Iss A/s · OMXCOP:ISS
Iss A/s — Investor Day (December 2020)
41 slides from Iss A/s's investor day presentation, Dec 16, 2020
Slide 1: OneISS: Stronger. Simpler. Closer.
OneISS Stronger. Simpler. Closer. 16 December 2020 PEOPLE PEOPLEMAKE MAKEPLACES PLACES 1
Slide 2: Agenda
Agenda 1 Introduction 2 Strategy and Market Dynamics 3 Operating model 4 Financials Jacob Aarup-Andersen 5 Concluding remarks Group CEO PEOPLE MAKE PEOPLE MAKEPLACES PLACES 2
Slide 3: Introduction
Thank Thankyou you PEOPLE MAKE PLACES 3
Slide 4: We have confirmed that our strategic direction is right
INTRODUCTION ISS is fundamentally in a healthy We have confirmed that our strategic and attractive market, with a direction is right … business model that will drive a Market is attractive, continued high potential competitive advantage in the • Attractive USD 400bn Key Account market – 2% current m
Slide 5: However, we have not yet fully executed on the strategy
INTRODUCTION We are on a journey in the coming … however, we have not yet fully years to further strengthen our executed on the strategy strategic focus and align our operating model to our Key We will sharpen our strategic focus further Account strategy as OneISS • Country and business unit divestm
Slide 6: Key near-term priorities include
INTRODUCTION Our no. 1 priority is to deliver on Key near-term priorities include the near-term recovery, while building ISS as the global FM leader for the future Bringing underperforming contracts and countries back to acceptable profitability • Deutsche Telekom • Danish Defence New operating mode
Slide 7: We will emerge even stronger
INTRODUCTION We will emerge even stronger FM market is structurally EBITDA recovery and attractive and our increased focus on cash business model is generation healthy ISS will emerge in the coming years as an Clear path back to growth with Deleveraging to below 3 times even stronger company mid sin
Slide 8: Stronger. Simpler. Closer.
INTRODUCTION Stronger. Simpler. Closer. Stronger. We will build on our unique heritage, doing what we do best and investing in the right Our strategy will help us become areas to help us grow. the most respected global leader in integrated facility services and strengthen our position as Simpler. We
Slide 9: Agenda
Agenda 1 Introduction 2 Strategy and Market Dynamics 3 Operating model 4 Financials 5 Concluding remarks PEOPLE MAKE PEOPLE MAKEPLACES PLACES 9
Slide 10: We see a strong outsourced FM market in the future despite Covid-19
STRATEGY AND MARKET DYNAMICS We see a strong outsourced FM market in the future despite Covid-19 • Reduction in covered square-meters over time due to a structural increase in work-from- Covid-19 is expected to home - estimated reduction of 10-15% over the next three years generate some headwinds •
Slide 11: Attractive Key Account market, with significant room to grow
STRATEGY AND MARKET DYNAMICS Attractive Key Account market, with significant room to grow USD 400bn global Key Account market ISS share Estimated approx. approx. 2% 40% of the USD 1 trillion market Global outsourced Key Accounts facility services market only market PEOPLE MAKE PLACES 11
Slide 12: Key Account strategy confirmed
STRATEGY AND MARKET DYNAMICS Key Account strategy confirmed Growth Margin Free cash flow Revenue stability Society Risk profile Key Accounts more Key Accounts net Key Accounts cash Key Accounts have Better opportunities Key Accounts have prone to bundle margin above non- flow dynamics and longer con
Slide 13: Bringing our value proposition to life through Key Account stories
STRATEGY AND MARKET DYNAMICS Bringing our value proposition to life through Key Account stories Case study 1 Case study 2 Pharmaceutical customer Industry and Manufacturing customer • FM services were managed by several players and partly done • Contract won from a regional competitor in 2016. Key r
Slide 14: Our ambition is to be a global leader in IFS, and #1 globally in cleaning
STRATEGY AND MARKET DYNAMICS Our ambition is to be a global leader in IFS, and #1 globally in cleaning We want to be a global leader in IFS We will accept nothing less Our core services going forward than being #1 in cleaning Cleaning globally • ISS’ heritage • Global leader position Continue growth
