Iss A/s · OMXCOP:ISS
Iss A/s — Investor Day (September 2015)
74 slides from Iss A/s's investor day presentation, Sep 17, 2015
Slide 1: Capital Markets' Day
Capital Markets’ Day 17 September, 2015
Slide 2: Welcome
Lord Allen of Kensington Kt CBE, Chairman Welcome
Slide 3: ISS Executive Group Management
ISS Executive Group Management Today’s speakers… Jeff Gravenhorst Troels Bjerg Andrew Price John Peri Heine Dalsgaard CEO CEO Northern Europe CCO CEO Americas CFO Other members of EGM… Michelle Healy Jacob Götzsche Flemming Bendt Henrik Langebæk(1) Thomas Hinnerskov(1) Chief People & Culture Officer
Slide 4: Vision and Strategy
Jeff Gravenhorst, Group CEO Vision and Strategy
Slide 5: Agenda
Agenda 12.30 – 12.35 5 mins Welcome Lord Allen 12.35 – 13.05 30 mins Vision and Strategy Jeff Gravenhorst 13.05 – 13.35 30 mins Operational Excellence Troels Bjerg 13.35 – 14.05 30 mins Commercial Development Andrew Price 14.05 – 14.30 25 mins Q&A 14.30 – 15.00 30 mins Break 15.00 – 15.30 30 mins Th
Slide 6: Creating value for shareholders is our priority
Creating value for shareholders is our priority Shareholder 1) Maximise growth and sustainability of Returns cash flow 2) Selective and value-accretive investment Cash Flow Growth • service enhancements • restructuring/ efficiency initiatives • acquisitions 3) Shareholder returns Investment • target
Slide 7: We will ensure capital allocation is optimal
We will ensure capital allocation is optimal Objective Comment 1. Capital structure Maintain optimal balance sheet strength, through-cycle 2. Capital expenditure/ net working capital Meet the modest, ongoing capital needs of the business 3. Ordinary dividend Targeted 50% payout policy 4. Acquisition
Slide 8: The world's greatest service organisation
the world’s greatest service organisation ”
Slide 9: Great service performance
Great service performance… SERVICE PERFORMANCE FACILITATING OUR CUSTOMERS PURPOSE THROUGH PEOPLE EMPOWERMENT 9
Slide 10: Facility services in context
Facility services in context Customer In-House Corporate Real Estate (CRE) or Facility Management (FM) Team Real Estate Design and Construction Facility Management Cleaning Support Property Catering Security Real Estate Advisory Portfolio Management Project Management Workplace Management Services S
Slide 11: Strategic positioning of ISS and key peers
Strategic positioning of ISS and key peers Revenue Employee Core initial Ability to Ability to DKK bn Headcount segment of deliver manage FY14 000s operations global IFS global IFS 74 511 Cleaning Support Property Catering Security FM 134 419 Catering Cleaning Support Security FM Property
Slide 12: ISS' revenue mix continues to improve
ISS’ revenue mix continues to improve 2006 Europe Latin America Asia Pacific Cleaning Support Property Catering Security FM Single Multi IFS 2014 Europe North America Latin America Asia Pacific Cleaning Support Property Catering Security FM Single Multi IFS 2006-14 average organic growth: 4.0% 2006-
Slide 13: IFS is where we can provide greatest value for our customers
IFS is where we can provide greatest value for our customers Customers want… ISS delivers via… …to focus on their core business (by engaging with service providers that support the core) …to ensure compliance (with local labour laws, Technology customer policies, HSE and other regulatory STRATEGIC P
Slide 14: ISS fully focused on key accounts
ISS fully focused on key accounts GCC drives 10% of group revenues IFS drives 32% of group revenues Key accounts drive 61% of group revenues GCC Other IFS Other Key account Other c. 1,700 key accounts(1) identified… ISS has had great success within GCC IFS remains at the core of ISS’ strategy…
Slide 15: Creating shareholder value
Our strategic initiatives will make us GREAT Strategic cornerstones Details Outcomes Objective Better recruitment, training, Leadership and key account manager programmes Empowering motivation and retention of Customer-focused training workshops designed by ISS people through employees Talen
Slide 16: ISS management structure aligned with our key account focus
ISS management structure aligned with our key account focus CEO Jeff Gravenhorst Bjørn Raasteen Todd O’Neill Group Legal Group Strategy Northern Europe Central Europe Eastern Europe Western Europe Americas Asia Pacific Troels Bjerg Jacob Götzsche Flemming Bendt Henrik Langebæk John Peri Thomas Hinne
Slide 17: Shareholders will benefit from our strategy
