Welcome to the ISS trading update for Q3 2025. Today's call is being recorded. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question-and-answer session. To ask a question, please press five-star on your telephone keypad. I would like to introduce Group CEO Kasper Fangel, Group CFO Mads Holm, and Group Head of Investor Relations Michael Witfeldt-Rasmussen. Speakers, please begin.
Good morning, everyone, and a warm welcome to our conference call. We appreciate you joining us today to discuss our Q3 trading update released earlier in the morning. As said, I'm Michael Witfeldt-Rasmussen, heading up Investor Relations here at ISS. Joining me today in the room is our CEO, Kasper Fangel, our CFO, Mads Holm, and Anne Sophie Riis from the IR team. Before we begin, please take a quick view at disclaimer, and then I will hand it over to start the presentation. Please move to slide number four.
Thank you, Michael, and good morning, everyone. Thank you for joining us for our third quarter 2025 trading update. We delivered a third quarter fully in line with expectations, reflecting steady progress on our strategic priorities, strong commercial momentum, and disciplined execution, keeping our overall strategy firmly on track. While there is still more to do, we're encouraged by the improvements we make day by day and the underlying momentum across the business. Let's begin with an overview of our progress and the key drivers behind the financial results. We delivered a Q3 in line with expectations on all three KPIs. Growth was 4.9%, an improvement against Q2 of 3.8%. More importantly, underlying growth is accelerating as new contracts ramp up, as well as we are expanding our services with existing customers. Our focused execution is delivering results.
We've secured a larger number of contract extensions and added new logos throughout the year. All in all, we continue to see signs that our efforts to strengthen the commercial engine are paying off. That said, a significant portion of the new logos we secured are back-end loaded with startup dates towards the end of 2025 or early 2026. As a consequence, we are narrowing our guidance range from 4%-6% to 4%-5%, leaving us with a strong exit rate for 2025. When you look at Q4, remember the uncertainty around the potential level of above base and not least the very challenging comparison base we have from last year. We successfully went live with DWP on October 1, and thanks to a well-executed mobilization.
Operations are running as planned, a major achievement for the team on such a large contract and a strong demonstration of our business ability to deliver. The process with Deutsche Telekom is progressing as planned, and no news does not equal bad news. We are now awaiting the final ruling from the court. Our view on the likely outcome remains unchanged since our last update in connection with Q2, and we continue to firmly believe that we are well positioned in the arbitration process. Finally, we are pleased to see that our credit rating upgrade reflects our strong financial position and consistent execution. Since we last spoke, we've continued to do what we do best, helping our customers create exceptional service moments at their workplaces. Our focus remains on delivering great customer experiences every day, powered by our self-delivery model and a strong service mindset.
By combining that with our ongoing commercial initiatives, we're continuing to see solid momentum both in new wins and in meaningful expansions with existing customers. So far this year, including Brisbane Airport, we just announced this morning, we've announced 21 contracts, nine new wins, nine expansions, two scope reductions, and one loss. As I mentioned earlier, the majority of these contracts will start up in the latter part of this year or in early 2026, which means we won't see material impact from them until 2026. While this weighs a bit on our 2025 growth rate, it provides a strong foundation for 2026, a year where we'll maintain our dedicated focus on execution within our four chosen segments, continue to pursue local opportunities, and grow with our existing customers. Simply by doing what we do best, creating workplace experiences that truly matter, and delivering unique service moments.
I'm encouraged when I look at the market environment we are operating in today. Office trends are generally improving across most markets, and as many of you have probably noticed yourself, employers are increasingly updating their return-to-office policies to bring people back together. In this transition, ISS plays an important role, helping create workplaces that attract employees back through a pull rather than a push effect. Our value proposition is centered around making the workplace better, spaces that inspire, connect, and enable productivity. While I can't share specific numbers, we do feel the positive impact of more employees returning to the office. Over time, I'm confident these trends will continue to support our growth into 2026. From the growth we've seen this quarter, we are observing an underlying like-for-like improvement in both volume and net new wins.
