XCSE:ISS ESEF Annual Report
ISS A/S (XCSE:ISS)
ESEF Annual Report
2021-10-07
For: 2021-06-30
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ISS A/S – Interim report for 1 J
In our opinion, the condensed consolidated interim financial statements give a true and fair view of the Group's assets, liabilities and financial position at 30 June 2021 and of the results of the Group's operations and consolidated cash flows for the financial period 1 January – 30 June 2021. In our opinion, the Management review includes a fair review of the development in the Group’s operations and financial conditions, the results for the period, cash flows and financial position as well as a description of the most significant risks and uncertainty factors that the Group face. Copenhagen , 11 August 2021 The Board o f Directors and the Executive Group Management Board have today discussed and approved the interim report of ISS A/S for the period 1 January – 30 June 2021. The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 “Interim Financial Reporting” as adopted by the EU and additional requirements of the Danish Financial Statements Act. The interim report has not been reviewed or audited. Kasper Fangel Jacob Aarup-Anderse n Pierre-François Rio lacci N iels Smedegaard Henrik Poulsen Valerie Beaulieu Kelly Lynn Kuhn Ben Stevens Søren Thorup Sørensen Cynthia Mary Trudell Nada Elbo a yadi (E) Joseph Nazaret h (E) Elsie Yiu (E) 
441 (794 ) 14 28 160 (137 ) 251 (2,677 ) 
650 (359 ) ISS A/S – Interim report for the period 1 January - 30 June 2021
2 40 14 - 2,742 2,670 
1,372 1,497 1,861 1,467 1,653 1,507 294 313 624 1,507 183 1,302 583 776 838 
185 8,124 (1,602 ) (191 ) 6,516 29 6,545 185 13,421 (892 ) (191 ) 12,523 24 12,547 
Company announcement no. 21/2021
Copenhagen, 11 August 2021
anuary – 30 June 20 21
1 of 32
Interim report for 1 January – 30 June 2021
Important milestones achieved in the turnaround execution. Upgrade of 2021 outlook for
free cash flow
Highlights
Organic growth was (0.2)% in H1 2021 (H1 2020: (3.0)%) and 5.8% in Q2 2021 (Q1 2021: (5.6)%), supported by
continued solid demand for above-base work, especially deep-cleaning and disinfection. Portfolio revenue
continues to be impacted by generally moderate re-opening of global activities with large variations across
geographies.
Operating margin (before other items) was 1.5% in H1 2021 (H1 2020: (2.2)% or around 0% excluding
restructuring costs and one-offs).
Free cash flow was DKK 1.6 billion in H1 2021 driven by improved operating profit and working capital
development. A large part of the cash flow from working capital is temporary and will result in a cash outflow
in H2 2021. Utilisation of factoring of DKK 1.0 billion at 30 June 2021 was unchanged from 31 December 2020.
Eight divestments were completed in H1 2021. Total net proceeds amounted to approximately DKK 1 billion.
The improved operating profit and cash flow, including divestment proceeds, decreased the net debt to DKK
13.5 billion from DKK 15.8 billion at 31 December 2020 reducing the leverage ratio to 5.3x (adjusted) (31
December 2020: 7.3x (adjusted)).
The execution of the OneISS strategy progressed as planned and important milestones were achieved in the
turnaround of the underperforming contracts and countries.
While turnaround initiatives in France progressed according to plan in H1 2021, increasing interest rates and
continued uncertainty around the pace of market recovery from Covid-19 led to an increase in the applied
WACC and consequently recognition of a goodwill impairment of DKK 450 million.
The performance in H1 2021 provides solid support for our 2021 outlook of positive organic growth and
operating margin above 2%. Free cash flow is now expected to be above DKK 1.0 billion (previously “slightly
positive”).
Jacob Aarup-Andersen Group CEO, ISS A/S, says:
“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.”
Financial overview Q1 2021 Q2 2021 H1 2021 H1 2020
DKKm (unless otherwise stated)
Revenue 17,213 17,191 34,404 35,481
Organic growth, % (5.6) 5.8 (0.2) (3.0)
Operating profit before other items - - 508 (762)
Operating margin (before other items), % - - 1.5 (2.2)
Free cash flow - - 1,645 (1,730)
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
2 of 32
Key figures and financial ratios
Financials H1 2021
H1 2020
2)
2020
Results (DKKm)
Revenue 34,404 35,481 69,823
Operating profit before other items 508 (762) (3,226)
Operating profit 468 (2,020) (4,730)
Pro forma adjusted EBITDA (LTM)
3)
2,536 2,747 2,175
Financial expenses, net (285) (289) (542)
Net profit from continuing operations 91 (2,540) (5,231)
Net profit from discontinued operations 160 (137) 36
Net profit 251 (2,677) (5,195)
Cash flow (DKKm)
Cash flow from operating activities 2,195 (1,150) (361)
Acquisition of intangible assets and property, plant
and equipment, net
(303) (341) (681)
Free cash flow 1,645 (1,730) (1,794)
Financial position (DKKm)
Total assets 44,407 49,368 43,605
Goodwill 19,355 20,546 19,662
Additions to property, plant and equipment 145 235 389
Equity 6,842 9,306 6,545
Net debt 13,480 16,385 15,802
Shares ('000)
Number of shares issued 185,668 185,668 185,668
Number of treasury shares 970 970 970
Average number of shares (basic) 184,698 184,698 184,698
Average number of shares (diluted) 185,698 185,257 185,136
Ratios H1 2021
H1 2020
2)
2020
Financial ratios (%, unless otherwise stated)
Operating margin
1)
1.5 (2.2) (4.6)
Equity ratio 15.4 18.9 15.0
Organic growth (0.2) (3.0) (6.5)
Acquisitions and divestments, net (0.5) (1.7) (1.8)
Currency adjustments (2.3) (0.6) (1.8)
Total revenue growth (3.0) (5.3) (10.1)
Net debt / Pro forma adjusted EBITDA
4)
5.3x 5.9x 7.3x
Share ratios (DKK)
Basic earnings per share (EPS) 1.3 (14.5) (28.2)
Diluted EPS 1.3 (14.5) (28.2)
Basic EPS (continuing operations) 0.4 (13.8) (28.4)
Diluted EPS (continuing operations) 0.4 (13.8) (28.4)
Non-financials H1 2021 H1 2020 2020
Social data
Full-time employees 75% 76% 75%
Employees end of period, number 363,455 439,264 378,946
1)
Based on Operating profit before other items.
Definitions, see Annual Report 2020.
3)
Adjusted for restructuring costs and one-offs (LTM). Including the impact of restructuring costs and one-offs, pro forma adjusted EBITDA
(LTM) was DKK (143) million and DKK (1,373) million at 30 June 2021 and 31 December 2020, respectively.
2)
Restated due to Portugal, Russia and Taiwan being classified as discontinued operations as of 31 December 2020.
4)
Adjusted for restructuring costs and one-offs (LTM). Including the impact of restructuring costs and one-offs, leverage was (94.1)x and
(11.5)x at 30 June 2021 and 31 December 2020, respectively.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
3 of 32
Strategic update
The OneISS strategy, announced in December 2020,
outlines the current strategic direction with dual
priorities of ensuring long-term improvement of the
operating model, while simultaneously delivering a
short-term turnaround.
The initiatives to enhance the operating model
continue to progress, improving execution and
developing global scale as a core competitive
advantage.
In Q2 2021, the work has been focused on
implementation of the organisational design across
countries as well as restructuring and strengthening
global commercial capabilities. The new commercial
structure is now being operated based on the four
previously announced globally prioritised industries;
Technology, Financial & Professional Services,
Industry & Manufacturing and Life Sciences. The
dedicated commercial leads of each of the industries
are establishing tailormade, best-in-class
operational, commercial and marketing practices to
capitalise on global scale and enhance commercial
momentum.
