ISS accelerates organic growth to 6.2% in second quarter of 2011
Copenhagen, 25 August, 2011 – ISS today announces consolidated results for the period 1 April – 30 June 2011 and for the first six months of 2011. The results demonstrate accelerated organic growth, continued revenue growth and growing operating profit both for the quarter and the first six months of 2011.
- Organic growth for the quarter ended at 6.2%, up from 5.8% in first quarter 2011 and 3.8% in comparable quarter 2010. This is the seventh consecutive quarter of increasing organic growth, driven by double digit growth in Latin America, North America and Asia
- Total revenue grew by 5% in the quarter to DKK 19.6 billion and by 7% for the first six months of 2011 to DKK 38.6 billion
- Operating profit grew by 4% for the quarter to DKK 1 billion and 15% to DKK 1.8 billion for the first six months of 2011, which is the highest ever January to June profit in ISS’ history
- Operating margin before other items for the quarter was 5.6%. For the first six months of 2011 the margin was 5.1% compared with 5.2% margin for the comparable period in 2010
- In June 2011 ISS successfully refinanced approximately DKK 18 billion of its debt
- In the second quarter of 2011 ISS added 9,100 new jobs across the world bringing the total number of ISS employees to 535,600 globally
Jeff Gravenhorst, ISS Group CEO, commented:
"ISS continue growing its business in both emerging and developed markets. We have doubled our organic growth rate from 3% to 6% for the first six months of 2011 compared with the same period in 2010, and have fully transitioned from a company driven by acquired growth to an organic growth company. For the first six months of 2011 we have positive revenue growth in all our geographies combined with an increased operating profit for the group – though in certain geographies margins came under pressure in the second quarter of the year, particularly in some Mediterranean countries and the Netherlands. In the second quarter of 2011 we won important new contracts with 23 airports in India, Phillip Morris International, Tesco, Carlsberg, GM, and Johnson & Johnson, and we are continuing the implementation of large Integrated Facility Services contracts. In June we successfully extended the maturity profile of our debt, giving ISS and the owners better operational flexibility and full flexibility to re-initiate the IPO at a favourable moment."
ISS delivered a strong performance in the second quarter of 2011, continuing the growth momentum seen in 2010 and the first quarter of 2011.
Revenue grew by 5% in the quarter to DKK 19.6 billion, while group revenue amounted to DKK 38.6 billion in the first six months of 2011, an increase of 7% compared with the same period in 2010.
Organic growth was 6.2% in the second quarter of 2011 – the seventh consecutive quarter with an increase in the organic growth rate. North America, Asia and Latin America delivered double-digit organic growth rates both in the quarter and the first half year of 2011. From January to June 2011, ISS grew organically 6% - double up from the 3% organic growth in same period 2010. The organic growth was a continuation of the positive organic growth trend seen in late 2010, fuelled by the start-up of several large Integrated Facility Services (IFS) contracts in 2011.
Operating profit before other items increased by 4% to DKK 1,959 million in the first six months of 2011. The operating margin (operating profit before other items as a percentage of revenue) for the quarter was 5.6%. For the first six months of 2011 the margin was 5.1% compared to 5.2% for the same period in 2010. The operating margin is impacted negatively by overall economic conditions in the Mediterranean countries, operational challenges in the Netherlands as well as start-up of large national and international IFS contracts.
The emerging markets comprising Asia, Eastern Europe, Latin America, Israel, South Africa and Turkey, where more than half of ISS’ employees are located, delivered organic growth of 14% and represent 19% of total revenue and 40% of total organic growth for the Group. In addition to boosting organic growth, the emerging markets delivered an operating margin of 6.7%.
ISS successfully refinanced approximately DKK 18 billion of its debt in June 2011, eliminating all significant short term financing maturities.
During the second quarter the total number of ISS employees increased by 9,100 to 535,600 globally. ISS has created 12,900 new jobs globally in the first six months of 2011, while the percentage of full time employees has increased from 72% to 73% compared to same period last year.
The LTM cash conversion rate for June 2011 was 87%. It was negatively impacted approximately by 5 cash conversion percentage points stemming from a change in payment terms of VAT and payroll and social taxes in certain countries in the Nordic region and the Western European region. Furthermore cash conversion was affected by the strong organic growth and an increase in debtor days of less than one day compared with June 2010.
The high organic growth in the first six months of 2011 is considered sustainable and is expected to continue unless macroeconomic factors should turn worse. Consequently, ISS expects organic revenue growth in 2011 to be at the level realised for the first six months of 2011.
The organic growth has been stronger than anticipated and operating profit before other items and operating profit is in 2011 expected to be above the level realised in 2010. However, the operating margin is now expected to be slightly below the level realised in 2010, also reflecting more difficult business conditions in certain Mediterranean countries and the operational challenges in the Netherlands.
Cash conversion for 2011 is expected to be slightly below the level realised in 2010.
Ole Andersen, Chairman
Jeff Gravenhorst, Group CEO
For investor enquiries
Søren Møller, Head of Investor Relations, +45 38 17 63 70 Barbara Plucnar Jensen, Head of Group Treasury, +45 38 17 62 60
For media enquiries
Kenth Kærhøg, Head of Group Communications, +45 38 17 62 05
A telephone conference will be held on Thursday, 25 August 2011 at 14:00 CET (13:00 UK time). The telephone numbers for the conference are: +45 32 72 76 25 (Denmark) +44 (0) 1452 555 566 (UK) Conference ID: 82580144
The conference call will also be available on live audio webcast, please visit: http://inv.issworld.com/events.cfm
About the ISS Group
The ISS Group was founded in Copenhagen in 1901 and has since grown to become one of the leading Facility Services companies in the world. ISS offers a wide range of services within the following business areas: cleaning services, support services, property services, catering services, security services and facility management services. The ISS Group’s revenue amounted to DKK 74 billion in 2010 and ISS now has more than 530,000 employees in over 60 countries across Europe, Asia, North America, South America and Pacific, serving more than 200,000 business to business customers every day.