ISS (ISS) Q3 2024 TU earnings summary

Executive summary

• Q3 2024 performance and financial results were in line with expectations, with organic growth momentum and margin improvements, and all 2024 KPI guidance reaffirmed.

• Organic growth of 5.5% YTD was mainly driven by price increases and volume growth, with group revenue reaching DKK 61.0 billion, up 4.5% year-over-year.

• Retention rate remained strong at 94%, supported by contract extensions, new wins, and a healthy pipeline for 2025.

• Share buyback program increased by DKK 250 million to DKK 1.5 billion, with total payout yield at 8%.

• Moody’s upgraded credit rating outlook to Baa3/Positive.

Financial highlights

• Organic growth YTD was 5.5%, with Q3 at 4.8%; price increases were the main driver, especially in Turkey.

• Volume growth contributed 0.5 percentage points, while net contract wins were slightly negative; project and above-base work had a neutral to slightly positive impact in Q3.

• All regions except Americas reported organic growth; Americas saw -12% in Q3 due to deliberate contract exits, while Mexico and Chile grew.

• FX impact was -4.4% in Q3 and is expected to be a 2% headwind for the year; acquisitions and divestments contributed 1% to nine-month revenue growth.

• Operating margin is on track to exceed 5% for 2024, with H1 at 4.9%.

Outlook and guidance

• 2024 guidance reaffirmed: organic growth of 5–6%, operating margin above 5%, and free cash flow above DKK 1.8 billion (excluding up to DKK 600 million negative impact from DTAG).

• Net contract wins expected to remain slightly negative for 2024 but anticipated to turn positive in 2025.

• Margin development is expected to be back-end loaded, with above 6% margin in H2.

• Cash conversion target remains above 60%, with reported cash flow impacted by timing effects.

• Working capital expected to be slightly negative, with improvements in markets with shorter DSOs.