ISG doubles profit despite construction loss

Aaron Morby 8 years ago

Contractor ISG has doubled pretax profits to £6.7m despite running up a loss at its construction division.

Sales rose 20% to £1.48bn in the year ending in June as the group benefitted from a strong recovery in London fit-out work and surging orders for data centres at its engineering division.

To feed the growth in orders ISG took on an extra 300 staff over the year at these two divisions. Looking ahead the construction group’s order book is 18% ahead of last year at just over £1bn.

David Lawther, chief executive officer, said he expected the construction division to return to profit next year after running up operating losses of £1.6m due to poor margins on projects agreed more than a year ago.

He said group incurred further one-off costs of £2.4m, completing the construction operation restructuring from seven to four regions with the closure of its Tonbridge office during the summer.

As a result construction revenue dropped from around £500m in 2013 to £463m this year.

Lawther said: “The UK construction market is now showing signs of improvement, both in the pipeline of opportunities and contract terms.

“We have recruited new people into the leadership team and in our regions to grow and improve our skillsets with a focus on improvement in key areas including procurement processes, bid and risk management and winning-work strategy.

“We anticipate seeing an upturn in margins and a return to profit from 2015.”

But the ongoing problems at construction were more than offset by ISG’s engineering and fit-out arms which help to lift underlying pre-tax profits to £11.5m.

ISG has grown revenue from data centre work from £30m to £250m in the space of two years.

The fit-out team benefited from the return of large-scale contracts, securing the biggest London office fit-out project of recent years, a £125m construction management contract to deliver the new 700,000 sq ft UK headquarters for UBS at 5 Broadgate.

ISG is scheduled to commence work on site at the start of 2015, following a 12-month pre-construction period.

Fit-out revenue in the year nearly doubled to £520m, lifting operating profits from £5m to £9.9m and restoring margins to 1.9%.

Despite a competitive retail market hit by fewer new build opportunities a focus on refurbishment projects helped the retail division to lift operating profit to £6.1m on slightly improved turnover of £283m.

Lawther added: “Our diversification strategy, combined with the recovery of our traditional UK markets, positions the company for continued growth.  Overseas, our businesses are benefiting from a growing reputation.

“We anticipate further improvement in our results in the coming year.”

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