Securing more integrated facility services (IFS) contracts and growing its business in emerging markets has helped ISS to overcome soft economic conditions in mature markets. Its interim financial report for the first nine months of 2014 saw profit before goodwill impairment and amortisation/impairment of brands and customer contracts increased to DKK 1,210 million (AUD$232 million), up from 2013’s DKK 726 million.
The company delivered resilient organic revenue growth of 2.4% in the first nine months (2013: 4.1%) and 2.4% in Q3 (2013: 5.2%); and a strong operating margin of 5.3% in the first nine months (2013: 5.3%) and 6.4% in Q3 (2013: 6.3%). Adjusted for the impact of the divested pest control activities in 2013, the YTD operating margin increased from 5.2% in 2013 to 5.3% in 2014.
ISS’ strategic initiatives including customer segmentation and central procurement are said to be progressing according to plan and support margin progression.
Emerging markets represent 24% of total revenue for the Group (2013: 23%) and delivered 10% organic growth (2013: 11%) and 6.1% operating margin in the first nine months (2013: 6.1%). Western Europe represents 51% of total revenue for the Group (2013: 50%) and delivered flat organic growth against a backdrop of difficult market conditions (2013: 5%) and 5.7% operating margin in the first nine months of 2014 (2013: 5.4%).
“ISS has delivered a resilient performance in the third quarter as we continue to grow profitably within the attractive global facility services market,” stated ISS Group chief executive officer Jeff Gravenhorst.
“Against a softer global macro backdrop, we realised resilient organic growth supported by strong performance in emerging markets and an increasing share of IFS revenue, now 30% of Group total. Significant contract wins in this quarter included Bankia, Vattenfall, Aller, Norwegian Defence Forces and Molson Coors.
“Our focus on profitable contracts along with progress on our strategic initiatives such as customer segmentation, central procurement, business process outsourcing and the successful divestment of non-core activities has supported another quarter of strong operating margins.
“Whilst we expect operating conditions, particularly in Europe, to remain challenging through the rest of this year and into next, we remain confident in our ability to grow organically, with strong operating margins and excellent cash conversion.”