The narrowing of the guidance is purely related to timing of contract startups and an earlier exit of the recent and out contract loss. We've also improved our retention rate to 94% this quarter, which I will elaborate on in the next slide. Our 2025 expiries have decreased from 3% - 2% since we last spoke in August. We still have two big-ticket items up for renewal this year, and we remain confident on a successful outcome of the current processes. I'm also pleased with the fact that an increasing number of our extensions often results in an expanded scope, driven by our commercial and on-site teams' ability to identify and capture growth opportunities.
We've have had two scope reductions and one loss during 2025 so far, which of course is disappointing, but also the nature of our business, and we keep full focus on doing what is best for the business and not driving into too aggressive terms and conditions. I will hand over to Mads for an update on our financials.
Thank you, Kasper. Turning to our financials for the third quarter of 2025, we delivered a solid result. Performed as planned. We delivered organic growth of 4.9%, with an improvement in like-for-like growth since the second quarter. The organic growth in the quarter was primarily driven by implementation of price increases, which contributed by around 4.5%. This underlines the resilience of our business model as we continue to successfully pass on inflationary pressure, particularly wage-related cost increases, to protect our margins. Volume growth had a positive contribution of around 1%, primarily driven by increased activity level at customer sites, mainly in Northern Europe and APAC, as well as scope increases across the regions. As expected, net contract wins had a negative contribution of around 1%. Recall that the majority of the contracts we have announced year-to-date will start up late 2025 and early 2026.
Projects and above base activity contributed around 0.5% and grew organically by 3% in the third quarter, despite a tough comparison base from last year. Growth was mainly related to customers' refurbishment programs and other smaller above base work, which are a large contribution from Central and Southern Europe. As you know, we do not report on margins or cash flow in our trading update, but I want to emphasize that both are progressing as planned, and we remain fully confident in achieving our full-year targets. Next slide, please. All regions except Americas delivered positive organic growth in the third quarter, in line with our expectations. In Northern Europe, we recorded third-quarter organic growth of 1%, with a challenging comparison due to the annuization effect from DEFRA and the Danish Building and Property Agency, which went live in the second quarter 2024. That, combined with a tough above base comparison for the third quarter 2024.
Recall DWP in the U.K. successfully went live on the 1st of October. Business is running according to plan, and the full impact will be reflected in the fourth quarter. We continue to see strong growth in Central and Southern Europe, primarily driven by price increases in Turkey. Additionally, we saw solid growth in above base and positive contribution from net new wins. In Asia-Pacific, we delivered organic growth of 9%. With particular strong performance in the Pacific region and in India, driven by new contract startups and volume growth with existing customers. As a reminder, roughly half of the year-to-date announced contracts originate from APAC. Finally, performance in the Americas was broadly as expected. The main headwind came from the annuization of a few smaller contract exits outside the U.S.
We have not seen larger wins in the region, but we remain patient and disciplined, focused on securing healthy, long-term contracts rather than chasing short-term growth. U.S. came in flat, in line with expectations. At our upcoming Capital Market Day, we will provide a deep dive into our U.S. business and share insight on our strategy going forward. Just a reminder, the fourth quarter will face a very tough comparison due to the one-off restoration work following last year's hurricane. Next slide, please. We are around two-thirds through our share buyback program, delivering a total shareholder payout yield of approximately 10%. In line with our capital allocation policy, we continue to pursue smaller bolt-on acquisitions in selective markets when they are value accretive. During the quarter, we completed the acquisition of Gabialdi, a company based in Northern Spain.