Shareholders will benefit from our strategy ISS allocation of FCF (pre-interest)(1), % 2006-09 2010-13 LTM (1) FCF (pre-interest) = [Cash flow from operating activities, add back net interest paid/ received] + net acquisition/ divestment of intangible assets (e.g. software) and PPE Significant poten
Slide 18: Operational Excellence
Troels Bjerg, CEO Northern Europe Operational Excellence
Slide 19: The ISS journey continues
The ISS journey continues ISS was founded in 1901 114 years later and after 600+ acquisitions (and 60+ divestments)… …we now have 509,133 employees… …and operate in 77 countries(1) The focus on alignment started in 2008 with ‘The ISS Way’ strategy… …and has gathered momentum under ‘Project GREAT’ Dr
Slide 20: ISS organisational blueprint for countries
ISS organisational blueprint for countries… Country Manager Commercial People & Culture Finance KEY ACCOUNTS SPECIALISED SERVICES DIRECT Key Account Key Account Service Key Account Cleaning Property Segment 1 Segment 2 Segment 3 Excellence Catering Route-based Single service Customer excellence
Slide 21: Supporting collaboration across countries and regions
…which will support collaboration across countries & regions.. Group Region/ Country Region/ Country 21
Slide 22: Fundamental to our new group structure
…and is fundamental to our new group structure CEO Jeff Gravenhorst Bjørn Raasteen Todd O’Neill Group Legal Group Strategy Northern Europe Central Europe Eastern Europe Western Europe Americas Asia Pacific Troels Bjerg Jacob Götzsche Flemming Bendt Henrik Langebæk John Peri Thomas Hinnerskov Global
Slide 23: It's all about people
It’s all about people Driving employee engagement • EES and eNPS(1) • Recognition of the front line • Company Day for management Instilling a service culture • Frontline training • Recruitment programme • First line management training Talent pipeline management • Key Account Manager (KAM) training
Slide 24: Scale: Procurement
Scale: Procurement Category Progress Financial impact • Total ISS addressable spend of c. DKK 22,000m • Pan-European agreements with 3 OEMs A selection of Wave I and II Categories covered to-date… 1. Fleet • Waves I and II comprise 8,000m of addressable spend • 2 leasing partners in place • Gross sa
Slide 25: Scale: BPO
Scale: BPO 2014 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sweden Norway Denmark Finland Belgium Transition Netherlands Go-live Australia • To-date, ISS has outsourced 83 FTE roles to Cognizant (Hyderabad, India) Benefits • 7-year contractual
Slide 26: Christian Kofoed Jakobsen
Christian Kofoed Jakobsen • 2014 – present ISS A/S (Nordic Key Account Director) • 2012 – 2014 ISS A/S (Regional CFO, Nordic Region) • 2010 – 2012 Saxo Bank A/S (CEO of Saxo Private Banking) • 2004 – 2010 ISS A/S (Group Treasurer) • 2001 – 2004 ABN Amro Bank NV (Global Account Manager) • 1995 – 2001
Slide 27: Nordea case study: Background
Nordea case study: Background Fixed price commercial model Capped GMP(1) Account Self-delivery management across Nordea geographies Operations & Mail services maintenance Phase 3: Strategic Facilities partnership Catering engineering & Phase 2: services capital project Well-proven support Key accoun
Slide 28: Nordea case study: End-user satisfaction
Nordea case study: End-user satisfaction ISS and Nordea conduct 3 surveys p.a. c. 1,000 randomly selected Nordea employees c. 50 online covered questions covering the ‘work journey’ Results used to engage and empower ISS employees… …and drive change and service improvement ISS must deliver certain e
Slide 29: Nordea case study: Increasing scope of services
Nordea case study: Increasing scope of services • Site Manager (Hermes Hus) • Floor Hostess services • Office Supply services • Security services (Hermes Hus) • Floor Hostess services • Property services • Carpool (Hermes Hus • Branches & Christiansbro) • Waste (all branches) • Floor Hostess service
Slide 30: The ISS experience
The ISS experience ‘I am new to the company and I have been amazed at the range of valuable initiatives being implemented to support our customers across the business - very impressive!’ Greg Daniel Account Director UK - UBS 30
Slide 31: Commercial Development
Andrew Price, Group CCO Commercial Development
Slide 32: IFS and the broader facility services market
IFS and the broader facility services market 2014: Global IFS revenues in context Global outsourced facility services Integrated Facility Services (IFS) • 55-60% of global facility services are estimated to be outsourced… • Global IFS revenues are growing at 8-9% p.a.... • Leading to a global outsou
Slide 33: What does the customer want?