Turnaround initiatives
Recovery of the underperforming contracts and
countries is progressing well with financial run-rate
improvements compared to 2020.
The UK continued the development into a more
streamlined and focused business within the
prioritised segments as outlined in the OneISS
strategy. The organisation is being developed
accordingly, including enhanced commercial
resources.
In France, the large restructuring plan is progressing
following the planned FTE reductions. The new
country manager is gradually shifting focus from
restructuring to operational efficiency and
improvement of the commercial performance. The
French market is still heavily impacted by Covid-19
restrictions and the pace of market recovery within
the most impacted customer segments remains
uncertain.
The execution programme for the Deutsche
Telekom contract, including significant tailormade IT
developments, was implemented in July 2021. The
implementation will increase compliance and
transparency and will support the financial
performance. Further enhancements of the IT
systems will continue as part of day-to-day business,
including upgrades to the Capital Projects system.
ISS entered into an agreement with the Danish
Defence to exit the partnership agreement gradually
from November 2021 to the end of May 2022. The
Danish Defence will take over all services and
obligations, currently being handled by ISS during
the transition period. The onerous contract
provision recognised in 2020 will cover the agreed
exit fee and costs as well as operation of the contract
until the exit date.
Divestment programme
Total net proceeds from the divestment programme
amounted to approximately DKK 1 billion in H1 2021
following good momentum in the first half of 2021.
The proceeds mainly related to the divestments of
four Eastern European businesses and the Swiss
sewer maintenance business, Kanal Services.
ISS continues to target approximately DKK 2 billion
in total net proceeds from the divestment
programme in 2021 and 2022.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
4 of 32
Group performance
Operating results
January – June 2021
Grou
p revenue in the first six months of 2021 was
DKK 34.4 billion, a decrease of 3% compared with
the same period last year. Organic growth was
slightly negative at (0.2)% as the positive organic
growth in Q2 2021 was offset by the negative
organic growth of (5.6)% in Q1 2021. The impact
from acquisitions and divestments, net was (0.5)%.
Currency effects reduced revenue by 2.3%, mainly
due to depreciation of TRY and USD against DKK.
Organic growth was (0.2)% in the first six months of
2021 as a result of the continued negative impacts
from Covid-19. Organic growth improved in Q2 due
to continued high demand for disinfection and
deep-cleaning and a low comparison base in Q2
2020, as revenue reductions from Covid-19
restrictions and lockdowns appeared from the
second half of March 2020 in most markets.
Revenue from key accounts generated organic
growth of 0.9%. Projects and above-base work grew
organically by around 17%, especially due to
sustained solid demand for deep-cleaning and
disinfection.
The adverse impact from Covid-19 on revenue
continued to vary across service type, customer
segment and geographies. The services suffering
the most were those depending on our customers’
employees being on site. Consequently, revenue
from food services declined approximately 26% to
account for around 10% (H1 2020: 13%) of Group
revenue. All other service lines were less impacted.
From a customer segment perspective, the most
significant revenue impact was within Aviation (part
of the Transportation segment).
All regions, except Continental Europe, reported
negative organic growth in the first six months of
2021, albeit improved compared to Q1 2021.
Americas continued to report double-digit negative
growth rates, primarily due to the exposure to food
services, while our Continental European business
grew 5% organically mainly due to strong
performance in Spain, Switzerland, Turkey and Italy.
Operating profit before other items amounted to
DKK 508 million (H1 2020: DKK (762) million) for an
operating margin of 1.5% (H1 2020: (2.2)% or around
0% excluding approximately DKK 800 million
restructuring costs and one-offs).
The operating margin has gradually improved as our
turnaround initiatives of underperforming contracts
(Deutsche Telekom and Danish Defence) and
countries (the UK and France) are progressing as
expected. Underlying improvement was also driven
by Covid-19 restructuring initiatives initiated last
year, including contract exits and continued focus on
cost control.
All regions reported positive margins with
Continental Europe and Northern Europe
contributing most to the improvement compared to
the same period last year.
In Denmark, ISS and Danish Defence entered into an
agreement to phase out and exit the partnership by
the end of May 2022. The onerous contract provision
recognised in 2020 will cover the agreed exit fee and
costs as well as operation of the contract until the
exit date. No further provision has been recognised
in 2021.
Revenue and growth YTD June 2021
DKK million
2021 2020
Organic
growth
Acq./
div.
Currency
adj.
Growth
2021
Continental Europe 13,767 13,703 5 % (1)% (4)% 0 %
Northern Europe 11,398 11,343 (1)% (0)% 1 % 0 %
Asia & Pacific 6,161 6,414 (1)% (0)% (3)% (4)%
Americas 2,820 3,708 (17)% - (7)% (24)%
Other countries 278 324
18 % (24)% (8)% (14)%
Corporate / eliminations (20)
(11)
- - - -
Group
34,404
35,481 (0.2)% (0.5)% (2.3)% (3.0)%
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
5 of 32
In Germany, the execution programme for the
Deutsche Telekom contract, including significant
tailormade IT developments, was implemented in
July 2021. The implementation will increase
compliance and transparency and will support the
financial performance. Further enhancements of the
IT systems will continue as part of day-to-day
business, including upgrades to the Capital Projects
system.
Corporate costs amounted to DKK 527 million (H1
2020: DKK 259 million). In line with the OneISS
strategy, we are investing in our operating model,
including in technology and centralisation of certain
functions.
Other income and expenses, net was an income of
DKK 441 million (H1 2020: (794) million),
predominantly due to gain on divestment of Kanal
Services in Switzerland.
Goodwill impairment was DKK 450 million (H1 2020:
DKK 416 million) which related to an impairment loss
in France. During the first six months of 2021,
transparency around the recoverability from Covid-
19 and related uncertainties has increased, noting
that the pace of market recovery within the most
impacted customer segments remains uncertain.
Accordingly, the risk reflected in the applied WACC
has been increased. Combined with increasing
interest rates in H1 2021, this led to a higher applied
WACC at 30 June 2021.
Financial expenses, net was DKK 285 million for the
first six months of 2021 (H1 2020: DKK 289 million).
Interest expenses decreased slightly compared to
last year due to lower net debt, which was offset by
adverse movements in foreign exchange gains and
losses.
The effective tax rate in H1 2021 was 50.0% (H1
2020: (10.0)%) calculated as Income tax of DKK 92
million divided by Profit before tax of DKK 183
million. The effective tax rate was negatively
impacted by non-tax deductible impairment in
France as well as certain valuation allowances on
deferred tax assets. Furthermore, due to the low
profit before tax in H1 2021, the impact from non-
tax deductible costs had a relatively higher impact
on the effective tax rate.
Net profit from discontinued operations was DKK
160 million (H1 2020: DKK (137) million) in the first
six months of 2021, including gain on divestment of
DKK 130 million from the sale of our businesses in
Romania, Hungary, Slovakia and the Czech Republic.
Net profit was DKK 251 million (H1 2020: DKK (2,677)
million). The improvement compared to the same
period last year was mainly due to improved
operating profit before other items and gain on
divestments, mainly Kanal Services in Switzerland.
Furthermore, H1 2020 was negatively impacted by
DKK 778 million related to the IT security incident.
Operating profit
1)
and margin YTD June 2021
DKK million
Continental Europe 190 1.4 % (344) (2.5)%
Northern Europe 306 2.7 % (535) (4.7)%
Asia & Pacific 370 6.0 % 247 3.9 %
Americas 160 5.7 % 114 3.1 %
Other countries 9 3.2 % 15 4.5 %
Corporate / eliminations (527) - (259) -
Group 508 1.5 % (762) (2.2)%
1)
Before other items.
2021 2020
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
6 of 32
Q2 2021
Group revenue in Q2 2021 was DKK 17.2 billion, an
increase of 3.6% compared with the same period last
year. Organic growth was 5.8% (Q1 2021: (5.6)%),
currency effects were negative 1.6%, and
acquisitions and divestments, net reduced revenue
by 0.6%.