This acquisition strengthened our regional presence and established us as the market leader in the area. It's a perfect strategic fit with Grupo Fissa, which we acquired in 2023, and it brings clear low-risk synergies, particularly within back-office functions. We expect synergies to come through already at the start of 2026. Gabialdi adds approximately 0.6% to group revenue on an annual basis, and the acquisition multiple is very attractive compared to ISS' current trading multiple, reflecting our disciplined approach to capital deployment. We will continue to evaluate bolt-on opportunities where there either is a strong strategic fit or clear operational synergies, but most importantly, where it can create long-term shareholder value. As Kasper mentioned in the beginning of the presentation, I also want to highlight our Moody's upgrade.
Our credit rating was improved from Baa3 positive to Baa2 stable, a clear recognition of our strong financial position and improved track record of disciplined and reliable execution. Please turn to the next slide, where Kasper will provide additional color on our 2025 outlook.
Thank you, Mads. First of all, I'm pleased to report a sequential like-for-like improvement in underlying growth since Q2. While net new wins remain slightly negative, the overall trajectory is positive, and we're moving in the right direction. In the first three quarters, we have progressed in line with our expectations. However, the timing of contract wins and losses has differed from our initial forecast. Specifically, new wins are more back-end loaded than anticipated, and we are exiting a particular loss faster than expected. As a result, we're slightly adjusting the contribution from net new wins and are narrowing our organic growth guidance to 4%-5%, positioning us with a strong exit rate heading into 2026. On margins, we remain fully on track and reconfirm our guidance of above 5%. Next slide, please. We also reconfirm our cash flow guidance for the year.
We still expect the strong underlying cash flow generation to be maintained in 2025. The guidance of above DKK 2.4 billion is in line with the above 60% cash conversion, adjusting for the DKK 200 million negative impact from 2024 prepayments. We still expect payment from DTAC for the amounts withheld in previous years, and providing it's received in 2025, that will bring our expectations to the free cash flow, including DTAC payments at above DKK 3 billion. Please turn to the next and final slide. As we wrap up, I would like to highlight how ISS' strategy and performance combine to deliver sustainable shareholder value. Our equity story can be summarized as follows. ISS has a strong market leadership in a growing facility service market with a GDP-plus growth rate. We maintain a relentless focus on profitability, driven by operational discipline.
We generate robust cash flow, giving us the flexibility to reinvest in growth while returning capital to our shareholders. This foundation is reinforced by disciplined capital allocation, balancing reinvestment, bolt-on M&A, and share buybacks. On top of that, we have a strong sustainability agenda, which not only reflects our values but also provides us with a meaningful competitive advantage. Taken together, these strengths position ISS to deliver sustainable growth and long-term value creation for our shareholders. In summary, Q3 was another solid quarter for ISS. We delivered in line on all key parameters, demonstrating strong stability and consistency, and this shows the resilience of our company despite elevated macroeconomic uncertainty. I'm proud of that performance, and looking ahead, I'm confident we will continue to accelerate. The strengths of ISS are undeniable.
Our strategy is clear, the investments are in place, and the leadership is strong, and we are simplifying the way we operate. This ensures that all of our 325,000 of us are moving in the same direction together. Let me finish by thanking our placemakers. Your dedication and care in every service moment define ISS and earn the trust of our customers every single day. To our customers, thank you for your partnership. We remain committed to helping you achieve your desired outcomes. With that, I have concluded the presentation, and we will now open the floor for Q&A. Thank you.
To ask a question, please press five-star on your telephone keypad. To withdraw your question, you may do so by pressing five-star again. In the interest of time and to allow as many as possible to ask questions, please limit yourself to two questions. We will have a brief pause while questions are being registered. The first question is from the line of Mads Brinkmann from Berenberg. Please go ahead. Your line will now be unmuted.
Yeah, good morning. Thanks for taking my questions. If we could just start on the extensions and the big-ticket items that you talked about yourself, Kasper. I'm just wondering, and I know at least the biggest one of them, I guess, is very much by year-end, so end of December. I'm just wondering, with the other contracts, like you alluded to yourself, you've been able to extend quite a few but also expand those contracts. I was wondering whether you could add some color on these last two big-ticket items if the extensions are dragging or dragging on just because it actually includes potential negotiations about scope increases as well. That would be very helpful. Thank you.
