The largest detractor to the Fund's performance for both the quarter and the one-year period was ISS (OCSE:ISS, Financial), a facilities services company headquartered in Denmark. ISS provides cleaning services, support services, property services, catering services and security. Before Covid-19, ISS suffered from a massive IT malware attack in early 2020 that disrupted operations and resulted in excess costs. Due to Covid-19, revenue declined by nearly 10% organically in the second quarter. The business segments most significantly impacted by Covid-19 were catering and above-base (work in excess of contract), and this revenue is falling away at a slightly higher margin than anticipated. Despite improving conditions, the near-term outlook remains uncertain and the company issued a rather wide guidance range for the 2020 fiscal year. That said, Covid-19 has significantly increased demand for the company's deep cleaning and disinfection services, which could support revenues in the medium term. ISS has a rather indebted balance sheet, but thanks to the lack of financial covenants and high liquidity, the company should be able to navigate this difficult environment successfully. Although the current environment is more challenging than expected, we are optimistic that the appointment of the new CEO Jacob Aarup-Andersen, who started in September 2020, will provide the company with the fresh perspective it needs to improve its results. We believe ISS remains an attractive investment.
From David Herro (Trades, Portfolio)'s Oakmark Intl Small Cap (Trades, Portfolio) Fund third-quarter 2020 commentary.