Although revenue development was flat between Q1
and Q2 2021, organic growth accelerated in Q2 in all
regions due to a lower comparison base in Q2 2020.
Organic growth was primarily driven by double-digit
growth in Continental Europe. This was mainly due
to recovery of portfolio revenue as tight Covid-19
restrictions were eased across the region, key
account growth and continued high demand for
projects and above-base work. Northern Europe
experienced continued high demand for projects
and above-base work, predominantly in Denmark.
Organic revenue growth in Asia & Pacific and
Americas was flat. Across the Group, projects and
above-base work grew organically by around 13% in
the second quarter of 2021.
Key account development
Revenue from key accounts was 69% of Group
revenue in the first six months of 2021 (2020: 67%)
and generated organic growth of 0.9%, slightly
better than the Group’s organic growth. As such, the
demand from key accounts continued to show some
resilience despite Covid-19 lockdowns and
restrictions. This was mainly due to high demand for
above-base work related to Covid-19 in Denmark,
the commencement of a five-year contract with
Iberdrola in Spain, and the launch of a Hospital
Authority contract in the healthcare segment in
Hong Kong. Additionally, the Americas region
gradually started up the five-year IFS contract with a
large international manufacturing customer.
Despite the continued suppressed activity in the
bidding environment, which is gradually ramping up,
ISS secured contract extensions with four major key
account customers, one new win as well as one
expansion. ISS extended the global contract with
Barclays for five years and the Rolls Royce contract
across eight countries for two years. Additionally, ISS
signed a one-year extension of the contract with
Victorian Department of Education and Training in
Australia and a five-year extension with DSB in
Denmark. In Norway, Equinor and ISS signed a five-
year contract, with a possible extension of additional
five years. Finally, ISS signed an expansion of a
contract with a global manufacturing customer,
which is set to launch in Q1 2022.
Major key account developments
1)
Countries Segment Term
Effective
Wins
Equinor Norway Energy & Resources 5 years Q4 2021
Extensions/expansions
Rolls Royce 8 countries Industry & Manufacturing 2 years Q1 2021
Barclays Global Business Services & IT 5 years Q2 2021
Victorian Department of Education and Training Australia Public Administration 1 year Q2 2021
DSB Denmark Transportation & Infrastructure 5 years Q4 2021
Industry & Manufacturing customer Global Industry & Manufacturing 5 years Q1 2022
Exits/losses
Danish Defence Denmark Public Administration - Q2 2022
1)
Annual revenue above DKK 100 million.
Revenue and growth Q2 2021
DKK million
Q2 2021 Q2 2020
Organic
growth
Acq./
div.
Currency
adj.
Growth
Q2 2021
Continental Europe 6,863 6,350 13 % (1)% (4)% 8 %
Northern Europe 5,705 5,395 3 % (0)% 3 % 6 %
Asia & Pacific 3,032 3,098 (0)% 0 % (2)% (2)%
Americas 1,462 1,593 (1)% - (7)% (8)%
Other countries 139 160
19 % (20)% (12)%
(13)%
Corporate / eliminations (10)
1 - - - -
Group 17,191 16,597 5.8 % (0.6)% (1.6)% 3.6 %
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
7 of 32
Ca
p
ital structure
Free cash flow
Free cash flow in H1 2021 was DKK 1,645 million (H1
2020: DKK (1,730) million), an improvement of DKK
3,375 million compared to the same period last year.
Free cash flow in H1 2021 was positively impacted by
improvement in operating profit before other items
and changes in working capital. The latter was a
result of the pick-up in activity, strong focus on
working capital management as well as timing with
a large part expected to reverse in H2 2021.
Cash flow from operating activities in H1 2021 was
DKK 2,195 million (H1 2020: DKK (1,150) million), an
increase of DKK 3,345 million compared with the
same period last year primarily due to the
improvement in operating profit before other items
and a positive impact from working capital. This was
predominantly due to an increase in employee-
related accruals following the pick-up in activity and
postponement of holidays due to Covid-19, with a
large part expected to reverse in H2 2021 as well as
generally strong focus on working capital
management. The improvement was further
supported by improved payment terms for ISS and
increased customer prepayments of DKK 272 million
following the extension of a global key account
contract. Utilisation of factoring of DKK 1.0 billion at
30 June 2021 was unchanged from 31 December
2020.
Cash flow from investing activities in H1 2021
improved to DKK 579 million (H1 2020: DKK (466)
million), mainly driven by cash inflow of DKK 889
million from divestments, primarily Kanal Services in
Switzerland. Investments in intangible assets and
property, plant and equipment, net, was DKK 303
million (H1 2020: DKK 341 million), which
represented 0.9% of Group revenue (H1 2020: 1.0%)
and reflected continued strict investment discipline
during Covid-19. Cash outflow from acquisitions of
DKK 21 million was mainly related to earn-out
payments on prior-year acquisitions.
Cash flow from financing activities in H1 2021 was
DKK (1,121) million (H1 2020: DKK 2,815 million)
mainly stemming from lower utilisation of working
capital facilities.
It is our primary capital allocation priority to ensure
that we maintain a strong and efficient balance sheet
and that our liquidity position supports our
operational needs and our continued strategy
execution.
On the back of a strong liquidity position and with
increased visibility on the Covid-19 impact, ISS
cancelled the EUR 700 million backup credit facility
in May 2021. The facility was established in Q2 2020
in response to Covid-19-related uncertainties. The
Group continues to have undrawn facilities of EUR 1
billion in a revolving credit facility maturing
November 2024.
ISS has no material debt maturities until 2024 and
no financial covenants in the capital structure. We
are committed to our Financial Policy of maintaining
an investment grade profile and ISS currently holds
corporate credit ratings of BBB-/ Negative outlook
assigned by S&P and Baa3/ Stable outlook assigned
by Moody’s.
Net debt decreased to DKK 13.5 billion at 30 June
2021 from DKK 16.4 billion at 30 June 2020, primarily
due to free cash flow as well as the progressing
divestment programme, which generated proceeds
of approximately DKK 1.5 billion in the 12-month
period ending 30 June 2021. Pro forma adjusted
EBITDA for the 12-month period ending 30 June
2021, excluding one-offs and non-recurring costs
related to restructurings initiated in 2020 in
response to Covid-19, was DKK 2,536 million, and
consequently financial leverage was 5.3x (2020:
7.3x)
1)
.
Leverage is expected to reduce during 2021 and
2022 as operating performance and free cash flow is
expected to improve. As such, we are on track to
meet our turnaround target of deleveraging to
below 3.0x to be achieved by 31 December 2022.
No dividend payment or share buyback will be made
in 2021 and 2022 as the leverage target is not
expected to be met until the end of 2022.
1)
Including the impact of restructuring costs and one-offs (LTM), leverage was (94.1)x and (11.5)x at 30 June 2021 and 31 December 2020, respectively.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
8 of 32
Equity
Total equity was DKK 6,842 million at 30 June 2021
equivalent to an equity ratio of 15.4% (30 June 2020:
18.9%). The increase from 31 December 2020 was
primarily a result of Net profit of DKK 251 million, and
positive currency adjustments relating to
investments in foreign subsidiaries of DKK 108
million, partially offset by negative fair value
adjustments of net investment hedges, net of DKK
65 million.
Divestment programme
The strategic divestment programme had good
momentum in the first six months of 2021. ISS
completed the divestment of its activities in the
Czech Republic, Romania and Slovakia in March and
Hungary in April. Furthermore, ISS divested the
Swiss sewer maintenance business, Kanal Services in
May. In addition, three minor business units in
Sweden and the UK were divested in H1 2021.
The divestment of the Group’s activities in Slovenia,
which was signed in November 2020, has been
postponed due to delayed regulatory approval, but
is expected to be completed in Q3 2021.
