UK construction suffered a £16m loss during the period due “to the deterioration in project performance since 30 June 2014 on contracts procured over 18 months ago.”
Losses have also been racked-up closing-out contracts from the former Tonbridge, Kent office and the discontinued luxury London residential business.
ISG has now agreed a settlement on its largest problem contract – believed to be a £61m accommodation job at Center Parcs in Woburn.
The company also confirmed today that is it planning a £16m equity fund raising “due to the impact of the losses and provisions in UK Construction.”
ISG has also negotiated an extra £10m short-term loan with its bankers.
The construction problems saw ISG make a total loss during the six months of £20.8m compared to a £1.7m profit last time as revenue rose to £819m from £682m.
The company enjoyed a strong performance from UK fit out, retail and engineering services.
ISG’s share price fell by more than 20% in early Stock Exchange trading this morning.
Chief Executive David Lawther said: “We have taken decisive steps to reform our UK Construction division and the issues caused by older contracts will be closed out.
“Higher quality and larger contracts are now in progress.”
He added: “The Group has been restructuring its UK Construction division over the past 18 months in response to the widely reported difficult trading conditions in this market.
“This has involved strengthening management, improving procurement, bid and risk management and assessing the core strengths of each business region and refocusing accordingly.
“Excluding these older contracts, the division has been profitable reflecting the Group’s restructuring and refocusing initiatives.
“Contracts procured since the start of the financial year continue to be secured on significantly improved terms.”