On M&A, especially the Spanish one, I mean, just taking this into context, it seems on the face of it to be value accretive and a cheap acquisition, so to say, but just looking at it, you've added three acquisitions in Spain over the last three years, DKK 1.6 billion. You're taking Spain on very crude math to a top five country larger than Germany. If you could help understand, please, in terms of the bigger picture here, the strategy of why you've been so acquisitive in Spain. I know you've bought stuff in Switzerland as well, but it hasn't occurred to me, at least in the past, that Spain was sort of a big strategic priority. I'm just wondering why you keep buying stuff in Spain other than it being cheap in the short run. Sorry, I'll do a third. On the margin, please.
I know you don't comment on it, or you say you haven't reported on it, but just if you could tell us whether the margin for Q3 has been in line or above the margin in Q3 last year, please. Thank you.
Thank you, Mads, and good morning to you as well. Thanks for three very valid and good questions. I will take the first one around extension, and then Mads will talk to your question around M&A and margin. First of all, Mads, we have reduced the percentage from 3% - 2% here in Q3, and you are indeed right that a number of the extensions has also resulted in expansions, and we have announced those of them that are above DKK 100 million, but we also have a significant number below DKK 100 million where the same pattern has occurred, which is good. It is really about expanding both into new service lines with our existing customers, but also to expand across borders. It is a great growth opportunity for us.
We are starting to see it coming through in the numbers with an improvement in Q3, but we expect that also to be a good growth lever for us in the future because we know the customers. We know their DNA. We know what we're trying to solve for in terms of outcome, and therefore we can put together strong value propositions. On the particular two that are left this year, first of all, there is no delay in the plans here at all. It has always been the plan that these are going to be extended very late in the year. There is no delay. I will also not highlight any particular red flags. The process is going according to plan. We are having the right discussions with the customers, and we feel comfortable around that this is a good process where we will also be successful.
Of course, we never celebrate before we have obtained the signature. Mads, M&A and margin over to you.
Yeah, so. Mads, you're right. We're doing an acquisition in Spain. We see Spain as a solid market, and we have a very strong management team in Spain who are really good at these integrations. That is also why Spain is one of the few countries where we allow M&A. It is also a place with a healthy margin. You're completely right. There are cheap opportunities in Spain, which makes it a very attractive multiple game, which we talked about last year. We buy at a certain price. We take out the synergy. We have a multiple in the mid-single digit, and then you add on top the ISS digit. As we have seen here, we will be able to take out the synergies early 2026.
Therefore, of course, we do this because it's the best spend of capital, and that is part of what we do in Spain. It's part of what we do in the group when the opportunity is right. Looking into the margin, we reported a margin for 4.2% in the first half of the year. We have guided above 5% for the full year, and we see the 5% as the floor, as we have mentioned earlier. Of course, the seasonality effect of third quarter is coming through. We keep doing what RiteFi says. That also means that with the 5% floor, we have the maneuver room to make the right investments for ISS throughout the full year. We are on track to deliver the margin on a floor, which is 5%, and we are on track to deliver on it.
Thank you. If I may just follow up, sorry, on the M&A side of things. Just maybe for the full year, I think you said previously we should expect DKK 500 million-600 million like you did last year in terms of M&A spend. Is that the same that we should think about this year, given that you've done two now? I think, I guess, around DKK 300 million in spend, something like that. So another DKK 200 million-300 million, is that fair to expect for the remainder of the year? I mean, is it too late in the year now for you to do any more?
I think what we have said is the 500-600, which we had done earlier, is a good guesstimate. I think it would be fair to say this year we will most likely end up a little bit lower than that.
Understood. Thank you very much.
The next question is from the line of Mr. Grenu from Morgan Stanley. Please go ahead. Your line will now be unmuted.