By the end of H1 2021, 11 countries out of the 18
countries in the programme scope had been
divested.
Total net proceeds from the above divestments
amounted to approximately DKK 1 billion in H1 2021.
ISS continues to target approximately DKK 2 billion
in total net proceed from the divestment
programme in 2021 and 2022.
At 30 June 2021, 9 businesses were classified as held
for sale comprising seven countries and two
business units; one business in Asia & Pacific and
one business in Americas. Assets and liabilities held
for sale amounted to DKK 1,372 million and DKK 583
million, respectively.
In H1 2021, divestments and fair value
remeasurement of businesses classified as held for
sale (including discontinued operations) resulted in
a net gain before tax of DKK 576 million (all
divestments) (H1 2020: net loss of DKK 130 million),
see note 14 to the condensed consolidated interim
financial statements.
Management changes
On 13 April 2021 at the Annual General Meeting,
Niels Smedegaard was elected as new Chair of the
Board of Directors (Board), as Lord Allen of
Kensington, previous Chair, did not seek re-election.
Furthermore, Kelly Kuhn was elected as new
member of the Board, as Claire Chiang did not seek
re-election.
On 1 May 2021, Liz Benizon took up the position as
Country Manager of ISS UK & Ireland and joined the
Executive Group Management.
On 1 June 2021, Markus Sontheimer took up the
position as Chief Information and Digital Officer and
joined the Executive Group Management.
Subsequent events
Other than as set out elsewhere in this Interim
report for H1 2021, we are not aware of events
subsequent to 30 June 2021, which are expected to
have a material impact on the Group’s financial
position.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
9 of 32
Regional performance
Continental Europe
Revenue in the first
six months of 2021
was DKK 13,767
million, which was
flat compared to H1
2020, reflecting an
organic growth of
5% (H1 2020: 1%).
Acquisitions and divestments, net decreased
revenue by 1% and currency effects impacted
negatively by 4%.
Organic growth in Continental Europe was mainly
driven by strong performance in Turkey, Spain,
Switzerland and Italy, albeit with a low comparison
base in Q2 2020. In Turkey, the growth was
supported by price increases as a result of cost
inflation passed on to customers as well as the
continued growth from launches of new hospital
contracts in the second half of 2020. Spain, Italy and
Switzerland experienced continued high demand for
projects and above-base work, especially deep-
cleaning and disinfection as well as contract
expansions. Across the region, projects and above-
base work increased around 23% organically. This
was partly offset by revenue reductions due to
contract exits in Germany and the Netherlands as
well as the impact from Covid-19 related lockdowns
which continued to negatively impact the region,
most significantly in the Netherlands due to high
exposure to food services.
Operating profit before other items amounted to
DKK 190 million in H1 2021 for an operating margin
of 1.4% (H1 2020: (2.5)%). Most countries in the
region contributed to the margin increase, led by
Spain, Switzerland and Turkey. The ongoing
restructuring initiatives, portfolio trimming and
continued focus on recovery from Covid-19,
together with the high demand for projects and
above-base work impacted the margins positively
across the region. In Germany the execution
programme for the Deutsche Telekom contract
continued according to plan and the IT
developments were implemented in July 2021.
Q2 2021 Reve
nue amounted to DKK 6,863 million
driven by organic growth of 13% (Q1 2021: (2)%),
while currency effects and acquisitions and
divestments, net decreased revenue with 1% and
4%, respectively. Organic growth was supported by
recovery of portfolio revenue as tight Covid-19
restrictions were eased across the region and
continued strong demand for projects and above-
base work as well as a low comparison base in Q2
2020. All countries, except the Netherlands,
delivered positive organic growth with Turkey, Spain,
Switzerland, Belgium, Austria and Italy delivering
double-digit growth rates.
Northern Europe
Revenue amounted to
DKK 11,398 million in
H1 2021, which was flat
compared with the
same period last year.
Organic growth was
(1)% (H1 2020: (7)%)
and currency effects
were positive with 1%.
The continued Covid-19 lockdowns and restrictions
across the region were the main drivers behind the
negative organic growth, with Norway and the UK
being the most significantly impacted. The region
has a relatively high exposure to food services,
where total revenue decreased by 24% compared to
same period last year, albeit with initial signs of
recovery towards the end of the period. Norway
reported negative organic growth due to high
exposure to food services and customers in the
Hotels and Aviation segments. The UK was
negatively impacted, predominantly by the extended
Covid-19 restrictions in most of the first six months
of 2021, though partly offset by a pickup within the
healthcare segment due to additional above-base
work. Organic growth in Finland and Denmark was
positive due to high demand for projects and above-
base work, mainly deep-cleaning and disinfection.
Projects and above-base work for the region
increased around 15% organically.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
10 of 32
Operating profit before other items amounted to
DKK 306 million, resulting in an operating margin of
2.7% (H1 2020: (4.7)%). All countries in the region
contributed to the increase in margin with focus on
recovery from Covid-19 and continued focus on cost
control being the main drivers. Further, the
operating margin in H1 2020 was negatively
impacted by one-off costs in the UK, following the
detailed review of the business platform, as well as
the Danish Defence contract in Denmark operating
at a loss-making level.
Q2 2021 Revenue amounted to DKK 5,705 million
driven by organic growth of 3% (Q1 2021: (4)%), with
currency effects increasing revenue by 3%. The
organic growth was mainly driven by the continued
high demand for projects and above-base work
across the region, predominantly in Denmark. All
countries in the region contributed to the
improvement compared to prior quarters, as initial
signs of recovery from Covid-19 appeared towards
the end of the quarter.
Asia & Pacific
Revenue decreased
4% to DKK 6,161
million in the first six
months of 2021
compared to the
same period last year,
reflecting a negative
organic growth of 1%
(H1 2020: 1%), and
negative currency effects of 3%.
Covid-19 continued to negatively impact the region,
most significantly in India, Indonesia and Singapore.
This was partly offset by positive organic growth in
Hong Kong, Australia and China, mainly driven by the
continued high demand for projects and above-base
work, mostly related to deep-cleaning and
disinfection. In Australia, this was further driven by
the pickup in activity in the domestic Aviation
segment. Across the region, projects and above-
base work increased around 17% organically.
Operating profit before other items increased to
DKK 370 million, resulting in an operating margin of
6.0% (H1 2020: 3.9%). Most countries in the region
contributed to the solid operating margin, driven by
strong operational performance and the continued
demand for higher margin projects and above-base
work. This was partially offset by impact from Covid-
19 lockdowns, especially in India and Indonesia.
Q2 2021 Revenue was reduced by 2% to DKK 3,032
million, representing an organic growth of (0)% (Q1
2021: (2)%), while currency effects reduced revenue
by 2%. The organic growth was driven by Hong
Kong, Australia and Singapore, mainly related to
Covid-19-related above-base work as well as the
Aviation segment in Australia. This was offset by
India and Indonesia with continued negative impact
from Covid-19.
Americas
Revenue decreased
24% to DKK 2,820
million in H1 2021
compared with the
same period last year.
Organic growth was
(17)% (H1 2020: (11)%)
and negative currency
effects were 7%.
Due to high exposure to food services and the
Aviation segment, the Americas region continued to
report the largest revenue decline in the Group. As
such, revenue from food services declined by 49%
compared to H1 2020 and accounted for around
22% of the region’s revenue (2020: 29%) compared
to 10% of revenue for the Group (2020: 11%). Initial
signs of recovery were seen towards the end of H1
2021. Mexico delivered organic growth of 8.3%,
mainly due to solid revenue growth from new sales
to key accounts.
Operating profit before other items was DKK 160
million for an operating margin of 5.7% in the first
six months of 2021 (H1 2020: 3.1%). Despite the
revenue decline, the region continued to generate a
solid operating margin mainly as a result of
renegotiation of contracts and portfolio trimming
last year and continued focus on cost control.
