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ISS focus on key accounts in fewer markets will lead to 100,000 job losses
ISS has revealed plans to cut 50% of its customers and some 100,000 jobs - representing a fifth of its global workforce - as it concentrates on key accounts and core services and leaves 13 countries that were among its least profitable markets: Thailand, Philippines, Malaysia, Brunei, Brazil, Chile, Israel, Estonia, Czech Republic, Hungary, Slovakia, Slovenia and Romania. These represent just 12% of ISS's group revenue and 8% of operating profits.
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.
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).
The two-year program of expedited investment will strengthen ISS's delivery capability to key accounts (including global and regional) and is expected to yield attractive financial returns. The company will focus on winning a larger share of the US$400 billion global market for key accounts with the biggest corporate customers. That business accounts for 46% of the company's organic growth, with ISS currently holding just 2% of the key-account market.
The company expects organic growth to accelerate to 4-6% a year in the medium term, from 1.5-3.5% expected in 2018.
"These bold decisions reflect our strong conviction in the growth opportunity afforded by key account customers," explained Jeff Gravenhorst, Group CEO, ISS. "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."
ISS's strategy - The ISS Way - has already created a more focused organisation, with stricter decision-making around the customers it wishes to serve and the services it provides. Considerable progress has been made, in driving growth of Integrated Facility Services for key account customers, especially global key accounts. 2018 has been a successful year and since the nine-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.
ISS said it will now strengthen and fully leverage its operating platform to drive stronger organic growth in the medium term. The geographic footprint will be narrowed to focus on those markets offering a meaningful and attractive opportunity to grow key account customers. The business will be simplified, risk reduced and capital reallocated to support core services. Restructuring costs are expected to fall in 2019 and again in 2020.
13th December 2018