Global cleaning giant ISS axing 100,000 jobs in major revamp

The countries ISS plans to leave are mostly in emerging markets, including Asia and Eastern Europe.
The countries ISS plans to leave are mostly in emerging markets, including Asia and Eastern Europe.PHOTO: BLOOMBERG

COPENHAGEN • ISS of Denmark, one of the world's largest private employers, is planning to get rid of about 100,000 jobs - representing a fifth of its global workforce - as it exits 13 countries that were among its least profitable markets.

Shareholders will get at least a quarter of as much as 2.5 billion kroner (S$524 million) in anticipated net proceeds, chief executive officer Jeff Gravenhorst said yesterday.

The countries ISS plans to leave are mostly in emerging markets, including Asia and Eastern Europe.

At the same time, the company wants to do more business with so-called key accounts, such as global banks.

Though shares fell as much as 3.3 per cent after investors learnt of the plans yesterday, analysts said ISS' new strategy was good news for its longer-term prospects.

"The market tends to be a bit short-sighted these days," Sydbank analyst Mikkel Emil Jensen said.

ISS is leaving countries that represent just 12 per cent of its group revenue and 8 per cent of operating profits. The plan means the firm will no longer do business in Thailand, the Philippines, Malaysia, Brunei, Brazil, Chile, Israel, Estonia, the Czech Republic, Hungary, Slovakia, Slovenia and Romania.

What ISS is doing is "investing more in stable margins long term, rather than higher margins", which includes spending money on "things like robots" to keep up with the latest technology in the industry, he added.

ISS, which, aside from cleaning, offers services such as catering, property maintenance and security, is leaving countries that represent just 12 per cent of its group revenue and 8 per cent of operating profits.

The plan means the firm will no longer do business in Thailand, the Philippines, Malaysia, Brunei, Brazil, Chile, Israel, Estonia, the Czech Republic, Hungary, Slovakia, Slovenia and Romania.

After leaving those markets, ISS' workforce will shrink to about 390,000 people, it said.

Mr Gravenhorst said ISS wants to focus on getting a larger share of the US$400 billion (S$549 billion) global market for key accounts with the biggest corporate customers.

That business accounts for 46 per cent of the company's organic growth, with ISS currently sitting on about 2 per cent of the key-account market, he added.

"The fact that they plan to shed 50 per cent of clients while losing only 12 per cent of turnover and 8 per cent of profits shows they are getting rid of a group of customers with limited growth potential," Sydbank's Mr Jensen said. "I find it somewhat hard to understand that the shares are down."

Copenhagen-based ISS expects organic growth to accelerate to between 4 and 6 per cent a year "in the medium term", from between 1.5 and 3.5 per cent expected this year, it said in a statement.

ISS, one of Europe's biggest employers, is taking the drastic steps after its shares lost about 18 per cent this year, in part as hedge funds speculated against the company.

The new strategy also comes after signs that some analysts were starting to question ISS' prospects.

Though most had been positive, Goldman last month told clients to start selling ISS shares.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 11, 2018, with the headline 'Global cleaning giant ISS axing 100,000 jobs in major revamp'. Print Edition | Subscribe