Mexico delivered a margin of 5.9% supported by new
sales to key accounts.
Q2 2021 Revenue decreased 8% to DKK 1,462
million compared with the same period last year,
reflecting negative organic growth of 1% (Q1 2021:
(30)%) and negative currency effects of 7%. The
negative organic growth was mainly driven by
continued Covid-19 closures in food services. This
was partly offset by growth in other segments of the
business and Mexico. Initial signs of recovery were
seen towards the end of the quarter for food
services and the Aviation segment.
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
11 of 32
Outlook
Outlook 2021
This section should be read in conjunction with
“Forward-looking statements” as shown in the table
on page 12.
Based on the development in H1 2021, the outlook
for free cash flow is upgraded. Outlook for organic
growth and operating margin remains unchanged.
The execution of the OneISS strategy is progressing
in line with plan, including the recovery of the
underperforming contracts and countries.
Global uncertainties remain significant as
governments across the globe continue to change
Covid-19 restrictions and lockdowns. Although the
global vaccination programmes are progressing, the
impact on the activity levels within ISS’s core services
remain uncertain.
Organic growth is expected to be positive in 2021
(2020: (6.5)%). Both portfolio revenue and above-
base revenue are subject to high uncertainty due to
the continued impact of Covid-19. The revenue lost
in 2020 from Covid-19 lockdowns and restrictions is
expected to be recovered over some years.
Operating margin is expected to be above 2% in
2021 (2020: (4.6)%). The main drivers of the
improvement are the progress on the
underperforming contracts and countries as well as
successful restructuring initiatives in response to
Covid-19. These initiatives include contract exits,
trimming and renegotiation of especially food
services contracts to ensure a healthy profitability at
reduced volumes.
Free cash flow is expected to be above DKK 1 billion
in 2021 compared to previously expected “slightly
positive” (2020: DKK (1.8) billion). The upgrade of the
outlook is mainly a result of working capital
improvement. The factoring level is expected to
slightly increase in 2021 compared to 2020.
Turnaround targets
ISS confirms the turnaround targets announced as
part of the launch of the OneISS strategy in
December 2020. The expectation for free cash flow
in 2022 is unchanged but due to the changed
outlook for 2021, the wording has been amended
from “strongly improving in 2022” to “solid positive
free cash flow in 2022”.
The turnaround targets focus on the short-term
recovery of the business and are outlining a healthy
recovery with focus on profitability and cash
generation:
Operating margin above 4% as run-rate when
entering 2023
Net debt / Pro forma adjusted EBITDA to be
reduced to below 3x by the end of 2022
Above DKK 1 billion free cash flow in 2021 and
solid positive free cash flow in 2022
Annual Report
2020
Interim report
H1 2021
Organic growth Positive Positive
Operating margin
1)
Above 2% Above 2%
Free cash flow Slightly positive Above DKK 1bn
1)
Based on operating profit before other items
Outlook 2021
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
12 of 32
Expected revenue impact from
divestments, acquisitions and foreign
exchange rates in 2021
Divestments and acquisitions completed by 31 July
2021 (including in 2020) are expected to have a
negative impact on revenue growth in 2021 of
approximately 0-1%-point. In the absence of
acquisitions, the negative revenue impact is likely to
increase during the year as we execute on the
strategic divestment programme. Business units to
be divested are included in Group revenue until the
time of divestment. Countries to be divested
continue to be reported as discontinued operations.
Consequently, only business units will impact
revenue growth upon divestment. Based on the
current exchange rates, a negative impact on
revenue growth of 0-2%-points is expected in 2021
from the development of foreign exchange rates.
1)
The forecasted average exchange rates for the financial year 2021
are calculated using the realised average exchange rates for th
e
first sev
en months of 2021 and the average forward exchange rates
(as of 1 August 2021) for the remaining five months of 2021.
Forward-looking statements
This report contains forward-looking statements, including, but
not limited to, the guidance and expectations in Outlook.
Statements herein, other than statements of historical fact,
regarding future event or prospects, are forward-looking
statements. The words may, will, should, expect, anticipate,
believe, estimate, plan, predict, intend or variations of such
words, and other statements on matters that are not historical
fact or regarding future events or prospects, are forward-looking
statements. ISS has based these statements on its current
views with respect to future events and financial performance.
These views involve risks and uncertainties that could cause
actual results to differ materially from those predicted in the
forward-looking statements and from the past performance of
ISS.
Although ISS believes that the estimates and projections
reflected in the forward-looking statements are reasonable, they
may prove materially incorrect, and actual results may materially
differ, e.g. as the result of risks related to the facility service
industry in general or ISS in particular including those described
in this report and other information made available by ISS. As a
result, you should not rely on these forward-looking statements.
ISS undertakes no obligation to update or revise any forward-
looking statements, whether as a result of new information,
future events or otherwise, expect to the extent required by law.
The Annual Report 2020 of ISS A/S is available at the Group’s
website, www.issworld.com .
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
13 of 32
Management statement
Executive Group Management Board
Group CEO
Group CFO
CEO Europe
Board of Directors
Chairman
Deputy
Chairman
E = Employee representative
Company announcement no. 21/2021
Copenhagen, 11 August 2021
15 Primary statements
15 Condensed consolidated statement of profit or loss
16 Condensed consolidated statement of comprehensive income
17 Condensed consolidated statement of cash flows
18 Condensed consolidated statement of financial position
19 Condensed consolidated statement of changes in equity
20 Basis of preparation
20 1 General accounting policies
20 2 Change in accounting policies
20 3 Significant accounting estimates and judgements
21 Statement of profit or loss
21 4 Segment information
22 5 Revenue
22 6 Share-based payments
23 7 Other income and expenses, net
24 8 Goodwill impairment
25 9 Financial income and expenses
26 10 Discontinued operations
27 Statement of cash flows
27 11 Changes in working capital
27 12 Free cash flow
28 13 Divestments
29 Statement of financial position
29 14 Assets and liabilities held for sale
29 15 Pensions and similar obligations
29 16 Provisions
30 Other
30 17 Government grants and assistance
30 18 Subsequent events
Condensed
consolidated
interim financial
statements
_
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_
ISS A/S – Interim report for the period 1 January - 30 June 2021
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
Condensed consolidated statement of profit or loss
1 January – 30 June
DKK million
YTD 2021 YTD 2020
Revenue
4, 5 34,404 35,481
Staff costs
17
(22,876 ) (23,794 )
Consumables (2,226 ) (3,070 )
Other operating expenses (8,016 ) (8,571 )
Depreciation and amortisation
1)
(778 ) (808 )
Operating profit before other items 508 (762 )
Other income and expenses, net
7
Goodwill impairment
8
(450 ) (416 )
Amortisation/impairment of brands and customer contracts (31 ) (48 )
Operating profit 468 (2,020 )
Financial income
9
Financial expenses
9
(299 ) (317 )
Profit before tax 183 (2,309 )
Income tax (92 ) (231 )
Net profit from continuing operations 91 (2,540 )
Net profit from discontinued operations
10
Net profit 251 (2,677 )
Attributable to:
Owners of ISS A/S 245 (2,682 )
Non-controlling interests 6 5
Net profit
Earnings per share, DKK
Basic earnings per share (EPS) 1.3 (14.5 )
Diluted earnings per share 1.3 (14.5 )
Earnings per share for continuing operations, DKK
Basic earnings per share (EPS) 0.4 (13.8 )
Diluted earnings per share 0.4 (13.8 )
1)
Excluding Goodwill impairment and Amortisation/impairment of brands and customer contracts.