What does the customer want? How important are the following criteria in purchasing IFS for Multinational companies? (1-5) 5 4.6 4.4 4.3 4.3 4.2 4.1 4 3 IFS buyers rate 2 self-delivery 1 Matching HSE/CSR Price Ability to self- Quality Matching highly geographic reputation deliver range of scope serv
Slide 34: International Key Accounts (GCC): Revenues by service
International Key Accounts (GCC): Revenues by service 2014: ISS group revenue split by service 2014: GCC revenue split by service Cleaning Support Property Catering Security FM Cleaning Support Property Catering Security FM Across some of our largest and most important clients, ISS delivers a broade
Slide 35: International Key Accounts (GCC): Revenue development
International Key Accounts (GCC): Revenue development GCC revenue development Comments Revenues (DKK m) as a % of ISS group 8,000 10.0 • Global Corporate Clients (GCC) has been a tremendous success story within ISS 7,000 9.0 8.0 • Significant growth to-date has 3 key drivers 6,000 7.0 • New contract
Slide 36: International Key Accounts: A source of strong growth
International Key Accounts: A source of strong growth HP: Year-end indexed portfolio value (2008 = 100) Other GCC customers: Year-end indexed portfolio value(1,2) 600 180 160 500 140 400 120 100 300 80 200 60 40 100 20 0 0 2008 2009 2010 2011 2012 2013 2014 Year 1 Year 2 Year 3 Year 4 • HP is one of
Slide 37: The evolution of Facility Services
The evolution of Facility Services Input-driven Output-driven Outcome-driven Asset-driven Service-driven • Leading the industry in workplace soloutions by leveraging our knowledge Future of our users differentiatiors… • Leading the technology race to create data which enhances knowledge and drives c
Slide 38: ISS understands workplace management
ISS understands workplace management ISS HQ (Buddingevej) Workplace Facilities Satisfaction Survey Tea, coffee and other refreshment facilities General cleanliness Washroom facilities/ showers Restaurant/ canteen General tidiness Parking (car, mororbike, bicycle) Security Access (e.g. lifts, stairwa
Slide 39: A transparent technology model with people-facing analytics
A transparent technology model with people-facing analytics 39
Slide 40: Protect reputation
Protect reputation Protect investment End-user satisfaction Safety and security Sustainability 40
Slide 41: Video: Interview with Christian Barthélémy
Video Interview with Christian Barthélémy Vice President Real Estate & Facility Management, Vattenfall Germany
Slide 42: Q&A
Q&A THE POWER OF THE HUMAN TOUCH
Slide 43: Coffee Break
Coffee Break Presentations will resume shortly
Slide 44: The Americas
John Peri, CEO Americas The Americas
Slide 45: The North American facility services market
The North American facility services market Real Estate Design and Construction Facility Management Cleaning Support Property Catering Security Real Estate Advisory Portfolio Management Project Management Workplace Management Services Services Services Services Services (1) CBRE acquired Global Work
Slide 46: Leading North American facility services companies
Leading North American facility services companies The North American outsourced facility services market is worth c. USD 200bn Total worldwide revenues (USDm) Total North American FM revenues (USDm) CBRE Compass Compass Sodexo Aramark Aramark Sodexo ISS ABM CBRE GWS Emcor Emcor JLL JLL ABM ISS 0 5,
Slide 47: ISS North America business performance
ISS North America business performance ISS North America organic growth (%) ISS North America operating margin (%) ISS North America revenue split by delivery 50 5.0 100% 4.5 40 80% 4.0 3.5 30 60% 3.0 20 2.5 40% 2.0 10 20% 1.5 1.0 0 0% 0.5 -10 0.0 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q3
Slide 48: Video: GoDaddy and Polycom