Slide 15: We have already taken the first steps in our tech agenda
STRATEGY AND MARKET DYNAMICS We have already taken the first steps in our tech agenda – now, we will accelerate investments to become a technology leader Technology will be a source of competitive advantage in facility management in the future Innovative technology already introduced We will acceler
Slide 16: We will further sharpen our strategic focus
STRATEGY AND MARKET DYNAMICS We will further sharpen our strategic focus Our country and business Countries We will exit Portugal, Russia unit divestments are based on: and Taiwan • Strategic fit • Risk profile • Ability to reach scale in Business We will divest selected non- the service/local marke
Slide 17: Agenda
Agenda 1 Introduction 2 Strategy and Market Dynamics 3 Operating model 4 Financials 5 Concluding remarks PEOPLE MAKE PEOPLE MAKEPLACES PLACES 17
Slide 18: What has not worked in the past
OPERATING MODEL What has not worked in the past Five key pain points identified We have strong country organisations, but we are yet to 1 reap the benefits of global scale 2 We have lacked robustness in our commercial bid process We have not developed a global approach to drive 3 consistent quality
Slide 19: Initiatives to drive change
OPERATING MODEL Initiatives to drive change Five key changes that will transform our business and underpin execution of our Key Account strategy 1 An aligned country operating model will drive needed standardisation A revamped Group Commercial function and enhanced commercial 2 process will strength
Slide 20: An aligned country operating model will drive needed standardisation
OPERATING MODEL – GLOBAL FUNCTIONS 1: An aligned country operating model will drive needed standardisation of Key benefits structure and processes globally We will align our country operating model across functions Higher degree of alignment and People & Commercial Digital & standardisation across C
Slide 21: A revamped Group Commercial function and enhanced commercial process
OPERATING MODEL - COMMERCIAL 2: A revamped Group Commercial function and enhanced commercial process will strengthen risk management and drive profitable growth in our prioritised segments Stronger risk Global commercial Value Commercial Excellence management team propositions • We have implemented
Slide 22: A newly created Operations Performance function
OPERATING MODEL – OPERATIONS 3: A newly created Operations Performance function to deploy best practices across the organisation Service Contract Transition and Costing Performance Transformation • Best practices • Dedicated transition • One system used for embedded for service team to ensure measur
Slide 23: A new IT operating model will modernise our IT infrastructure
OPERATING MODEL – TECHNOLOGY 4: A new IT operating model will Significant incremental modernise our IT infrastructure investments into IT and security Total IT costs (OPEX* + CAPEX) +DKK ~350 m Digital talent Future-proof Innovation Significant Illustrative foundation investments into IT and • New C
Slide 24: A new Executive Group Management will drive transformation
OPERATING MODEL - LEADERSHIP 5: A new Executive Group Management with internal talent and strong external additions will drive transformation Jacob Aarup- Andersen Group CEO New to EGM and in role Functional Focus Strategic Focus Regional Focus Kasper Fangel Corinna Celia Liu Pierre- François Daniel
Slide 25: Significant talent inflow over the last year
OPERATING MODEL - LEADERSHIP 5: Significant talent inflow into service lines, functions, and countries over the last year New Country Managers New Group Senior External Hires UK United States Pacific Head of Technical Services 14% of Group 10% of Group 6% of Group Revenue Revenue Revenue Head of Ope
Slide 26: We are working to improve specific well-known operational issues
OPERATING MODEL We are working to improve specific well-known operational issues Current status on key focus areas Lessons applied in new operating model design • Execution • Ongoing • Severely hit by • Significant • Commercial focus on risk programme dialogue with Covid-19 reorganisation management
Slide 27: Agenda
Agenda 1 Introduction 2 Strategy and Market Dynamics 3 Operating model 4 Financials Kasper Fangel 5 Concluding remarks Group CFO PEOPLE MAKE PLACES 27
