February 26, 2020 / 11:09 AM / a month ago

UPDATE 2-ISS shares tumble on outlook despite virus boost to some services

(Adds ISS CEO comments)

By Jacob Gronholt-Pedersen

COPENHAGEN, Feb 26 (Reuters) - Services provider ISS warned on its 2020 profit on Wednesday, sending its shares to a record low despite saying the coronavirus outbreak had increased demand for face masks and other services.

ISS employs 471,000 staff and delivers services such as cleaning and catering to more than 200,000 clients in 63 countries.

It now expects an operating margin of more than 4.5% this year versus guidance of around 5% announced in November, ISS said in a statement.

Shares in ISS, whose clients include Deutsche Telekom and Hong Kong Airport, were down 13% at 130.30 Danish crowns by 0943 GMT.

“Some customers in Asia have shut down their sites, but others are asking for more services,” CEO Jeff Gravenhorst told Reuters in an interview.

“The whole world is asking for face masks right now,” he said. Demand for sanitizer hand gel and services such as cleaning in hospitals and maintenance of air conditioning systems, have also spiked, he said.

However, considering the overall slowdown in business activity in Asia, Gravenhorst said he expects the coronavirus to hurt revenue in Asia slightly in the beginning of the year.

He said ISS is now especially cautious with food deliveries to clients.

“Rather overcooked than undercooked,” Gravenhorst said, referring to the company’s instructions to its chefs and food suppliers.

“For the time being we’re cooking a bit more overdone just to be on the safe side. Customers will have to do without rare steaks and raw eggs for now,” he said.

The Copenhagen-based company started primarily as a cleaning business, but has expanded globally with services ranging from cleaning offices and cooking meals to guarding buildings and operating call centres.

ISS cut its guidance and launched a cost-cutting plan in November last year, shaving one-fifth off its market value.

“We still have the same view on improvement of our operating margin as we did in November. But there is now greater uncertainty about execution in the first months of 2020, and this is reflected in out guidance for the full year,” Gravenhorst said.

The financial impact of a malware attack that hit ISS this month was still uncertain, but most operations and systems would be back to normal within a few weeks, he said.

The Danish firm, which competes with companies such as Sodexo and G4S, posted 2019 revenue of 78.6 billion Danish crowns ($11.44 billion), up 6%.

$1 = 6.8727 Danish crowns Reporting by Jacob Gronholt-Pedersen; editing by Louise Heavens and Jason Neely

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