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In its latest trading update for 1 January – 30 September 2023, global workplace experience and facilities management firm, ISS, reports continued strong organic growth and strengthened focus on the execution of its OneISS strategy.
In Q3 2023 organic growth was 9.3% and 10.7% for the first nine months of 2023, driven by price increases and underlying volume growth. Organic growth for projects and above-base work was slightly positive.
Total revenue for the quarter amounted to DKK 20.0 billion (£2.3bn).
ISS states improvements in underlying margin have been realised, and the business it is well on track to deliver the targeted operating margin of above 5% in 2024.
It also reports that commercial development remained solid, and customer retention rate was maintained at a high level at 95% (LTM).
The Group also cites that the OneISS strategic direction remains unchanged. Now, three years after the launch of the strategy, the new and streamlined Executive Group Management team has reviewed and prioritised OneISS initiatives to ensure all initiatives generate the expected value and strengthen the strategic execution.
ISS says the enhanced focus on strategic initiatives is expected to generate operational benefits and cost savings of an estimated DKK 200-250 million annually with the majority expected to have effect in 2024. Related to the review, one-off costs of around DKK 200-250 million are expected to be recognised in H2 2023.
In August, ISS announced its intentions to strategically reposition itself in the French market, to focus on servicing its Global Key Account customers and to divest its other activities. This states ISS is developing in line with its plan and due diligence is in progress with potential buyers.
In Spain, the bolt-on acquisition of Grupo Fissa was completed in September 2023. The integration is expected to be finalised during Q1 2024.
Outlook
The 2023 outlook has been updated. Organic growth is now expected to be around 9% (previously 7 – 9%). Operating margin remains within the previous range (4.25% – 4.75%) with underlying margin expected to be around 4.6%. Including one-off costs related to the OneISS review, operating margin is expected to be reported at around 4.3%.
Commenting on the latest results, Kasper Fangel Group CEO, ISS A/S, said: “It is satisfying that our strong growth and development throughout 2023 was maintained in the third quarter.
“ISS is well on track to deliver on our financial targets for 2024. The demand for our services is still increasing across markets and we are constantly focusing on improving our service offerings whilst delivering best-in-class service experiences for our many customers world-wide – achieved through the tireless efforts of our more than 350,000 dedicated placemakers.
“The OneISS strategy execution continues to drive value. We launched the strategy three years ago and during the second half of this year we have reviewed and focused the strategic initiatives to further improve the execution, accelerate strategic development and continue to build a stronger and value-creating ISS. This will enhance our ability to seize the opportunities that lie ahead.”
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