than 120,000 employees, ISS was also the world’s largest industrial cleaning firm. Also in 1993, ISS launched its ISS University to implement new initiatives for staff training.

ISS began trading on the New York Stock Exchange in 1994, five years after its shares were listed on London’s International Stock Exchange. The group expanded by acquisition in France and Switzerland, acquiring control of Net Inter and SHT/Hasco, which specialized in the health care segment of the Swiss cleaning market.

ISS acquired ESGO B.V., a large and fast growing support services group active in Asia, in 1995. ESGO had 10,000 employees and turnover of $50 million a year. ISS CarePartner was formed in 1995 to provide services for senior citizens in a variety of settings. This segment of the company experienced its greatest success in Nordic countries.

ISS continued to play a progressive role in labor relations in the mid-1990s. The group supported minimum wage increases in the United Kingdom and showed an unusual willingness to cooperate with trade unions. In 1995, ISS set out to form a consultative works council for its employees, borrowing a practice from the world of manufacturing (and anticipating a European Union directive to do so by September 1996). Such gestures were made in the name of ultimately producing a greater number of clients and increasing shareholder value via higher employee morale and lower turnover. They also eased resistance from labor unions in the United Kingdom when the group sought public sector cleaning contracts, observed the Financial Times.

Waldemar Schmidt, company veteran of 20 years (mostly outside Denmark), took over as chief executive in late September 1995. His predecessor, Poul Andreassen, was credited with building ISS into the world’s largest cleaning business in his 33 years leading the company. Schmidt took over towards the end of a trying year. The company had lost contracts in the United States, renegotiated ones in Germany, and pulled out of the bidding to renew a cleaning contract at London’s Heathrow Airport when a competitor undercut the £5 per hour wages it paid its cleaning staff by 30 percent. The group risked becoming classified as a subcontractor as full service facility management companies increased in popularity. ISS now hoped to maintain its margins by focusing on specialized cleaning services.

Mid-1990s Scandal and Recovery

ISS’s foreign subsidiaries were allowed a great deal of independence, due to the numbers of contracts they had to manage and the localized nature of the business. In at least one case, this freedom was abused. A scandal emerged in mid-1995 involving false accounting practices over a ten-year period at ISS’s U.S. subsidiary. This “great earthquake” resulted in a DKr 2 billion (£220 million) loss in the first half of 1996.

ISS Inc., the U.S. branch of the business, had to be sold, though it was ISS’s largest unit, accounting for 40 percent of group sales. Aaxis Limited acquired it in 1997, while ISS Group took a 19.5 percent holding in Aaxis, which was listed on the Montreal exchange. The same year, ISS Group took its own shares off the New York Stock Exchange and sold off assets such as its headquarters building and the ISS University Hotel. Its Darenas supply operations were also sold off.

ISS Group acquired Germany’s NWG Holding, Europe’s largest hospital cleaning specialist, in 1998. NWG’s annual revenues were about DKr 1.4 billion and the firm employed 17,000 workers. ISS Group’s presence in Asia was also bolstered as the group acquired Reliance Environmental Services, a 7,000-employee business based in Hong Kong. Both these additions were dwarfed by the 1999 acquisition of Abilis, Europe’s second largest cleaning and specialized services provider, for DKr 3.6 billion. Abilis added 50,000 employees and turnover of more than DKr 5 billion to ISS Group. An incredible recovery had been achieved in just three years. After the Abilis acquisition, ISS had a total of 195,000 employees in more than 70 companies in 32 countries and was a market leader in Europe and Asia.

Company Perspectives

Since the early years of the ISS Group, our corporate behavior has been guided by ethical values which today are deeply embedded in our corporate culture. ISS does not measure its success simply in financial terms, but in equal measure by how much we fulfil our responsibilities to our employees, customers, shareholders and society in general. ISS was formed in Denmark 100 years ago on the basis of core Scandinavian values—equality, fairness, and openness—in our dealings with people inside and outside the organization. A profound commitment to training and education is another fundamental element of the Group’s Danish inheritance.

Eric S. Rylberg was named CEO in an August 2000 restructuring. ISS continued to expand rapidly, acquiring 53 companies in 2000 alone. Larger acquisitions included Klinos SA in France and RCO Holdings PLC in the United Kingdom. ISS also announced a pending merger with Jydsk Rengoring a/s in Denmark and the planned acquisition of Lavold Groep in the Netherlands. Turnover for the year rose 45 percent to DKr 28.72 billion (EUR 3.85 billion). Operating profit rose 42 percent to DKr 1.45 billion (EUR 195 million).

