ISS (Investment Case): Solid organic growth and shareholder returns continue
Summary
- ISS A/S reported strong Q1 2026 performance with 7.4% organic growth, supporting its 2026 guidance of over 5% organic growth, operating margin above 5%, and underlying free cash flow above DKK 2.7bn.
- The company maintains a solid capital return profile with a DKK 2.5bn share buyback program and dividends, supported by leverage at 2.3x NIBD/EBITDA, allowing for potential M&A activities.
- ISS shares rose approximately 65% in 2025 and continue to perform well in 2026, trading in line with peers on 2026E EV/EBIT, with potential for further valuation improvement through strategic execution and margin enhancement.
- A resolution of the Deutsche Telekom case in H1 2026 could positively impact free cash flow guidance, potentially increasing it to above DKK 3.1bn.
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We have updated our investment case on ISS A/S following the Q1 2026 trading update. The company delivered solid momentum in Q1 2026 with organic growth of 7.4% and a more balanced growth mix across price, volume, net new wins, and projects, which supports the 2026 guidance of organic growth above 5%, operating margin above 5%, and underlying free cash flow above DKK 2.7bn (and DKK 3.1bn if the Deutsche Telekom case is successful).
The capital return profile for 2026 remains solid with a 2026 share buyback programme of DKK 2.5bn ongoing until Feb 2027 and further dividends expected, after ISS paid DKK 3.2/share in connection with the FY 2025 results, corresponding to a payout ratio of 20% of adjusted net profit. With leverage at 2.3x NIBD/EBITDA, there is still room for both bolt-on M&A and continued capital return.
The ISS share rose ~65% in 2025 and has maintained that momentum into 2026. ISS now trades broadly in line with facility services peers on 2026E EV/EBIT (12.1x vs. 11.9x), after the previous 20-30% discount was closed through strong execution, improved cash flow, and rising capital returns. The remaining valuation gap to sector benchmark Compass Group remains, and ongoing execution of the medium term strategy and further margin improvement to narrow the operating margin differential with Compass Group may reduce the ongoing valuation gap. A resolution of the Deutsche Telekom case is expected in H1 2026 and could lift the FCF guidance to above DKK 3.1bn and may be a positive trigger.
To learn more you can catch up on the presentation of the Q1 2026 trading statement, with ISS Head of Investor Relations Michael Vitfell-Rasmussen. Link: https://www.inderes.dk/videos/iss-praesentation-af-trading-update-for-1-kvartal-2026
Read the full updated investment case here.
Disclaimer: HC Andersen Capital receives payment from ISS for a DigitalIR subscription agreement. / Philip Coombes 14:25 08/05-2026.
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