Good morning, Kasper and Morgan Matt. Just two questions on my side. The first one would be on the series of contracts that you've announced, the possibilities. I mean, I understand it's taken the company above DKK 100 million, but given all these contracts being extension, the last thing you have announced.
Remy, really sorry to interrupt you, but we can't hear the question, sorry. It seems like you're very far away from the mic. Can you move closer?
Is it better now?
It's better, sorry. Yeah, thank you.
Okay, okay. Sounds good. Yeah, I mean, I just want to elaborate a little bit on all the contracts you've announced, the win, the extension, the launches. I mean, I understand it's just whatever is above DKK 100 million, but I'm trying to—can you help us understand the volume growth run rate taking into account all these contracts that you expect entering 2026? If I'm kind of doing the math back of the envelope, I'm kind of getting to a 1.5%-2% growth contribution from everything you've announced to date in terms of run rate contribution to next year. I just wanted to understand whether you thought that this assumption was in the right ballpark, and if not, then what I'm missing there. That would be the first question. The second one is, I think.
Kasper, at the beginning of the presentation, you referred to a continued sign of commercial momentum improvement. Aside from this contract that you've announced, what in the discussion with customers or in the quantitative KPIs makes you confident that you continue to see that momentum flowing to ISS?
Yeah. Thanks. Rémi. Much appreciated. Let me start with the pipeline. The pipeline continues to look healthy and lucrative. That's both on local customers, on regional customers, and also on global big-ticket items. It is clear that what I have shared with you several times before is that an office environment is just so much more important to all businesses post-COVID compared to what was the case before COVID-19. It really comes to the realization of business decision-makers that the way that you engage your staff is to get them physically together. Not necessarily every day during the week, but you got to do it at least a few days during the week. We all know that having a policy in place and trying to force people into the office environment, that's not going to last as a sustainable solution.
You got to find an office environment that is appealing and inspiring where people have a desire to get in, and they are finding the alternative, which is to stay and work from home, less attractive compared to getting into the office space. We are seeing that with the local customers and with the regional customers and, of course, also with the global customers. There we can help because we have the solutions that can help to drive these outcomes. That is what continues to fuel the pipeline. Specifically on your building blocks, remember, we are starting DWP up, which is over DKK 1 billion-DKK 1.2 billion to be precise. That has started up in October. That is DKK 300 million of Danish revenue in the fourth quarter, so a big-ticket item that is helping the growth contribution on net new. You mentioned the contract announcements yourself.
I don't want to give you any specific numbers, but I will just make a few additional comments that will help you to understand the building blocks for the fourth quarter. Because in the fourth quarter, we also get both on volume and net new a contribution from a full quarter impact of contracts that have started up in Q3 and expanded in Q3 over the course of Q3, so a full quarterly impact of that in Q4. Then we have, as you rightfully said yourself, the ones that are ticking in and are going live in Q4. All in all, we are very positive about exiting this year with a solid exit position, setting us up for a good growth in 2026.
Understood. Thank you very much.
Next up, we have Allen Wells from Jefferies. Please go ahead. Your line will now be unmuted.
Hey, good morning, gentlemen. Just a couple from me. Obviously, you flagged in that last answer that the DWP contract starting in October ramping. Could you maybe just provide a little bit of more kind of anecdotal detail around how that ramp started, kind of one and a bit months in? What are the learnings? And maybe, is there any impact from that on the decision to narrow the guidance? I assume not, but maybe you can just clarify. That's my first question. Secondly, obviously, you flagged the uncertainty in 4Q on above base. I'm mindful, obviously, we've got the hurricane comp that you've also flagged, but we are approaching the halfway point of this quarter. Interested to see what you're hearing and seeing so far from the decisions from your customers around kind of above base in Q4, and if that carries on.
For the rest of the quarter in the trend that we've seen so far, what does that actually mean for the above base level for this quarter? Thank you.