100 in 2001

Between 1998 and 2001, the group added 150,000 employees to its existing 115,000 as it acquired more than 100 new companies. The group entered a new market—Japan—in 2001. It was another strong year as turnover and operating profit rose to EUR 4.68 billion (DKr 34.85 million) and EUR 219 million (DKr 1.63 billion), respectively.

Principal Subsidiaries

ISS Europe A/S; ISS Finans A/S; ISS Nordic A/S; ISS Overseas

A/S.

Principal Divisions

CarePartner; Damage Control; Facility Services; Food Services; ISS Aviation.

Principal Competitors

Rentokil Initial plc; The ServiceMaster Company.

Key Dates

1901:

ISS is founded as a Copenhagen security firm.

1934:

Danish Cleaning Company is formed.

1943:

ISS establishes its first transnational operation in Sweden.

1973:

The Group restructures after global expansion.

1977:

ISS shares are listed on the Copenhagen Stock Exchange.

1979:

Holdings in U.S.-based facilities management firm are acquired.

1993:

The acquisition of the National Cleaning Group makes ISS the market leader in the United States.

1995:

The discovery of accounting irregularities leads to the sale of the U.S.-based arm of the company.

2000:

Revenues and income rise sharply as company expands and restructures.

Further Reading

Baker, Bob, “Most Century City Janitors Decide to Walk Off the Job,” Los Angeles Times, May 31, 1990, p. B3.

——, “Tentative Accord OKd to End Janitors’ Strike,” Los Angeles Times, June 26, 1990, p. B1.

Barnes, Hilary, “Danish Group to Issue 3m Shares in New York,” Financial Times (London), September 5, 1994, p. 21.

——, “Danish Group’s Clean Start: Hilary Barnes Looks at How ISS Outsourced Its Management Training,” Financial Times (London), Bus. Education, October 27, 1997, p. 15.

——, “International People: Schmidt Wastes No Time at ISS,” Financial Times (London), October 3, 1995, p. 22.

——, “A New Broom with the Know-How,” Financial Times (London), October 31, 1995, p. 23.

——, “Shares in ISS Plunge After US Profits Were Overstated,” Financial Times (London), May 31, 1996, p. 19.

Carnegy, Hugh, “At a Loss to Explain 10-Year Scandal: Revelations of False Accounting Have Badly Shaken ISS,” Financial Times (London), August 16, 1996, p. 19.

——, “Cleaning Group Loses £220m After US Accounting Scandal,” Financial Times (London), August 16, 1996, p. 1.

“Cleaning Up Around the World,” Director (London), July 1996, p. 17.

Donkin, Richard, “Cleaner Service—Richard Donkin on How One Company Recruits and Motivates Employees in a Low-Wage Industry,” Financial Times (London), February 22, 1995, p. 13.

“EWC Agreement at ISS,” European Industrial Relations Review (London), November 1995, pp. SS13+.

Gavison, Yoram, “Sweeping into New Corners; Until Now, Foreigners Have Focused on High-Tech. But This Week, ISS Bought 50% of Ashmoret—A Janitorial Services Firm,” Ha’aretz (Tel Aviv), August 19, 1999.

Johnson, Mike, “Unloading Unnecessary Operations,” Management Review (New York), January 1997, p. 6.

MacCarthy, Clare, “A Sweeping Success at Cleaning Up,” Financial Times (London), June 8, 1999, p. 15.

Mahoney, Kevin, “A Clean Start,” People Management, June 11, 1998, p. 31.

Maitland, Alison, “From Dead-End Job to Bright Career,” Financial Times (London), September 3, 2001, p. 7.

Marsh, David, “Can Europe Compete? Cleaning Up Continental Competitors—Case Study, ISS; High-Quality Cleaning Can Be a Pan-European Business, According to the Danish Company That Leads the World in This Field,” Financial Times (London), March 1, 1994, p. 14.

Pike, Alan, “A Stronger Emphasis Now on Partnership,” Financial Times (London), November 18, 1999, p. 1.

“Service with a Smile,” Economist, April 25, 1998, pp. 63–64.

Taylor, Robert, “Works Councils Go Commercial,” Financial Times (London), July 26, 1995, p. 12.

—Frederick C. Ingram