ISS Group from Denmark, one of the world’s leading facility services companies, has announced that it will divest operations in 13 countries, including Thailand, Philippines, Malaysia, and Brunei.
ISS announced its ambition to increase organic growth to 4-6% per annum by accelerating its transition towards key account customers. ISS has proven its ability to win and grow such clients and now plans to strengthen its position further in a market place that offers compelling, long-term growth potential. A two-year programme of expedited investment, encompassing services (e.g. workplace, technical, catering) and platform (e.g. technology, data and innovation), will materially enhance ISS’s delivery capabilities, says the press release.
Investment will include project-related operating expenditure, capital expenditure and selected M&A. It will strengthen ISS’s ability to protect and care for customers’ property, people and environment. Capital will be reallocated from areas that are not core to the key account strategy to help fund this transformation.
As a consequence of this strategy – The ISS Way – the operations in the 13 countries are to be divested. And the exit from non-core services will be concluded by divesting a number of business units across the group – entirely consistent with ISS’s strategy of recent years.
ISS’s strategy has already created a more focused organisation, with stricter decision-making around the customers it wishes to serve and the services it provides.
In 2017, these planned country and business unit divestments generated a revenue of DKK 9,685 million (12% of Group) and Operating Profit before other items of DKK 373 million (8% of Group). The process of divesting countries and business units is expected to conclude during 2020.
These divestments will significantly simplify the business, reducing complexity and risk. Upon completion, the number of customers is expected to reduce by 50% (from 125,300 to around 62,700) and the number of employees is expected to reduce by 20% (from 490,000 to around 390,000).
“These bold decisions reflect our strong conviction in the growth opportunity afforded by key account customers. When the time comes, it will be tough to part ways with many outstanding colleagues and high quality businesses. However, we must focus our capital and resource on those customers, services and geographies that can truly benefit from our future investment in processes, technology and innovation. This acceleration of our strategy will improve our offering for Key Account customers and deliver a stronger and more consistent financial performance for our shareholders,” says Jeff Gravenhorst, Group CEO, ISS A/S.
Considerable progress has been made, in driving growth of Integrated Facility Services (IFS) for Key Account customers, especially Global Key Accounts. 2018 has been a successful year and since the 9-month interim report in November, ISS has won or extended relationships with four major customers with a combined revenue of around DKK 2 billion, of which new revenue amounts to approximately 1% of the Group total.