Yeah. Thanks, Allen. A little bit more color on DWP. I mean, as I said in my presentation, massive credit to our team in the U.K. and specifically to the individuals that have worked a long time with the mobilization of DWP. It's very well done. I would say the learning for us on that is that when you are absorbing such a significant portion of volume, you also got to prepare well in advance. That's exactly what we have done on the DWP, making sure that all the details were worked through and there was a diligent process around each of the service lines before we went live. That is paying off. That's why I'm so pleased to report that things operationally are going well. There's no link to the narrowing of guidance related to DWP.
As I said before in my presentation, the reason why we are narrowing the guidance to 4-5% is simply because of a few contract delays that are starting up later than what we expected, plus the loss that we have announced earlier in the year that is mobilizing faster than what we initially expected. No drama around that. In terms of above base, I mean, for the full year, we expect a slight negative contribution from projects. That, of course, also implies that it is going to be a negative in Q4 because we have a positive contribution year to date Q3 of 1%. That is purely related to the hurricane, the comparison from last year, the restoration work that Mads spoke about in his presentation in Q4 in the U.S. We do not see any structural changes on.
Above base where customers are cutting back on their spend on projects. So no structural changes in that regard.
Thank you. The next question is from Kristian Godiksen from SEB. Please go ahead. Your line will now be unmuted.
Thank you. A couple of questions from my side. On the DWP, maybe I'll just follow up. Could you maybe comment a bit on the potential for the above base? You previously stated that DKK 1.2 billion is for the core part of the contract, and then there was a significant potential for above base. That would be the first question. Secondly, if you could perhaps reveal a bit more on the initiatives in the U.S., whether they are gaining traction or not and how far progressed you are there. Thirdly, a household question. You stated a couple of times that like-for-like growth, but I'm a bit unsure what you are adjusting for. Maybe could you comment a bit on that? That would be the first three questions, and then I can jump back. Thank you.
Yeah. Thanks, Kristian. And good morning to you as well. On DWP, of course, on such a significant customer with such a geographical presence in the U.K., there is also a good opportunity for additional work above scope, so additional project work. We got to earn our right to get that and win that. That we do, of course, by delivering on the base and making sure that we're competitive on above base. We are confident that we can do that, but we're not there yet. That is a work in progress. Yes, there is a chunk of opportunities, but it's not something that comes for free. It's something that we need to earn our right to get. We're working hard on that on a daily basis. In terms of the U.S.
A data point that will help, I think, to understand the current context in the U.S. The growth in the third quarter in the United States of America is flat, so zero-ish. That, of course, means that the annualization of the losses has stopped, but it also means that we have not won any meaningful items yet in the U.S. The question then is, are we doing the right things? Do we have the right setup to make a breakthrough in the U.S. going forward? I absolutely believe that is the case. We have the right leadership team in place. As Matt said, the plan is there. You will, of course, when we have a Capital Market Day at some point of time next year, that will be one of the agenda items that you will get additional details on.
The plan is exactly as I want a plan to be. It's laser-sharp, it's focused, it's with a few things that are moving the needle from a growth perspective and therefore also from a value perspective. With a strong governance model around that, we are also executing accordingly. I will also highlight that we are patient. It takes time. It's not something that comes overnight. What is critical to us is that we can see the arrow is pointing in the right direction, and we can see that we are becoming a little bit better every day. That is the case. Be patient about the timing. At some point of time, we will also start to see the acceleration coming through in the U.S. Your third question, Godiksen, I didn't get that. The like-for-like comparison you mentioned. Maybe just a little bit.
More color on that if you want that answered.
Yeah. Yeah. Please. I can do that. Maybe just one follow-up on the U.S. part. Just to be sure, are the platforms then basically in place now in order for you to begin to start winning these contracts that you see out on the market? That was just my follow-up. On the household question on lifestyle, it's just that you mentioned lifestyle. I can't remember. You used the term like-for-like before and only referred to organic growth. I was just wondering if there was anything specific to adjust for in. Yeah.
