Today, ISS A/S announced interim operational and financial results for Q3 and the first nine months of 2012.
- Revenue for the first nine months of 2012 was up by 2% to £6.3 billion. Organic growth was 1.7% in the period
- Operating profit before other items amounted to £341 million for the first nine months of 2012 compared with £343 million for the same period in 2011
- Operating margin increased in Q3 to 6.4% bringing the operating margin for the first nine months of 2012 to 5.4%
- Net Profit for Q3 was £22 million compared with a loss of £17 million for the same period in 2011. For the first nine months of 2012 net result was a loss of £9.4 million compared with a loss of £64 million for the same period in 2011
- The LTM (Last Twelve Months) cash conversion for September 2012 was 98%
Jeff Gravenhorst, ISS Group CEO, said:
“This has been a very important quarter for ISS. We secured two of the largest global contracts in the history of ISS and we welcomed two new long term investors resulting in a significant deleverage of ISS. We still see challenging macro-economic conditions. Therefore we remain focused on driving profitable growth with acceptable payment conditions, and in some areas we have deliberately withdrawn from certain business relationships. For Q3 our efforts helped improve the margin and secure strong cash conversion. More than half of the new Barclays contract is now operational and together with a strong pipeline of new customer contracts, we expect a solid finish to 2012.”
Group revenue amounted to £6.3 billion in the first nine months of 2012, an increase of 2% compared with the same period in 2011, driven by organic growth of 1.7% and a positive effect from exchange rate movements of 2%, which was partly offset by the successful divestment of non-core activities of 2%.
All regions except North America and Pacific delivered a positive organic growth rate including Asia with a double-digit organic growth rate. The organic growth was influenced by challenging business conditions in certain European countries where the main focus of ISS remains on ensuring a profitable customer base with satisfactory payment conditions. This has led to the identification of contracts which have been exited in 2012, resulting in a reduced organic growth. Furthermore, a decline in non-portfolio services in 2012 and the timing of contract start-ups have negatively impacted the organic growth.
Operating profit before other items amounted to £341 million in the first nine months of 2012 compared with £343 million in the same period in 2011. The operating margin (operating profit before other items as a percentage of revenue) was 5.4% for the first nine months of 2012 compared with 5.5% for the same period in 2011.
The operating margin improved in Q3 and was positively impacted by increases especially in the Nordics and certain Western European countries. For the first nine month of 2012 the margin was impacted by the introduction of austerity measures in a number of our mature markets as well as some operational challenges in the Netherlands, France and Brazil. In addition, the margin was negatively impacted by the strategic divestments of non-core activities including the damage control business in Germany, the coffee vending business in Denmark and Norway and the governmental outplacing services in Norway.
Operating profit amounted to £324.5 million in the first nine months of 2012 compared with £319 million in the same period in 2011.
The net result improved from a loss of £64 million in the first nine months of 2011 to a loss of £9.4 million in the first nine months of 2012. For Q3 the net profit amounted to £22 million compared with a loss of £17 million in the same period in 2011.
The LTM cash conversion for September 2012 was 98% as a result of a strong cash flow performance in all regions, reflecting continued focus on securing payments for work performed.
The outlook for 2012 is based on a continued challenging macroeconomic outlook and difficult market conditions in some European countries.
ISS experienced a strong positive trend in organic growth in 2011 following the start-up of several large Integrated Facility Services (IFS) contracts leading to organic growth of 6.2% for the Group. The organic growth in 2012 is negatively impacted by the challenging macroeconomic conditions, decline in non-portfolio services, exiting customer contracts with unsatisfactory payment conditions and timing of contract start-ups. However, due to the start-up of recent multinational IFS contract wins and the continued strong growth in emerging markets, ISS expects an organic growth for 2012 around 2%.
The operating margin for 2012 is expected to be around the level realised in 2011. Cash conversion is expected to be around 90%.