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ISG profit falls 25% but private sector market improves

8 Sep 10 ISG has posted a pre-tax profit of £8.8m for the year ending 30 June 2010, a fall of a quarter on the previous year.

ISG has posted a pre-tax profit of £8.8m for the year ending 30 June 2010, a fall of a quarter on the previous year.

Revenue was also down at £972m, compared to £1.05bn in 2009.

The group order book in June stood at £742m (2009: £822m), and 70% of it is private sector (2009: 68%)

Net cash at 30 June 2010 stood at £31m (2009: £32.1m.).

ISG has reorganised its construction, retail and fit-out businesses into three streams: multinational corporate office and retail fit out customers; national food retail customers; and UK construction customers.

It said the change to its structure, which includes the refocusing of our management teams on the three offers, is “designed to make it easier for customers to engage with the right part of the business”.

Operations review

In London Fit Out, ISG said revenue increased 4%, “indicating a stabilisation of the market”.

Operating profit declined to £3.3m (2009: £4.3m) and margins to 1.9% (2009: 2.6%).

Its order book stands at £122m (2009: £159m), but the firm detected “with continuing signs of improvement in pipeline in the smaller end fit out market”.

ISG's London Construction business increased operating profit 119% to £2.2m (2009: £1m) on revenue of £154m (2009: £217m).

This was due to “tight management of costs, together with better buying margins and a different mix of work”, the firm said.

The order book declined to £114m (2009: £188m), reflecting a change in mix towards a higher proportion of smaller sized projects.

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In Regional Construction, ISG posted an operating profit of £3.5m (2009: £3m) on revenue of £338m (2009: £367m).

Some 62% of its revenue is with public sector clients (2009: 59%), the majority in the education sector and frameworks.

The order book stands at £276m (2009: £286m), but the firm anticipates “some softening in public sector work load post the government's spending review”.

The retail businesses, ISG Pearce and ISG Cathedral, maintained operating profit at £6.7m (2009: £6.7m) on revenue of £192m (2009: £208m).

Almost half (49%) of revenue is in the food sector and 36% in retail banking.

The firm reported some “early signs of an improvement in high street retail sector”.

Its order book looks healthy at £163m (2009: £135m).

Overseas, ISG made an operating loss of £200,000 in Europe (2009: profit £1.4m) on increased revenue of £33m (2009: £29m).

In the Middle East, joint venture business continued to make a small loss of £0.3m (2009: £0.4m), predominantly due to the poor performance of the joinery division, which ISG is now selling to its partner.

The Asia business delivered an operating profit of £1.9m (2009: £2.2m) on revenue of £86m (2009: £60m).

Outlook

David Lawther, chief executive, said: "While there is little doubt that our markets will remain highly competitive over the coming year, we are seeing a recovery in the spending programmes of our private sector customers.

“Our results show the continued resilience of the Group and our strategy places us well to resume the growth path we demonstrated leading up to the global economic crisis."

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