Yeah. Okay.
In terms of.
On your household... Yeah. Housekeeping question. There is nothing to adjust. I think what you're referring to here is that I mentioned that I'm pleased to see that the contribution from volume, so growing with existing customers, is improving in Q3 compared to the first-half position. The same goes for net new contracts. If I look at that consolidated, we had a negative contribution in Q2 of approximately 1.5%, and that is flat in Q3. The arrow is pointing in the right direction, and it's starting to come through in the numbers. That's what I meant. In terms of the U.S. on the platform.
I mean, I think in summary, a good way to describe it is that we have a platform in place now in the U.S. where we have the people and the expertise that we need to fuel the engine with horsepower from a commercial point of view. We have the platform in place where we can absorb that organic growth without having to increase our overhead costs accordingly. That has been built over the last 12-plus months. Now it is about having the laser focus on the prospects in the pipeline and converting these opportunities into new wins and push that over the finish line.
Perfect. Perfect. Thank you very much. Just a very brief follow-up on the growth contribution. Now I understand it. Can you tell me very shortly what was the reason for the sequential improvement for the existing customers?
For the volume? Yeah. Yeah. It is simply the expansions that we have also communicated externally that have contributed positively in Q3 versus the first half.
Perfect. Thank you. Makes sense.
The next question is from the line of Nicole Monyon from UBS. Please go ahead. Your line will now be unmuted.
Good morning. Thanks very much for taking my questions. Just two from me, please. Firstly, on the net new, can you give us any insight into the nature of the delays and some of the contract starts? Anything sort of common you're seeing across customers or nothing really to sort of call out there? Are there any much smaller contracts in there that are still churning off more than expected or not? I assume not from your comments, but just wanted to check in on that. Secondly, just on your comments on return to office, it looks like you think this can still be a tailwind into next year. Just wanted to pick up on this a bit. Some of your peers have maybe suggested that this theme has played out a little bit, but it seems as though you think it has further to run.
Just wanted to get your thoughts there, really, what you're seeing and perhaps in what markets beyond the sort of general trend of kind of higher office investments. Thanks.
Yeah. On the net new, it's a combination really of the contracts above DKK 100 million that we have announced, but also contract wins lower than DKK 100 million that we have won and that have started up and are supposed to start up in the fourth quarter. From a retention point of view, as I said in the presentation, we have improved that from 93% to 94% here in Q3. Yes, we do have some losses that are below DKK 100 million. Otherwise, that number would be 100%. We are strengthening the focus on retention with additional resources that have it as their day job to make sure that we are working on that particular thing. We're not there yet. We can still become better at it. I think we are moving into a better territory.
That is also what is coming through in the 94%, the improvement versus 93%. On return to office, I mean, my major point around that is that it is more, how can I say, the emotional part of it. What I mean with that is that we see in conversations more and more with customers that they want their staff to have this feeling around that they are not being forced into the office because then it is a matter of time before they will start to seek employment with the competition. Nobody wants to be forced for anything. They want to have the desire to get back in. They want their people in the office, and they want to push that to a greater extent than what they have done before. That is where we are coming in.
We don't expect a swing factor in more people being in the office from now on compared to what we've seen in the first nine months of this year in terms of the growth for next year. There will be some small moves. I don't see that as a swing factor. The other part is massive. This thing around notion and the belief in people and decision-makers to make the office space something that is appealing and inspiring because that means that you're willing to invest in it. That's exactly where we're coming in, and we're having a great opportunity.
Thank you.
The last questions are from the line of Lars Heindorff from Nordea. Please go ahead. Your line will now be unmuted.
