Company announcement no. 21/2021
Copenhagen, 11 August 2021
ISS A/S – Interim report for 1 January – 30 June 2021
7 of 32
Ca
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.