ISS, one of the leading global providers of facility services, has just announced its interim financial report for the first six months of 2017. The company reports organic revenue growth of 1.8% in H1 and 1.0% in Q2 (Q1 2017: 2.6%). Total revenue increased by 2% in H1 and Q2 (Q1 2017: 2%), driven by organic growth and a positive effect from the net impact from acquisitions and divestments, partly offset by a negative impact from foreign exchange effects.
An operating margin of 5.0% is reported in H1 (H1 2016: 4.9%) and 5.4% in Q2 (Q2 2016: 5.4%). The operating profit before other items increased to DKK 1,954 million in H1 (H1 2016: DKK 1,907 million) and DKK 1,079 million in Q2 (Q2 2016: 1,058 million). Cash conversion over the last 12 months is reported at 92% (Q1 2017: 98%).
Net profit (adjusted) decreased to DKK 1,056 million in H1 (H1 2016: DKK 1,155 million), negatively impacted by a DKK 212 million loss related to the re-measurement of a business classified as held for sale in Northern Europe. Net profit decreased to DKK 839 million in H1 (H1 2016: DKK 897 million).
Leverage at 30 June 2017 was 2.8x (30 June 2016: 2.5x), impacted by the acquisition of the Guckenheimer business. Capital allocation and leverage objectives “remain unchanged”.
ISS Group has extended its global integrated facility services partnership with Barclays until 2022. In addition, the company has significantly expanded and extended its FM contract with the National Westminster Bank into an integrated facility services partnership including technical services and maintenance and has also won an integrated contract with ABB covering four countries in the APAC region.
Revenue generated from integrated facility services has increased by 4% in local currency in H1 (Q1 2017: 6%), leading to a total share of 36% of Group revenue (Q1 2017: 36%). Revenue from global corporate clients increased by 10% in local currency in H1 (Q1 2017: 10%) and represents 11% of Group revenue (Q1 2017: 11%).
The 2017 outlook for organic revenue growth is narrowed to 1.5%-2.5% (from 1.5%-3.5% previously). Expectations for operating margin (above 5.78%, restated) and cash conversion (above 90%) are unchanged.
Jeff Gravenhorst, Group CEO at ISS, said: “As we anticipated in May, our organic growth was down in Q2 compared to Q1. While the annualisation of losses and wins as well as the downsizing of some businesses were expected, we also faced some delays in contract start-ups and lower demand for non-portfolio services. The announced reduction in our future scope of services with DXC Technology is expected to come into effect from Q4 onwards. Our pipeline remains healthy and our value proposition compelling, as evidenced by recent contract wins with the National Westminster Bank, ABB and BHP Billiton as well as the extension with Barclays. Given our performance in H1 and our expectations for growth in H2, including the scope reduction with DXC Technology, we’ve narrowed our organic revenue outlook for the year from 1.5-3.5% to 1.5-2.5% within the lower half of our original range.”