Note
_
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_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
1 January – 30 June
DKK million
Note YTD 2021 YTD 2020
Net profit 251 (2,677 )
Other comprehensive income
Actuarial gains/(losses)
15
Impact from asset ceiling regarding pensions (638 ) 102
Tax (3 ) 48
Net total, that will not be reclassified to profit or loss in subsequent periods 9 (209 )
Foreign exchange adjustments of subsidiaries and non-controlling interests 108 (455 )
Fair value adjustments of net investment hedges (83 ) 125
Recycling of accumulated foreign exchange adjustments on country exits (26 ) -
Tax 18 (27 )
Net total, that may be reclassified to profit or loss in subsequent periods 17 (357 )
Other comprehensive income 26 (566 )
Comprehensive income 277 (3,243 )
Attributable to:
Owners of ISS A/S 274 (3,246 )
Non-controlling interests 3 3
Comprehensive income 277 (3,243 )
Condensed consolidated statement of
comprehensive income
_
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_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
Condensed consolidated statement of cash flows
1 January – 30 June
DKK million
Note YTD 2021 YTD 2020
Operating profit before other items 508 (762 )
Operating profit before other items from discontinued operations
10 45 26
Depreciation and amortisation 778 816
Share-based payments 35
Changes in working capital
11 1,61
4
(730)
Changes in provisions, pensions and similar obligations (378 ) 81
Other expenses paid (32 )
(136 )
Interest received 14
Interest paid (165 ) (233 )
Income tax paid (224 ) (254 )
Cash flow from operating activities 2,195 (1,150 )
Acquisition of businesses (21 )
(103 )
Divestment of businesses
13 889 (5 )
Acquisition of intangible assets and property, plant and equipment (312 ) (382 )
Disposal of intangible assets and property, plant and equipment 9 41
Acquisition of financial assets, net
(17 )
Cash flow from investing activities 579 (466 )
Other financial payments, net (638 ) 3,319
Repayment of lease liabilities (468 ) (504 )
Acquisition of non-controlling interests (15 )
Cash flow from financing activities (1,121 ) 2,815
Total cash flow 1,653 1,199
Cash and cash equivalents at 1 Januar
y
Total cash flow 1,653 1,199
Foreign exchange adjustments 93
(281 )
Cash and cash equivalents at 30 June 4,488 3,588
Free cash flow
12 1,645 (1,730 )
_
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_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
Condensed consolidated statement of financial position
30 June 30 June 31 December
DKK million Note 2021 2020 2020
Assets
Intangible assets 22,189 23,574 22,518
Property, plant and equipment and leases 3,276 4,001 3,546
Deferred tax assets 899 825 818
Other financial assets 323 331 354
Non-current assets 26,687 28,731 27,236
Inventories 167 274 175
Trade receivables 9,828 11,928 9,861
Tax receivables 171 111 163
Other receivables 1,694 3,239 1,567
Cash and cash equivalents 4,488 3,588 2,742
Assets held for sale
14
Current assets 17,720 20,637 16,369
Total assets 44,407 49,368 43,605
Equity and liabilities
Equity attributable to owners of ISS A/S 6,817 9,279 6,516
Non-controlling interests 25 27 29
Total equity 6,842 9,306 6,545
Loans and borrowings 17,194 13,806 17,345
Pensions and similar obligations
15
Deferred tax liabilities 975 1,455 1,022
Provisions
16
Non-current liabilities 19,930 17,227 20,498
Loans and borrowings 870 6,286 1,298
Trade and other payables 5,537 5,180 5,083
Tax payables 124 283 142
Other liabilities 9,014 10,127 7,899
Provisions
16
Liabilities held for sale
14
Current liabilities 17,635 22,835 16,562
Total equity and liabilities 44,407 49,368 43,605
_
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_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
Condensed consolidated statement of changes in equit
y
1 January – 30 June
DKK million
Note
Share
capital
Retained
earnings
Trans-
lation
reserve
1)
Treasury
shares Total
Non-con-
trolling
interests
Total
equity
2021
Equity at 1 January
Net profit - 245 - - 245 6 251
Other comprehensive income - 9 20 - 29 (3 ) 26
Comprehensive income - 254 20 - 274 3 277
Share-based payments
6 - 35 - - 35 - 35
Acquisition of non-controlling interests - (8 ) - - (8 ) (7 ) (15 )
Transactions with owners - 27 - - 27 (7 ) 20
Changes in equity - 281 20 - 301 (4 ) 297
Equity at 30 June 185 8,405 (1,582 ) (191 ) 6,817 25 6,842
2020
Equity at 1 January
Net profit - (2,682 ) - - (2,682 ) 5 (2,677 )
Other comprehensive income - (209 ) (355 ) - (564 ) (2 ) (566 )
Comprehensive income - (2,891 ) (355 ) - (3,246 ) 3 (3,243 )
Share-based payments - 2 - - 2 - 2
Transactions with owners - 2 - - 2 - 2
Changes in equity - (2,889 ) (355 ) - (3,244 ) 3 (3,241 )
Equity at 30 June 185 10,532 (1,247 )
(191 ) 9,279 27 9,306
1)
At 30 June 2021, accumulated foreign exchange losses of DKK 17 million related to discontinued operations (30 June 2020: gain of DKK 139 million).
Attributable to owners of ISS A/S
_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
1 General accounting policies
Basis of preparation
2 Changes in accounting policies
3 Significant accounting estimates and judgements
The condensed consolidated interim financial statements of ISS A/S for the period 1 January - 30 June 2021 comprise ISS A/S and
its subsidiaries (collectively, the Group).
The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial
Reportin
g
" as adopted b
y
the EU and additional requirements of the Danish Financial Statements Act.
The accounting policies adopted in these condensed consolidated interim financial statements are consistent with those followed
in the preparation of the Group’s consolidated financial statements for the year ended 31 December 2020, except for the adoption
of a number of new or amended standards which became applicable for the current reporting period. The Group did not have to
change its accounting policies or make retrospective adjustments as a result of adopting these standards.
The preparation of condensed consolidated interim financial statements requires management to make
j
udgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
Except for the
j
udgements and estimates commented upon in the notes of these condensed consolidated interim financial
statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended
31 December 2020.
T
h
e Group
h
as prepare
d
t
h
e con
d
ense
d
conso
l
i
d
ate
d
interim
f
inancia
l
statements on t
h
e
b
asis t
h
at it wi
ll
continue to operate as a
going concern. The Board of Directors and the Executive Group Management Board consider that there are no material
uncertainties that may cast significant doubt over this assumption and have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less
than 12 months from the end of the re
p
ortin
g
p
eriod.
The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual
consolidated financial statements, and should be read in conjunction with the Group’s consolidated financial statements as at 31
December 2020.
_
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_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
4 Segment information
DKK million
Continental
Europe
Northern
Europe
Asia &
Pacific Americas
Other
countries
Total
segments
YTD 2021
Revenue
1)
13,767 11,398 6,161 2,820 278 34,424
Operating profit before other items
190 306 370 160 9 1,035
Operating profit 176 297 365 148 9 995
Total assets 16,011 17,109 7,489 4,261 1,454 46,324
Hereof assets held for sale - - 167 315 890 1,372
Total liabilities 9,609 10,160 3,181 3,221 773 26,944
Hereof liabilities held for sale - - 35 74 474 583
YTD 2020
Revenue
1)
13,703 11,343 6,414 3,708 324 35,492
Operating profit before other items
(344) (535) 247 114 15 (503)
Operating profit (1,084) (683) 204 100 14 (1,449)
Total assets 18,213 17,453 7,900 4,868 2,839 51,273
Hereof assets held for sale -
-
121 -
1,376 1,497
Total liabilities 11,091 10,436 3,791 3,861 1,603 30,782
Hereof liabilities held for sale -
-
36 -
740 776
Reconciliation of operating profit
DKK million YTD 2021 YTD 2020
Operating profit for reportable segments 995 (1,449)
Unallocated corporate costs (527) (259)
Unallocated other income and expenses, net - (312)
Operating profit 468 (2,020)
ISS is a leading, global provider of workplace and facility service solutions operating in 60 countries. Operations are generally
managed based on a geographical structure in which countries are grouped into regions. The regions have been identified based
on a key principle of grouping countries that share market conditions and cultures. Countries where we do not have a full country
support structure, which are managed by Global Operations, are combined in a separate segment “Other countries”.
