ISS (ISS.CO) CMD first take Favourable mid term financial targets, especially on margins

Equity Research 14 September 2026 | 8:03AM BST

ISS (ISS.CO): CMD first take: Favourable mid-term financial targets, especially on margins

We are attending ISS’s CMD in Copenhagen today (14 September). ISS’s initial press Ben Andrews, CFA | release outlines new mid-term financial targets, which we view favourably and Goldman Sachs International believe are supportive of our Buy thesis (see here): Poppy Boyd-Taylor | poppy.boyd- 1. 2028 operating margin guidance is above expectations: ISS expect an Goldman Sachs International operating margin of 5.5-6.0% in 2028 (above consensus/GSe at 5.5%/5.6% in Leo Mose 2028). The mid-point of the operating margin guidance implies c.5% upside to | Goldman Sachs International 2028 consensus EBIT expectations, all else equal. organic growth guidance is solid, and with improved quality: Organic revenue growth of >5.0% on average over 2026-2028 (vs. consensus/GSe at 5.6%/5.7% on average over 2026-2028). ISS also highlights a larger expected share of LFL growth (at least 2% contribution from volume growth and net new wins), and a decent contribution from projects and above-base, while expecting pricing to represent a reduced share of growth compared to 2026. 3. Cash conversion guidance appears above expectations: Cash conversion guidance of >60% suggests upside to mid-term consensus (which models c.61% in 2027-28). ISS are re-iterating the leverage target of 2.0-2.5x, 20-40% dividend pay-out of adjusted net profit, and balancing share buybacks vs. value accretive M&A.

Our view: We view this new framework of mid-term targets favourably, with the clearest signal of upside on margins. All else equal, the mid-point of the FY28 operating margin guidance would imply FY28 EBIT that is 5% above consensus (with 10% upside if margins were to reach the top end of the 5.5-6% guidance range). We also view the FCF conversion guidance of >60% as generally better than consensus currently models. The organic growth guidance of >5% is consistent with consensus, and includes a higher quality mix: LFL growth of at least 2%, plus a decent positive contribution from above base.

As such, the targets appear supportive of one of the key tenets of our Buy thesis: improving fundamentals and upside to consensus earnings estimates (see here). During today’s event, we look for further detail on the building blocks of the mid-term growth and margin guidance; the long-term margin potential of the business beyond FY28; why this North America strategy is better positioned to succeed than previous iterations; the size and timing of future share buyback

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programmes; and further colour on the group’s M&A strategy.

Exhibit 1: Summary of key financial targets vs. GSe/consensus ISS CMD Guidance New Guidance GSe Company consensus 2026E 2027E 2028E Avg. 26-28E 2026E 2027E 2028E Avg. 26-28E Organic growth Average annual >5.0% over % 5.0% 5.0% 5.7% 6.9% 5.1% 4.7% 5.6% Operating margin (ex IAS 29) 5.5-6.0% in 2028 5.3% 5.5% 5.6% - 5.3% 5.4% 5.5% - Cash conversion >60% 68% 63% 64% - 67% 61% 61% -

Source: Company data, Company-compiled consensus, Goldman Sachs Global Investment Research

Valuation and risks Our 12-month price target is Dkr 340, and our rating is Buy. Our price target is based on: an 85% weight on our fundamental valuation, derived by applying a 12.25x EV/EBITA multiple to our NTM+1 estimates, and a 15% weight on our M&A theoretical valuation (10x EV/EBITDA, based on historical transactions, applied to our NTM+1 estimates).

Key risks to our view and price target: weaker-than-expected margin progression, weaker-than-expected FCF, lower-than-expected organic growth, operational execution, and M&A execution.

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