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ISS reports strong organic growth for full year 2019

ISS’ financial results for the full year 2019 have reported strong organic growth and improving underlying free cash flow, despite selective operational challenges for the business.

The global support services company reported organic growth of 7.1% in 2019 (2018: 3.9%) and 8.1% in H2 2019 (H1 2019: 6.0%), driven by 11% organic growth from key accounts on the back of strong commercial momentum, including the launch of Deutsche Telekom and a generally high level of wins, extensions and expansions. Growth was furthermore supported by an increasing customer retention rate.

Operating margin was 4.2% in 2019 (2018: 5.0%) and 4.6% in H2 2019 (H2 2018: 6.1%) which according to ISS was impacted negatively by its reorganisation in France, two large loss-making contracts and a DKK 150 million (£17.4 million) provision to cover identified risks.

Key contract developments since Q3 results include the win of Hong Kong Airport Authority, extension/expansion of Lewisham and Greenwich NHS Trust (UK) and an IT and telephone service provider (Spain).

On 17 February, ISS discovered a malware attack and immediately disabled access to shared IT services across sites and countries. ISS stated there is no indication that any customer data or systems have been breached and a phased recovery plan is being implemented. As a result of this ISS expects its 2020 financial performance to be negatively impacted as a result but are unable to quantify the magnitude at this stage.

Outlook 2020
Organic growth is expected to be above 4% (2019: 7.1%) driven by generally solid commercial momentum, and operating margin is expected to increase to above 4.5% (2019: 4.2%) driven partly by run-rate improvements in 2020 and the normalisation of certain significant short-term headwinds in 2019.

The outlook does not reflect financial impacts related to the malware attack or to the Coronavirus, as the situation remains too uncertain to assess an impact at this point.

Jeff Gravenhorst, Group CEO, ISS A/S, said: “2019 was a mixed year. On one hand, we continued to see the benefits from our strategic focus towards key accounts – both in terms of historically strong organic growth and improving underlying free cash flow. We won, extended and expanded many key accounts and launched the largest contract in the history of ISS with Deutsche Telekom. However, we also faced a few significant local headwinds. It stands as a reminder that our transformation isn’t over yet.

“The strategy is right and we are gradually getting closer to the finishing line. Today, we are a more focused business with a clear value proposition for our customers and we are becoming a structurally higher growth business.

“While the coronavirus and the recent malware attack on ISS provides some uncertainty, we expect solid organic growth together with improving margins and stronger free cash flow in 2020.”

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