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Risk & Business Continuity

ISS Group upgrades outlook for 2021 on strength of interim results

Open-access content Wednesday 11th August 2021
Authors
Facilitate Team
Financial-growth-iStock-496568604.jpg

iStock

FM provider ISS Group says important milestones achieved in its strategy to turn around business signal an improved outlook for free cash flow for 2021. 

The Dutch-based group’s interim trading results for 1 January to 30 June show organic growth was 0.2 per cent in the first half of 2021 (H1 2020: 3 per cent) and 5.8 per cent in Q2 2021 (Q1: 5.6 per cent), supported by strong solid demand for above-base services, especially deep cleaning and disinfection. Portfolio revenue continues to be affected by generally moderate reopening of global activities after Covid-19 lockdowns, reflecting the wide variations across nations covered by the group. 

The operating margin (before other items) was 1.5 per cent in H1 2021 (H1 2020: 2.2 per cent) – or around 0 per cent excluding restructuring costs and one-offs. Free cash flow was DKK 1.6 billion in H1 2021 (about £182 million) driven by improved operating profit and working capital development. The group says a large part of the cash flow from working capital is temporary and will result in a cash outflow in the second half of 2021. 

Eight divestments were completed in H1, with total net proceeds amounting to about DKK 1 billion (about £114 million). The improved operating profit and cash flow, including divestment proceeds, saw net debt fall to  DKK 13.5 billion from DKK15.8 billion on 31 December 2020. 

Execution of the OneISS strategy, launched in December to sharpen the group’s strategic focus, enhance the operating model and outline the path for ISS’s short-term turnaround, has progressed as planned and important milestones were achieved in the turnaround of underperforming contracts and countries.  

The statement says the group’s performance in H1 provides solid support for its 2021 outlook of positive organic growth and operating margin above 2 per cent. Free cash flow is now expected to be above DKK 1 billion (previously forecast as “slightly positive”).   

Jacob Aarup-Andersen, group CEO, 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.” 

Image credit | iStock

 

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