ISS Q1 2025 presentation: Organic growth at 4.3%, outlook confirmed

ISS A/S (CPH:ISS) reported a solid start to 2025 with 4.3% organic growth in its Q1 trading update presented on May 6, 2025. The company confirmed its full-year outlook and highlighted progress on strategic initiatives, while maintaining its commitment to significant shareholder returns.

Executive Summary

ISS delivered what CEO Kasper Fangel described as a "solid start to 2025" with focused execution across business segments. The company reported Q1 organic growth of 4.3% and a strong retention rate of 94%, indicating successful client relationship management despite ongoing strategic contract trimming.

The presentation highlighted that commercial initiatives are gaining momentum, while the Deutsche Telekom AG (ETR:DTEGn) (DTAG) arbitration process is progressing as planned. Management also noted that a leaner Executive Group Management structure is accelerating execution across the organization.

As shown in the following executive summary slide, the company confirmed its 2025 outlook:

Detailed Financial Analysis

The 4.3% organic growth in Q1 2025 was driven by several components, with net price increases contributing approximately 4.5% and volume growth adding about 0.5%. These positive factors were partially offset by net contract wins at around -2%, while projects and above-base work contributed approximately 1%.

The following breakdown illustrates the components of Q1 2025 organic growth:

Regional performance showed varying results, with strategic contract trimming impacting growth across all regions. Northern Europe saw organic growth of 4% in Q1 2025, down from 5% in Q1 2024. Central & Southern Europe recorded 9% growth, down from 12% in the same period last year. Asia & Pacific posted 4% growth compared to 5% in Q1 2024, while Americas experienced a decline of 9%, compared to a 2% decline in Q1 2024.

This regional breakdown is illustrated in the following slide:

The company emphasized its historical resilience through various economic cycles, presenting data from 2000 to 2024 that showed consistent performance despite challenges such as the dot-com bubble, the 2007 financial crisis, and the COVID-19 pandemic. The average organic growth from 2000-2024 was 3.6%, while the average operating margin was 5.04%.

As shown in the following historical performance chart:

Strategic Initiatives and Market Trends

ISS presented findings from its January 2025 "Evolving Workplaces" survey, which polled nearly 11,000 office workers across 15 countries. The results strongly support ISS’s business model, with 81% of respondents working in a hybrid fashion (typically 1-2 days at home per week), 88% identifying risks with working from home, and 64% believing that improved facilities and office experiences would motivate them to be in the workplace more often.

The survey results, which provide valuable context for ISS’s service offerings, are illustrated here:

The company reported that its business pipeline remains solid, with an improving retention rate. Notable expansions included Australia Pacific Airports (Melbourne) and Construction operations in Türkiye, each contributing approximately 0.1% to revenue growth. Additional expansions were reported in Public Healthcare (Southeast Asia), Danish Crown A/S, Salling Group A/S, Healthcare (Spain), and Real Estate (Hong Kong).

The contract maturity profile shows stability in the client base, as illustrated in this slide:

Outlook and Shareholder Returns

ISS reconfirmed its 2025 outlook, projecting organic growth of approximately 4-6% and an operating margin above 5% (excluding IAS 29 impacts). The company provided a detailed breakdown of its free cash flow forecast for 2025, projecting reported free cash flow of more than 3.0 billion DKK including DTAG timing effects.

The following slide details the company’s 2025 outlook:

The free cash flow components for 2025 are broken down in this chart:

A significant focus of the presentation was on shareholder returns, with ISS highlighting its commitment to returning substantial cash to shareholders in 2025. The company has already paid a dividend of DKK 575 million and completed DKK 575 million of a planned DKK 2.5 billion share buyback program. Additionally, 11.5 million shares have been approved for cancellation at the April 2025 Annual General Meeting.

These shareholder returns translate to approximately 10% total payout yield for 2025, as shown in the following slide:

Historical Performance and Financial Strength

The quarterly organic growth trend shows a relatively stable pattern over recent years, with Q1 2025 continuing the positive momentum:

ISS also highlighted its credit and sustainability ratings, noting an MSCI AA rating maintained for five straight years, a Sustainalytics score of 13.5/100 (low risk), and positive momentum in its credit ratings with Moody’s at Baa3 (positive outlook) and S&P at BBB (stable).

CFO Mads Holm emphasized that the company has restored earnings per share with a CAGR of 9.4% from 2014-2024, while delivering solid cash conversion averaging 57% during the same period.

With the stock closing at DKK 168 on May 5, 2025, and trading near its 52-week high of DKK 171.5, investor sentiment appears aligned with management’s positive outlook for the remainder of 2025.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.