Outsourcing group ISS plans to cut its workforce by 100,000 and raise up to $381mn by selling businesses over the next two years, betting that focusing on its biggest clients will boost sales growth.
The move, which will see the Danish firm quit 13 countries, has echoes of the streamlining at several British rivals after acquisition sprees left them struggling to cope with sprawling low-margin businesses.
ISS said it would invest proceeds from the sales in areas such as workplace, technical and catering services, and return around 25% to shareholders via a share buyback or a special dividend.
The company, which has worked with organisations ranging from Denmark’s defence ministry to Deutsche Telekom, said the plan would significantly simplify its business, reducing its customer numbers by 50% and its staff by 20% — to around 390,000 people from about 490,000.
ISS started primarily as a cleaning business, but has expanded globally to offer services ranging from cleaning offices and cooking meals to guarding buildings and operating call centres.
The company said it expected to increase annual underlying revenue growth to 4-6% from 2019.
It has previously projected underlying revenue growth of 1.5-3.5% this year, after 2.4% in 2017.
“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,” chief executive Jeff Gravenhorst said in a statement.
ISS said its key accounts contributed 56% of revenues in the first nine months of 2018.
The move comes as indebted British support services company Interserve battles to secure a rescue deal with its creditors.
ISS said it expected to raise 2.0-2.5bn crowns ($305-$381mn) from selling businesses that accounted for 12% of its revenues last year.
“A bigger focus on the largest and most profitable customers and an organic growth target of 4-6% should be able to reassure investors,” said Nordnet analyst Per Hansen.
ISS said it expected free cash flow of around 3bn crowns in constant currency by 2021 and committed to paying a dividend in 2019-2020 at least equal to the 7.70 crowns per share it paid this year.
Its shares were down 2.6% at 1245 GMT, in a weak European equities market.