1)
Including internal revenue which due to the nature of the business is insignificant and therefore not disclosed.
_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
5 Revenue
DKK million YTD 2021 YTD 2020
Key accounts 23,578 23,628
Large and medium 8,730 9,887
Small and route-based 2,096 1,966
Revenue 34,404 35,481
6 Share-based payments
LTIP 2021
LTIP 2021
Total PSUs granted 1,349,527
Number of participants 129
Number of PSUs expected to vest at grant date 685,249
Fair value of PSUs expected to vest at grant date, DKK million 80
LTIP 2018 (vested)
In March 2021, the LTIP 2018 programme vested. Based on the annual EPS and TSR performances for 2018, 2019 and 2020, 0% of
the granted PSUs vested. After this vesting, no further PSUs are outstanding under the LTIP 2018 and the programme has lapsed.
On 1 March 2021, new performance-based share units (PSUs) were granted under the LTIP to members of the EGM (EGMB and
Corporate Senior Officers of the Group) and other senior officers of the Group. The programme is described in the consolidated
financial statements for 2020. The number of PSUs granted was 1,349,527. Like previous grants under the LTIP, the PSUs will vest
on the date of the third anniversary of the grant, subject to achievement of certain performance targets and service criteria. Upon
vesting, each PSU entitles the holder to receive one share at no cost.
_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
7 Other income and expenses, net
DKK million YTD 2021 YTD 2020
Gain on divestments 456 19
Other income 456 19
Loss on divestments (10) (16)
Acquisition and integration costs (5) (1)
IT security incident - (778)
Winding up of businesses - (18)
Other expenses (15) (813)
Other income and expenses, net 441 (794)
Gain on divestments mainly related to the divestment of Kanal Services in Switzerland. In 2020, the gain related mainly to the
divestment of the Pest control business in Singapore.
Loss on divestments mainly related to the divestment of the Fruit Baskets business in Sweden and the Restoration business in the
UK. In 2020, the loss comprised additional divestment and settlement costs mainly related to prior-year divestments in Denmark
and Germany.
IT security incident in 2020 comprised unavoidable incremental costs incurred as a consequence of the IT securit
y
incident,
including writedown of impaired assets, non-chargeable costs due to lack of documentation and certain customer claims and
penalties.
Winding up of businesses in 2020 related to the Open Space business in Australia.
_
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Company announcement no. 21/2021
Copenhagen, 11 August 2021
8 Goodwill impairment
DKK million YTD 2021 YTD 2020
Identified in impairment tests 450 400
Loss on divestments - 16
Goodwill impairment 450 416
Goodwill
Carrying
amount
(DKK million)
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
Applied
avg.
rate
Allowed
decrease
30 June 2021
937 0.9% 0.0% 2.4% 0.0% 2.0% 0.0% 5.0% 0.0% 8.9% 0.0%
31 Dec 2020
1,387 3.1% 2.1% 3.1% 2.0% 2.0% 0.7% 5.0% 0.6% 7.3% 0.6%
Identified in impairment tests in 2021 and 2020, the losses related to goodwill impairment in France.
Impairment tests
The Group performs impairment tests on intangibles, i.e. goodwill, brands and customer contracts, annually and whenever there
is an indication that intangibles may be impaired. The annual impairment test is performed as per 31 December based on
financial budgets approved by management covering the following financial year.
Loss on divestments in 2020 related to the Parking Management business in Indonesia.
At 30 June 2021, the Group performed a review for indications of impairment of the carrying amount of intangibles. Except for
France, it is management’s opinion, based on the review performed, that excess values are fairly resilient to any likely and
reasonable deteriorations in the key assumptions applied and presented in note 3.7 in the consolidated financial statements for
2020.
During the first six months of 2021, management has gained more insights and increased transparenc
y
around the recoverability
from Covid-19 and related uncertainties, noting that the pace of market recovery within the most impacted customer segments
remains uncertain. Accordingly, the risk reflected in the applied WACC has been increased. Combined with increasing interest
rates in H1 2021, this led to a higher applied WACC at 30 June 2021. Furthermore, compared to previous assessments,
management expects a more moderate growth and margin improvement in 2023-2025, especially within the most impacted
customer se
g
ments. Assum
p
tions for the terminal
p
eriod are maintained.
France At 30 June 2021, the impairment test for France resulted in recognition of an impairment loss on goodwill of DK
K
450
million.
Forecasting period Terminal period
Discount rate,
net of tax
Growth Margin Growth Margin
Applied assumptions, sensitivities and carrying amounts for France are illustrated below.
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Company announcement no. 21/2021
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9 Financial income and expenses
DKK million YTD 2021 YTD 2020
Interest income on cash and cash equivalents 14 16
Foreign exchange gains - 12
Financial income 14 28
Interest expenses on loans and borrowings
(189) (223)
Interest expenses on lease liabilities (35) (40)
Bank fees (23) (24)
Foreign exchange losses (12) -
Net interest on defined benefit obligations (9) (8)
Forward premiums, currency swaps (9) (2)
Other
1)
(22) (20)
Financial expenses (299) (317)
1)
Including interest expenses related to non-recourse factoring with certain large blue-chip customers.
Foreign exchange gains and losses mainly related to gains and losses on intercompany loans from the parent company.
Interest expenses on loans and borrowings decreased during 2021, mainly driven by lower utilisation of Group credit facilities.
This was partly offset by higher interest expenses on bonds as the EUR 300 million 2021 bond was refinanced by a new 5-year EUR
500 million bond in H2 2020 as well as increased commitment fees on Group credit facilities.
Forward premiums on currency swaps ISS uses currency swaps to hedge the exposure to currency risk on intercompany loans.
The cost of hedging increased slightly in H1 2021 due to higher interest rate spreads compared to H1 2020.
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Company announcement no. 21/2021
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10 Discontinued operations
Net profit/(loss) from discontinued operations
DKK million YTD 2021 YTD 2020
Revenue 1,185 2,257
Expenses
1)
(1,140) (2,231)
Operating profit before other items 45 26
Other income and expenses, net
2)
130 (118)
Operating profit 175 (92)
Financial income/(expenses), net (2) (16)
Net profit before tax 173 (108)
Income tax (13) (29)
Net profit from discontinued operations 160 (137)
Earnings per share from discontinued operations, DKK
Basic earnings per share (EPS) 0.9 (0.7)
Diluted earnings per share 0.9 (0.7)
Cash flow from discontinued operations
DKK million YTD 2021 YTD 2020
Cash flow from operating activities 46 66
Cash flow from investing activities (15) (1)
Cash flow from financing activities (18) (38)
The divestment of the Group's activities in Slovenia, which was signed in November 2020, has been postponed due to delayed
regulatory approval but is expected to be completed during Q3 2021. Management remains committed to finalising the
divestment programme while focusing on executing divestments at adequate valuations.
Our strategic divestment programme (announced in December 2018 and updated in December 2020) has progressed well. In the
first half of 2021, we completed the divestment of the Czech Republic, Romania and Slovakia in March and Hungary in April. At 30
June 2021, seven countries out of the total 18 countries in the programme scope continued to be classified as discontinued
operations and assets held for sale.
1)
Including depreciation and amortisation of DKK 0 million (2020: DKK 8 million).
2)
Related to net gain from divestments, including recycling of accumulated foreign exchange adjustments (2020: including impairment loss of DKK 114 million due to
remeasurement of the fair value of Brazil).