Yeah. Good morning. Thank you. Two from my side to follow up on the U.S. and on Christian's earlier questions. How much of the negative growth in the Americas, you write about the deliberate closures, how much did that affect the negative growth? Given the positive comments that you made on the U.S., but still with flat growth, I mean, when do you expect to see the U.S. will actually turn into positive organic growth? That's the first part. The second is on the net new and the trends, which obviously will be up in the fourth quarter given the DWP contract and some of the late start on some of the contracts that you mentioned earlier on. Will it be fair to assume that net new, the run rate will be positive as we enter into 2026?
Yeah. First, on your second question, Lars, and also good morning to you. Yes, the exit position of net new will be positive going into next year. You're right about that, and I can confirm that. On your first question in terms of the U.S., I don't want to give any specific timeline and say within X number of quarters, then we are cracking the code to how we can accelerate growth in the U.S. That will not be credible to do that. What I will continue to communicate is exactly where we are on the journey, and I will continue to push our team in the U.S. to do the right things. That is to build a pipeline that is not filled with all sorts of Mickey Mouse prospects, but real prospects with strong substance. It's getting there. It's better.
It's not where it needs to be in the end, but it's improving. It takes time. Hopefully, we are moving fast, but I can't give any guarantee around that. We have destroyed good trends in the past in ISS. I've been here seventeen years by losing patience too fast. It's nothing to do with them having a free ride or anything. Our U.S. management team are absolutely feeling accountable for working on the right things. I know, and we know that when we do the right things, then it's also a matter of time before it starts to pay off in the numbers. I think the last point you mentioned was around, if U.S. is flat, how can the region then be negative? That has to do with contract exits in Chile and Mexico in the beginning of this year.
It's the analyzation of that that we're seeing here in the third quarter. There's nothing structural in terms of that that we have lost additional contracts in the third quarter. It's just the analyzation from the losses that we incurred in the beginning of the year.
Thank you.
The next question is from the line of Johan Eliason from SB1 Markets. Please go ahead. Your line will now be unmuted.
Good morning, Kasper. Just a question on your capital allocation priorities. You have the ambition to spend around DKK 2.5 billion on buying back your shares and DKK 7 million on M&A. That has made sense, obviously, since your own valuation has been quite low. We have seen your valuation improving over the year from around PE 9 times to around PE 12 today. It is still below where you were before the pandemic, but that was also in another interest rate scenario, obviously. Looking into next year, how will your priorities, I guess, on a relative valuation basis, M&A must look a little bit more attractive going forward, or is this sort of the balance you foresee for some time now? Hello?
Thank you very much for the question. I mean, we have a very firm capital allocation policy, and we keep that. We still believe that, first of all, we pay out 20%-40% of our resulting dividend. Of course, we look into other alternatives. Among them, bolt-on M&A is definitely on the list, but of course, also capital allocation in form of share buybacks. I think what you have seen within, I would say, the last two years is that we have utilized share buyback in conjunction with, of course, also doing these bolt-on acquisitions where they make sense from a financial perspective. I alluded to it, how we also see it as a multiple play for ISS. That capital allocation policy, we stick also in the next year. Nothing too much other than we will be extremely.
Committed to the policy that we have established because we actually believe it's a strong policy and it's well understood by the market. That is how we will look at it. From an M&A perspective, remember, there's a few countries that will do M&A because we want to do it where we think we have a strong management team who are able to do this in the right way with low risk. Aligned with the capital policy also in 2026 is the key here.
Excellent. And then just the housekeeping. Can you remind me of the remaining duration of the DTAG contract?
The DTAG contract ends at the end of 2029.
Okay. Thank you.
Okay. Thank you very much, everyone, for joining our call. It's a busy day here in Denmark with a lot of Danish companies announcing the results this morning. Thanks for prioritizing ISS. Thanks for your interest in the company. Our IR team will remain available to take questions over the course of today, but also, of course, also the coming days. Mats and I are just very much looking forward to meet a lot of you in the upcoming roadshow. With that, thank you very much. Have a fantastic rest of your day.