FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
ISS has presented the next phase of its OneISS strategy and new financial targets at its Capital Markets Day held at Canary Wharf in London.
ISS stated that the company’s journey is evolving from a period of turnaround to a new phase of strong growth at sustainable and attractive margins. It added all financial targets and commitments have been achieved since the launch of the OneISS strategy in 2020, and its financial health has recovered.
The workplace experience and facility management company is now poised to enhance its performance by strengthening its competitiveness in the FM industry and delivering strong organic growth combined with disciplined acquisitive revenue.
The growth agenda will be focused on providing integrated facility services to key accounts in three segments (office-based, production-based and healthcare) from a stronghold as global leader in Cleaning.
Operational efficiency, technology and sustainability are three key commercial areas that ISS is focusing and investing in. These areas, says ISS will become differentiating factors for performance at current customers’ workplaces and in future customer bids.
ISS will also be progressing on its own environmental commitments while supporting its customers’ journey to reduce carbon, energy, waste and materials.
Following the delivery of the financial turnaround targets, ISS has announced new financial targets and a new capital allocation strategy.
Financial targets
ISS’ new financial targets will be focusing on the delivery of strong growth over time through strengthened competitiveness and a scalable operating model.
It is targeting 4 – 6% organic growth annually from 2024 and will additionally add volume to the operating model through selective acquisitive growth.
The new target for the operating margin is to be sustainably above 5% from 2024 and thereafter.
ISS also expects to continue to be highly cash generative by converting more than 60% of the operating profit before other items into free cash flow. The preliminary 2023 outlook for the operating margin is 4.25%-4.75%.
Capital allocation
Capital will be allocated by fulfilling four clear ambitions in prioritised order:
1) Maintain investment grade rating and adhere to the updated financial leverage target of net debt of 2.0-2.5 times EBITDA;
2) Pay dividends to shareholders with a commitment of annual dividend pay-out ratio of 20-40% of adjusted net profit;
3) Allocate capital to value-creating investments in the form of acquisitions or business enhancements;
4) Distribute excess cash to shareholders through share buyback programmes.
ISS will adhere to the targeted financial leverage in 2023, and, as such, initiate dividend payments in 2023 (related to the 2022 financial year). With the ambition to pay stable and increasing dividends to shareholders over time, ISS will initiate a dividend payment of 20% of the adjusted net profit for 2022 subject to approval at the Annual General Meeting. ISS will also consider deploying capital for mergers and acquisitions or share buybacks on an ongoing basis during 2023.
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