Video GoDaddy and Polycom THE POWER OF THE HUMAN TOUCH
Slide 49: ISS North America customer focus
ISS North America customer focus 2014 Strategic objectives Customer segment No. of Share of Service offerings and delivery models Industry focus Share of revenue customers revenue Key Accounts Facility Management • Business Services & IT 25 50% • Industry & Manufacturing Cleaning Support Property Ca
Slide 50: ISS in North America
ISS in North America • Large branch network focused on Janitorial • Supports large number of smaller customers • Migrating to a focused network supporting target segments and Key Accounts 50
Slide 51: ISS North America progress report
ISS North America progress report Priority Revenue split (LTM) Status Comments Property (36%), Catering (0%) • Strong Technical capability notably with International Key Increase Catering and Accounts and Aviation customers Technical competence • Early self-delivery initiatives within Catering • Cat
Slide 52: Facility Services in Latin America
Facility Services in Latin America Groupings Characteristics ISS countries • Outsourcing concept well established although largely input based Developed • Multi-national companies driving • Argentina Argentina Brazil Chile Colombia outsourcing of integrated service • Brazil (regional approach is rel
Slide 53: Facility Services in Latin America contd.
Facility Services in Latin America contd. The Latin America outsourced facility services market is estimated at USD 35-40bn(1) Major Pan-Regional Players Other Regional Players Local Players (1) Source: ISS estimates based on third-party data Good growth High growth challenges Macro Colombia Peru Pa
Slide 54: ISS Latin America business performance
ISS Latin America business performance ISS Latin America organic growth (%) ISS Latin America operating margin (%) ISS Latin America revenue split by delivery 35 7.0 100% 30 6.0 80% 25 5.0 60% 20 4.0 40% 15 3.0 10 20% 2.0 5 1.0 0% 0 0.0 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q11
Slide 55: Acquisitions and Disposals
Jeff Gravenhorst, Group CEO Acquisitions and Disposals
Slide 56: We will focus on our core service proposition
We will focus on our core service proposition Customers want… Cleaning ISS delivers via… Support …to focus on their core Property …to ensure compliance Catering STRATEGIC PARTNERSHIPS …to safeguard their business SELF-DELIVERY INTEGRATION Security …to maximise uptime of their facilities Facility Man
Slide 57: We impose strict acquisition criteria
We impose strict acquisition criteria Criteria Criteria • People focused • Suitable for output or • Financial returns outcome-based (ROCE) ahead of cost of contracts capital (WACC) • Can be integrated into Strategic Financial IFS criteria criteria • WACC varies by country • A business where ISS can
Slide 58: More than 60 divestments completed in 6 years
More than 60 divestments completed in 6 years 2009 2010 2011 2012 2013 2014 • Asker (Norway, Property) • Refrigeration (Spain, • ISS Batiservices (France, • ISS Proko Infra OY (Finland, • COOLIT HVAC (Austria, • Base Care Ltd (New Zealand, Property) Property) FM) Property) Property) • Industriservic
Slide 59: GS Hall has created value for shareholders
GS Hall has created value for shareholders ISS acquired GS Hall in January 2015 for DKK 609m(1) The integration of GS Hall is fully in line with expectations Technical Engineering Compliance Energy Deliverables realised thus far… …and those planned for the future • Assured energy • Planned and react
Slide 60: ISS global catering reach
ISS global catering reach NORDIC 2014 catering revenue: DKK 2,700m ~6k catering employees EASTERN EUROPE 2014 catering revenue: DKK 91m ~1k catering employees WESTERN EUROPE NORTH AMERICA 2014 catering revenue: 2014 catering revenue: DKK 5,327m DKK 1m ~27k catering employees ~18 catering employees A