Slide 28: Managing through unprecedented turbulent times in 2020
FINANCIALS Managing through unprecedented turbulent times in 2020 Customer type organic growth (Jan-Sep 2020) Service line growth Projects & above-base organic growth 10 14 0 12 -1.8 10 -10 Percentage Percentage Percentage 8 -4.9 -20 6 -30 4 -40 2 -10.4 -50 0 Key Account Non-Key Total Q3 19 Q4 19 Q1
Slide 29: 2020 financial performance at a glance
FINANCIALS 2020 financial performance at a glance While 2020 turned out to be a perfect storm… …. we are, despite 2nd wave impacts, set to deliver on the reinstated guidance announced in August Original The perfect storm Reinstated 2020 Outlook (Malware attack, Covid-19 and 2020 Outlook Current (26
Slide 30: Turn-around targets
FINANCIALS Turn-around targets ISS will remain an industry leader and … however, our previous medium-term will return to solid organic growth, robust targets are withdrawn to focus on the short- margins and strong free cash flow… term recovery New Turn- around targets: EBIT-margin above 4% when Posi
Slide 31: Clear recovery path back to mid single-digit operating margin
FINANCIALS Clear recovery path back to mid single-digit operating margin Initiatives to reach 1 Improvement within specific key operational issues Deutsche Telekom, Danish Defence, France and mid-single UK digit margin Recovery to 2 Covid-19 margin recovery… … driven by the gradual normalisation of
Slide 32: Covid-19 margin recovery
FINANCIALS 2: Covid-19 margin recovery Margin recovery driven by the normalisation of revenue… … and restructuring of the platform to be fit for purpose While food services have been severely • Adjustment of fixed cost impacted by Covid-19 as it is significantly structure… Estimated 2020 restructuri
Slide 33: Cost saving programme to fund investments into new operating model
FINANCIALS Cost saving programme to fund investments into new operating model Incremental annual Group Ramping up New operating model for IT spend (DKKm)1 investments into the Increased recurring annual investments into IT 250 Illustrative new operating model… Establishment of Operations Performance
Slide 34: Further simplification and refocusing of the portfolio
FINANCIALS Further simplification and refocusing of the portfolio 13 countries and multiple business units divested to focus on Key Accounts Around 60% successfully completed Existing divestment Remaining future divestment proceeds estimated at Combined net program on track around DKK 1 bn divestmen
Slide 35: Deleveraging to below 3 times EBITDA by FY2022
FINANCIALS Deleveraging to below 3 times1 EBITDA to be achieved by FY2022 Illustrative Three key levers driving de- 7-8x2 leveraging 1 Gradual EBITDA recovery over 2021- 2022 and beyond 2 Positive and improving Free Cash Flow Below 3x in both 2021 and 2022… …allocated fully to reduce net debt (no di
Slide 36: Preliminary outlook for 2021
FINANCIALS Preliminary outlook for 2021 The recovery journey has started and will progress gradually during 2021 • Organic growth held back by continued significant Covid-19 headwinds in Q1 2021… Positive organic • … followed by gradual recovery from Q2 2021 Organic growth growth • Limited support f
Slide 37: Agenda
Agenda 1 Introduction 2 Strategy and Market Dynamics 3 Operating model 4 Financials Jacob Aarup-Andersen 5 Concluding remarks Group CEO PEOPLE MAKE PLACES 37
Slide 38: We are a purpose-driven organisation
CONCLUDING REMARKS We are a purpose-driven organisation • A proud heritage based upon a deep respect for people… • …and a strong customer focus • Originated in Denmark but successfully exported across the globe • Embedded values of… • Fairness • Equality, and • Inclusion • …are fundamental to our va
Slide 39: We are driven by our purpose: 2025 ambition
Our stakeholder We are driven by 2025 ambition ambition our purpose Customers ‘Connecting people and places to ‘To achieve industry leading customer engagement‘ make the world work better’ “Making the world work better starts with our belief in creating a fair and inclusive society. We Share- Societ
Slide 40: Connecting people and places to make the world work better
ONE ISS Connecting people and places to make the world work better PEOPLE MAKE PLACES 40
Slide 41: Q&A
Q&A PEOPLE MAKE PEOPLE MAKEPLACES PLACES 41