COPENHAGEN: A leading facility services company says it will shut down operations in Thailand and 12 other countries as it tries to boost growth and simplify its business.
Denmark-based International Service System (ISS) says the aim of the two-year plan is "reducing complexity and risk,'' and once completed, the number of its customers is expected to have been reduced by half.
ISS said on Monday it wants reduce its staff by 20%, from the present 490,000 worldwide to around 390,000.
It added that operations in Thailand, the Philippines, Malaysia, Brunei, Brazil, Chile, Israel, Estonia, Czech Republic, Hungary, Slovakia, Slovenia and Romania will be divested.
Ultimately, it aims for annual organic growth of up to 6%.
The Copenhagen-based group has activities in more than 70 countries, serving both public and private sector customers.
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.
“The market tends to be a bit short-sighted these days,” Sydbank analyst Mikkel Emil Jensen said. What ISS is doing is “investing more in stable margins long-term, rather than higher margins.” That includes spending money here and now on “things like robots” to keep up with the latest technology in the industry, he said.
Chief executive officer Jeff Gravenhorst said ISS wants to focus on getting a larger share of the $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 sitting on about 2% of the key-account market, he said.
“The fact that they plan to shed 50% of clients while only losing 12% of turnover and 8% of profits shows they’re getting rid of a group of customers with limited growth potential,” Jensen at Sydbank said. “I find it somewhat hard to understand that the shares are down.”
ISS expects organic growth to accelerate to 4-6% a year “in the medium term,” from 1.5% to 3.5% expected in 2018, it said in a statement.