Organic revenue grew by 6.0% in H1 and 5.8% in Q2 (Q1 2019: 6.1%), driven by wins and expansions of key account contracts following strong commercial momentum and continued solid non-portfolio demand in the first half of 2019.
Delivering service solutions to key account customers, in particular Integrated Facility Services (IFS), is a key part of ISS’ strategy. Revenue from key accounts grew organically by 7.9% in H1 and 7.7% in Q2 and represented 61% of Group revenue (Q1 2019: 60%). Revenue from global key accounts grew organically by 7.3% in H1 and 11.0% in Q2 2019 and accounted for 15% of Group revenue. Growth was driven by contracts launched in 2018, primarily with an international food and beverage company and a company in the Industry & Manufacturing segment. Furthermore, the start-up of the new contract with a technology service company as well as the more recent expansion of the Barclays contract and the conversion of the Vattenfall contract into a global key account contributed to the growth. ISS also experienced high demand for non-portfolio services across its global key account contracts.
In December 2018, ISS announced its intentions to divest operations in 13 countries – in addition to Argentina and Uruguay, where sales processes were already ongoing. Countries to be divested have been classified as discontinued operations and comparative figures have been restarted accordingly. Argentina and Uruguay were divested in January 2019 and ISS’ activities in Estonia were divested 31 July 2019. Sales processes continue to be ongoing for the remaining 12 countries. Part of the proceeds from the strategic divestment programme will be reinvested back into the business through an accelerated investment programme covering DKK 700- 800 million (£85.5 – £97.7 million) over 2019-2020. Investments among others include the organic build-out of technical services, catering and workplace management, the launch of a global shared services initiative as well as an accelerated global IT migration, including a new facility management system.
Commenting on the results, Jeff Gravenhorst, Group CEO, ISS A/S, said: “We continued our consistent and strong commercial momentum with the extension of large key account contracts like Danske Bank and an international manufacturing company. On 1 July 2019, we launched our Integrated Facility Services partnership with Deutsche Telekom at approximately 9,000 buildings across Germany, making it the largest partnership in the history of ISS.
“Our focus on key accounts is paying off and we are on track to deliver industry leading organic growth of 6.5%-7.5% in 2019. As expected, margins were slightly lower in the first half of the year, reflecting the contract start-ups and expansions as well as the launch of the announced transformational investments (2019-2020). We are making good progress on our divestment programme, where we expect divestments and proceeds to step up in the second half of 2019.”