Copenhagen, 2013-11-12 08:40 CET (GLOBE NEWSWIRE) --
- Organic growth reached 4.0% YTD. Up from 1.7% in the same period in 2012. Organic growth in Q3 2013 was 5.1%
- Operating margin YTD was 5.3% compared with 5.4% in the same period in 2012. Operating margin in Q3 was 6.3%
- Profit before goodwill impairment/amortisation etc. increased to DKK 726 million from DKK 429 million in same period of 2012
- The LTM (Last Twelve Months) cash conversion for September 2013 was 109%
Jeff Gravenhorst, ISS Group CEO, said:
“ISS continues its solid performance. Although we continue to experience overall challenging macroeconomic conditions, ISS delivered robust organic growth in Q3 and recorded strong Cash Conversion, driven by our continued focus on profitable growth and our efforts to improve working capital. Margin for the quarter was as expected and on a comparable basis slightly above the same period last year. We continue to grow organically in both developed and emerging markets supported by the successful implementation of large contracts like Barclays, Novartis and Citibank. In the third quarter we have won significant new contracts with Nordea Bank, Vattenfall and São Paulo International Airport. We continue executing our strategy.”
Group Performance
Group revenue amounted to DKK 58.8 billion in the first nine months of 2013 compared with DKK 58.9 billion in the same period in 2012. Revenue was positively impacted by organic growth of 4.0%, but offset by the successful divestment of non-core activities amounting to 1.8% and a negative effect from exchange rate movements of 2.5%.
The organic growth was driven by positive organic growth in both developed and emerging markets. Western Europe, Asia, Latin America, North America and Eastern Europe delivered positive organic growth rates, with Asia continuing to report double-digit organic growth.
The organic growth was mainly driven by start-ups of the Barclays and the Novartis contracts as well as continued strong growth in emerging markets. This was partly offset by challenging macro-economic conditions, particularly in some European countries.
Operating profit before other items amounted to DKK 3,097 million (2012: DKK 3,176 million) in the first nine months of 2013 and was negatively impacted by both divestments and currency effects. The negative effect from the divestment of the pest control activities in 12 developed markets reduced the operating profit before other items by DKK 58 million or the operating margin by 21 bps for the third quarter compared with the same period in 2012. Adjusted for the impact of the divested pest control activities, the operating margin for the third quarter was improved compared with the same period in 2012. The negative effect from exchange rate movements reduced the operating profit before other items by DKK 73 million compared with the same period in 2012.
The operating margin (operating profit before other items as a percentage of revenue) was 5.3% for the first nine months of 2013 compared with 5.4% for the same period in 2012. The operating margin was in line with expectations and was positively impacted by margin increases in the Nordic region. This was offset by the strategic divestments of non-core activities as well as the start-up of multinational IFS contracts and impact from operational challenges in certain countries in Europe and the Americas.
Profit before goodwill impairment/amortisation and impairment of brands and customer contracts increased to DKK 726 million from DKK 429 million in same period of 2012, driven by an increase in operating profit and lower financial expenses, net.
The net profit amounted to DKK 12 million in the first nine months of 2013 compared with a loss of DKK 92 million in the first nine months of 2012, positively impacted by an increase in other income and expenses, net, and lower financial expenses, net, which was partly offset by higher non-cash expenses related to goodwill impairment.
The LTM cash conversion for September 2013 was 109% as a result of a strong cash flow performance in all regions. Ensuring a strong cash performance continues to be a key priority, and the result reflects the efforts regarding securing payments for work performed and exiting customer contracts with unsatisfactory payment conditions. These efforts led to a decrease of around two debtor days compared with 30 September 2012.
The emerging markets comprising Asia, Eastern Europe, Latin America, Israel, South Africa and Turkey, where we have more than half of our employees, delivered organic growth of 11% and represent 23% of total revenue for the Group. In addition to significantly increasing the Group’s organic growth, the emerging markets delivered an operating margin of 6.0% in the first nine months of 2013.
Following the completed divestment of the pest control activities in 12 developed markets, ISS used the proceeds to execute an excess proceeds offer and a partial redemption of its EUR 581.5 million 8.875% Senior Subordinated Notes due 2016, which was settled on 8 July 2013. The outcome was that Noteholders of an aggregate principal amount of EUR 45.5 million accepted the proceeds offer and an additional aggregate principal amount of EUR 186.5 million was redeemed at a call price of 101.479. The aggregate principal amount of Notes outstanding, following this process, is EUR 349.5 million.
In August 2013, the securitisation programme was extended with one year to September 2015 and the pricing on the programme was reduced by 25 bps on the interest margin.
ISS continuously reviews the strategic rationale and fit of business units in light of the ISS Way Strategy, leading to the identification and evaluation of non-core activities. As of 30 September 2013, five business units (net assets DKK 1.3 billion) were classified as held for sale.
ISS reiterates that an IPO remains an option for the Company, and exploratory work is being undertaken. However, no decision has been made.
Outlook
The outlook for 2013 is based on a mixed global macroeconomic outlook with continued strong growth in emerging markets combined with weak growth and difficult macroeconomic conditions in large parts of Europe, including the uncertainty surrounding current and future austerity measures.
In 2013, we had a solid start following the wins of several large IFS contracts in 2012. The organic growth in Q4 is expected to be lower than previous quarters as most of our large IFS contracts were operational in Q4 2012. Combined with the underlying business development, we expect to realise above 3% organic growth in 2013.
The divestment of the margin accretive pest control activities in 12 developed markets in May 2013 has been followed by restructuring activities to align the cost structures in the impacted countries. We expect a negative impact on the operating margin from these divestments of around 0.2 percentage point for the Group on an annualised basis. As a result, the operating margin for 2013 is expected to be slightly lower than the level realised in 2012. Cash conversion is expected to be maintained above 90%.
Lord Allen of Kensington CBE Jeff Gravenhorst Chairman of the Board Group CEO
Telephone conference ISS will host a conference call on Tuesday, 12 November 2013 at 14:00 CET (13:00 GMT).
Dial-in-numbers: +45 35 44 55 80 (Denmark) +44 203 364 5374 (UK) +1 855 753 2230 (US)
Live webcast The conference call will also be available on live webcast. In order to listen to the conference call and view the presentation simultaneously, please visit http://inv.issworld.com/events.cfm
For media enquiries Kenth Kærhøg, Head of Group Communications, +45 38 17 62 05 Manuel Vigilius, Global Media Relations Manager, +45 38 17 64 04
For investor enquiries Barbara Plucnar Jensen, Head of Group Treasury, +45 38 17 62 60 Martin Kjær Hansen, Treasury Manager, +45 38 17 64 31
About ISS The ISS Group was founded in Copenhagen in 1901 and has grown to become one of the world’s leading Facility Services companies. ISS offers a wide range of services such as: Cleaning, Catering, Security, Property and Support Services as well as Facility Management. Global revenue amounted to almost DKK 80 billion in 2012 and ISS has more than 530,000 employees and local operations in more than 50 countries across Europe, Asia, North America, Latin America and Pacific, serving thousands of both public and private sector customers. For more information on the ISS Group, visit www.issworld.com .
ISS A/S, CVR 28 50 47 99, ISIN XS0253470644 ISS Global A/S, ISIN XS0206714247
