Facilities services group ISS said that its resilient revenues have proved “the importance of the global strategy in unprecedented times”.
The Copenhagen-based company’s half-year results show organic growth of 2.9 per cent in H1 of 2020 and 9.9 per cent in Q2 2020, affected by Covid-19 lockdowns across its territories, but underpinned by key accounts (2.2 per cent organic growth in H1 2020) as well as strong demand for deep cleaning and disinfection services. Organic growth in July was 7.8 per cent.
Its operating margin was 2.2 per cent in H1 2020 (H1 2019: 3.7 per cent) or around 0 per cent excluding restructuring costs and one-offs.
Performance was dented by the operating profit drop-through from revenue lost as a result of the pandemic as well as other operational hits including inefficiencies and delays in several key operational priorities as a result of the significant redirection of resources on the back of Covid-19 and an IT malware attack.
Free cash flow improved to Danish Krone 1.7 billion (£206,485,354) in H1 2020 (H1 2019: DKK2.6 billion). The free cash flow of DKK1.7 billion was negatively affected by seasonality, the impact of Covid-19 and the IT malware attack on operating performance, while positively affected by short-term benefits of DKK1.6 billion from postponed payment of VAT and social charges offered under government support schemes. The utilisation of factoring reduced by DKK0.7 billion.
Total available liquidity remained above DKK11 billion at 30 June (30 April 2020: above DKK11 billion) and around DKK14 billion as of 31 July.
Net debt fell from DKK18.6 billion at 30 June 2019 to DKK16.4 billion at 30 June 2020. But because of weaker operating profit, leverage at 30 June 2020 increased to 5.9x pro forma adjusted EBITDA (30 June 2019: 3.4x). Excluding restructuring costs and one-offs affecting operating profit, leverage at 30 June 2020 was 4.3x. While leverage is expected to peak in 2020, the group expects to see a significant reduction in 2021 as performance normalises and the divestment programme is completed.
Organic growth in 2020 is expected to be between 2 per cent and 10 per cent. The operating margin, excluding restructurings and one-off costs (0 per cent in H1 2020), is expected to be marginally positive in 2020. Free cash flow in 2020 is expected to be between DKK0.5 and 3.5 billion with a mid-range of about DKK2 billion.
Jeff Gravenhorst, group CEO, ISS A/S, said: “The first half of 2020 has proven extraordinarily challenging for ISS given the combined impact of the malware attack and Covid-19. Our financial performance has suffered from the loss of revenue and a delay of certain transformational projects as we reprioritised during the crisis.
“That said, the strategic decisions we have made over the past few years have made ISS more resilient in these unprecedented times. Our revenue from key account customers has continued to grow, with the strength of our value proposition becoming more apparent. We have helped customers break the chain of infection and supported the safe return of people to their workplaces. We have increased our liquidity, strengthened our cash flows and reduced net debt. We have now started the shift from crisis management back towards the execution of our strategic priorities. Global uncertainty remains considerable, but we are well placed to capitalise on the recovery as it comes through and the positive, long-term structural trends.”