Slide 61: Financials
Heine Dalsgaard, Group CFO Financials
Slide 62: Converting operating profit into strong cash flow
Converting operating profit into strong cash flow Shareholder Returns Operating margin Working capital Cash Flow Growth Capital expenditure Taxation Other items Capital structure and net financial Investment expenses Margin in the business People Organic Growth Processes Technology 62
Slide 63: Operating margin
Operating margin ISS has a long-term track record of margin stability… …despite significant divestments in recent years… LTM margin improvement for 7 consecutive quarters (%) 7.0 14,000 18.0 5.7 16.0 6.0 12,000 14.0 5.0 10,000 12.0 5.6 8,000 10.0 4.0 6,000 8.0 3.0 6.0 4,000 2.0 4.0 5.5 2,000 2.0 1.0
Slide 64: Working capital
Working capital LTM cash conversion(1) has averaged 99% over the past 38 quarters Observations 120 • ISS has a long history of working capital stability… 100 • …which has not been impacted by the growing importance of • Emerging Markets 80 • IFS 60 • GCC • Our focus on key accounts and more complex
Slide 65: Capital expenditure
Capital expenditure ISS’ historic net capital expenditure(1) profile has been consistent… …as has the breakdown by investment type(2) 1,200 1.6 1.4 1,000 1.2 800 1.0 600 0.8 0.6 400 0.4 200 0.2 0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Net investment, DKKm As a % of revenues Leasehold i
Slide 66: Taxation
Taxation 2015 • Effective tax rate (ETR) expected to be c. 30% in 2015 KEY DEVELOPMENTS • Absence of certain non tax-deductible expenses (e.g. IPO costs) 2015 versus 2014 • Removal of limitation to interest deduction (Denmark) • We constantly work on a list of tax optimisation and compliance initiat
Slide 67: Other income and expenses
Other income and expenses ISS’ other income and expenses, net(1) 2014 and 2015 LTM restructuring projects (DKK m) 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Q214 Q314 Q414 Q115 Q215 0 -130 -140 Other income and expenses, net -150 -100 in 2014 and 2015 include: -160 -170 -200 • Gains/ losses on
Slide 68: Cash flow will always be a key focus for ISS
Cash flow will always be a key focus for ISS FCF (pre-interest), 2009-LTM Observations 3,500 70 • Historic stability in working capital targeted to continue 3,000 60 • Future net capital expenditure needs not expected to deviate 2,500 50 from historic levels 2,000 40 • Cash tax rate should fall in 2
Slide 69: Capital structure and net financial expenses
Capital structure and net financial expenses ISS’ financial policy balances the following key Issued bonds and bank loans Maturity profile considerations • ISS to maintain a financial profile in line with • EUR 700m EMTN • 1.125% senior unsecured DKK 12,000m being Investment Grade • Maturing 2020 •
Slide 70: Capital structure and net financial expenses contd.
Capital structure and net financial expenses contd. ISS has demonstrated its ability to reduce leverage since its IPO Analysis of Q215 financial income and expenses, net 35,000 7.00 DKK 115m Interest income and expenses, net 6.0 30,000 6.00 4.9 5.0 Amortisation of financing fees (DKK 9m) 25,000 4.5
Slide 71: We will return surplus capital to shareholders
We will return surplus capital to shareholders Capital allocation objectives 1. Capital structure Special dividends ISS will give clear 2. Capital expenditure/ net working capital consideration to its share price and valuation 3. Ordinary dividend when determining whether to buy 4. Acquisitions and
Slide 72: Conclusion
Jeff Gravenhorst, Group CEO Conclusion
Slide 73: Creating value for shareholders is our priority
Creating value for shareholders is our priority Shareholder Returns Cash Flow Growth Investment Margin in the business People Organic Growth Processes Technology 73
Slide 74: Q&A
Q&A THE POWER OF THE HUMAN TOUCH