In its latest trading update for the period 1 January – 30 June 2021, global facilities services firm, ISS, says important milestones have been achieved in the turnaround execution of the business.
The group’s interim results show organic growth was slightly negative at (0.2)% in H1 2021 (H1 2020: (3.0)%) and 5.8% in Q2 2021 (Q1 2021: (5.6)%), supported by continued solid demand for above-base work, especially deep-cleaning and disinfection. Portfolio revenue continues to be impacted by generally moderate re-opening of global activities with large variations across geographies.
Operating margin (before other items) was 1.5% in H1 2021 (H1 2020: (2.2)% or around 0% excluding restructuring costs and one-offs).
Free cash flow was DKK 1.6 billion in H1 2021 which ISS says was driven by improved operating profit and working capital development. ISS added that a large part of the cash flow from working capital is temporary and will result in a cash outflow in H2 2021. Utilisation of factoring of DKK 1.0 billion at 30 June 2021 was unchanged from 31 December 2020.
Eight divestments were completed in H1 2021, with the total net proceeds amounting to approximately DKK 1 billion. The improved operating profit and cash flow, including divestment proceeds (mainly related to the divestments of four Eastern European businesses and the Swiss sewer maintenance business, Kanal Services), decreased the net debt to DKK 13.5 billion from DKK 15.8 billion at 31 December 2020.
The execution of the group’s OneISS strategy has progressed as planned and important milestones were achieved in the turnaround of the underperforming contracts and countries. While turnaround initiatives in France progressed according to plan in H1 2021, increasing interest rates and continued uncertainty around the pace of market recovery from Covid-19 led to an increase in the applied weighted average cost of capital and consequently recognition of a goodwill impairment of DKK 450 million.
ISS says that the performance in H1 2021 provides solid support for its 2021 outlook of positive organic growth and operating margin above 2%. Free cash flow is now expected to be above DKK 1.0 billion (previously “slightly positive”).
Speaking about the resuts, Jacob Aarup-Andersen Group CEO, ISS A/S, said: “The first half of 2021 was an important period for ISS, where we have built a solid foundation for the new operating model and our short-term turnaround. The business environment continues to be challenged by Covid-19 restrictions, but it is truly inspirational to see the resilience and agility of our frontline employees as they support our customers’ health and productivity. I am also pleased to see how the ISS organisation is coming together under the OneISS strategy. The underlying financial performance is developing well, driven by our turnaround initiatives. The opportunities to improve our financial performance are significant, and we are moving in the right direction. At the same time, we acknowledge that we have a lot of hard work in front of us.”