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Paper-thin margins prompt ISG to reorganise construction division

10 Sep 13 Recovery in the London office fit-out market has helped ISG grow profits and swell its order book.

CEO David Lawther
CEO David Lawther

However, ISG’s UK Construction business is to be restructured to strip out costs and improve margins.

For the year ended 30 June 2013, underlying profit before tax increased to £8.5m (2012: £7.5m) on revenue of £1,284m (2012: £1,281m).  Reported pre-tax profit was £2.5m (2012: £1.2m).

UK Construction accounted for £538m, or 42%, of total revenue but had an operating profit margin of just 0.2%.  The UK Construction division’s pre-tax profit reached £1.5m, up from £1.2m in 2012.

“As market conditions remain challenging we are in the process of reorganising our Construction business into three regions in order to optimise operational efficiency,” said CEO David Lawther. “The order book for our UK Construction business is in line with prior year at £391m (2012: £390m), of which £338m is for delivery in the current financial year (2012: £335m).  We would anticipate revenue for the current financial year being slightly below prior year, however we are targeting to improve margins.”

Fit-out accounted for £288m and retail customers for £267m, with 1.7% and 2.1% operating margins respectively. The forward order book up in Fit-out & Engineering Services is up by 89% from £111m a year before to £210m.

UK operations generated turnover of £1,093bn and £12.5m profit before tax.

Net cash at year-end was up 42% at £36.1m (£25.4m 2012).

A share placing in June raised £7.4m net to support international expansion, with acquisitions of ACE in Brazil and Tecton in Germany.

“Overseas, our businesses are performing well and we are entering new markets and strengthening our existing presence through selective acquisitions,” Mr Lawther added.

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MPU

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