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Company announcement no. 21/2021
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11 Changes in working capital
DKK million YTD 2021 YTD 2020
Changes in inventories 11 (3)
Changes in receivables (32) (452)
Changes in payables 1,635 (275)
Total 1,614 (730)
12 Free cash flow
DKK million YTD 2021 YTD 2020
Cash flow from operating activities 2,195 (1,150)
Acquisition of intangible assets and property, plant and equipment (312) (382)
Disposal of intangible assets and property, plant and equipment 9 41
Acquisition of financial assets, net
1)
(4) (7)
Addition of right-of-use assets, net (243) (232)
Total 1,645 (1,730)
The free cash flow measure should not be considered a substitute for those measures required b
y
IFRS and ma
y
not be
calculated by other companies in the same manner. As such, reference is made to the IFRS measures included in the condensed
consolidated statement of cash flows on p. 17.
Free cash flow as defined b
y
management, cf. the 2020 Annual Report p. 94, is summarised below. Free cash flow is not a
financial performance measure established by IFRS. Accordingly, the measure and its calculation is solely presented as it is used
by management as an alternative performance measure in managing the business.
1)
Excluding investments in equity-accounted investees of DKK (18) million (2020: DKK 10 million). The negative investments in 2021 related to dividends and disposals of
equity-accounted investees.
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Company announcement no. 21/2021
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13 Divestments
The Group completed eight divestments during 1 January - 30 June 2021 (three during 1 January - 30 June 2020):
Company/activity Country Service type
Excluded from
profit or loss Interest
Annual
revenue
1)
(DKK million)
Number of
employees
1)
Fruit Baskets Sweden Food February Activities 17 19
Indoor Plants Sweden Technical February Activities 23 35
ISS Slovakia Slovakia Country exit April 100% 102 831
ISS Czech Republic Czech Republic Country exit April 100% 262 1,698
ISS Romania Romania Country exit April 100% 88 934
ISS Hungary Hungary Country exit May 100% 55 439
Kanal Services Switzerland Technical May 100% 339 280
Restoration business UK Technical June 100% 23 36
Total 909 4,272
1)
Unaudited.
Divestment impact
DKK million YTD 2021 YTD 2020
Goodwill 191 31
Other non-current assets 289 10
Current assets 224 38
Non-current liabilities (36)
(1)
Loans and borrowings (121) (6)
Current liabilities (153) (18)
Net assets disposed 394 54
Gain/(loss) on divestment, net 550 1
Divestment costs 71 27
Consideration received 1,015 82
Cash in divested businesses (60)
(20)
Cash consideration received 955 62
Contingent and deferred consideration - 5
Divestment costs paid (66)
(72)
Divestment of businesses (cash flow) 889 (5)
Divestments subsequent to 30 June 2021
The Group completed no divestments from 1 July to 31 July 2021.
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Company announcement no. 21/2021
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14 Assets and liabilities held for sale
Businesses classified as held for sale
Profit or loss effect
15 Pensions and similar obligations
16 Provisions
A dispute has arisen under a PFI (Private Finance Initiative) contract between ISS’s end-customer and the project company. The
dispute does not relate to the services delivered by ISS, but as a subcontractor to the project company, the dispute creates
uncertainty as to ISS’s received remuneration. ISS has engaged in constructive dialogue with the parties to ensure unaffected
services and payments. However, as a consequence of the uncertainty following the ongoing dispute, remuneration received in
relation to the services delivered has not been reco
g
nised as income.
As announced 24 June 2021, ISS and Danish Defence agreed to exit their partnership in Denmark b
y
the end of Ma
y
2022. The
provision recognised in 2020 in relation to the contract will cover the agreed exit fee and exit costs as well as operation of the
contract until the exit date. No further provision has been recognised in 2021.
In H1 2021, divestment of businesses classified as held for sale at 31 December 2020 resulted in recognition of a net gain of DK
K
576 million in the profit or loss. The net gain was recognised in Other income and expenses, net (DKK 446 million (gain)) and Net
profit from discontinued operations (DKK 130 million (gain)).
In H1 2021, we completed the divestment of four countries and the Kanal Services business in Switzerland. As a result 9
businesses were classified as held for sale at 30 June 2021.
At 31 December 2020, 14 businesses were classified as held for sale comprising 11 countries (discontinued operations) and three
business units in Continental Europe, Asia & Pacific and Americas, respectively.
At 30 June 2021, the carrying amount of provisions was DK
K
1,801 million (31 December 2020: DK
K
1,926 million). The decrease
was primarily due to payments related to restructuring provisions recognised in 2020 on the back of Covid-19 in a number of
countries.
For interim periods, the Group’s defined benefit obligations are based on valuations from external actuaries carried out at the
end of the prior financial year taking into account any subsequent movements in the obligation due to pension costs,
contributions etc. up until the reporting date. For interim periods, actuarial calculations are only updated to the extent that
significant changes in applied assumptions have occurred. Based on an overall analysis carried out by management it is
determined whether u
p
dated actuarial calculations should be obtained for interim
p
eriods.
At 30 June 2021, the overall evaluation carried out b
y
management resulted in updated actuarial calculations being obtained for
Switzerland and the UK, due to market fluctuations, which had impacted interest rates and asset values. The updated calculations
led to recognition of actuarial gains of DKK 650 million, which were largely offset by impact from asset ceiling of DKK 638 million.
The net gain of DKK 12 million (DKK 9 million net of tax) was recognised in other comprehensive income with a resulting decrease
in the defined benefit obli
g
ation.
Recycling of accumulated foreign exchange adjustments recognised in equity had a positive impact on the net gain of DK
K
26
million, mainly related to the Czech Republic, Slovakia and Romania.
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Company announcement no. 21/2021
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17 Government grants and assistance
Covid-19 related grants and assistance
DKK million YTD 2021 YTD 2020
Wage subvention 309 605
Sick pay compensation 9 8
Social security contribution 5 12
Other 1 4
Recognised in Staff costs 324 629
56 109
18 Subsequent events
Other than set out elsewhere in these condensed consolidated interim financial statements, we are not aware of events
subsequent to 30 June 2021, which are expected to have a material impact on the Group’s financial position.
Governments in several countries, most significantly Hong Kong, Switzerland, the UK, Australia, Germany, Austria and France have
offered support schemes in the form of wage compensation. The schemes are temporary, subject to certain conditions, and
compensate costs related to e.g. employees on furlough, social security contribution and sick pay compensation.
During the first six months of 2021, the Group was entitled to receive DK
K
324 million in employee-related grants, which is
specified below. As the grants compensate costs already incurred they are recognised in profit or loss as a reduction of staff costs.
Depending on the specific commercial model, customers were appropriately and accordingly compensated.
Hereof included in Other receivables as of 30 June
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Company announcement no. 21/2021
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Other
Conference Call
A conference call will be held on 11 August 2021 at
10:00 am CEST. Presentation material will be
available online prior to the conference call.
Dial-in details
DK: +45 7876 8490
SE: +46 4 0682 0620
UK: +44 203 7696 819
US: +1 646 787 0157
PIN code for all countries: 283234
Link: https://streams.eventcdn.net/iss/interim-
report-for-h1-2021/
For investor enquiries
Michael Bjergby, Head of Group Investor Relations
Phone: +45 38 17 63 90
E-mail: [email protected]
Louisa Baruch Larsson, Senior IR Manager
Phone: +45 38 17 63 38
E-mail: [email protected]
For media enquiries
Kenni Leth, Global Press & Media Relations
Phone: +45 38 17 66 21
E-mail: [email protected]
Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
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Our global footprint
ISS is a leading, global provider of workplace and facility service solutions.
In partnership with customers, ISS drives the engagement and well-bein
g of
people, minimises the impact on the environment, and protects and maintains
property. ISS brings all of this to life through a unique combination of data,
insight and service excellence at offices, factories, airports, hospitals and
other locations across the globe. In 2020, Group revenue was DKK 69.8 billion.