ISG issues fresh construction profit warning

Aaron Morby 9 years ago
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ISG’s construction division is continuing to drag the group down with continuing losses on projects.

In a trading statement this morning the firm issued a fresh profit warning estimating that the poorly performing division was expected to run up a loss of £5m in its first half of the year.

David Lawther, chief executive officer, warned that disappointing UK construction trading would now overshadow strong performances at both its fitout and engineering services divisions.

He said: “We continue to work on the recovery plan for UK construction.

“Despite the many positive steps we have taken, we have continued to experience disappointing project outcomes on some older contracts.”

“With margin and risk control remaining our priority rather than volume and some customers delaying the start on site of their projects, volumes this year will be below our expectations with profit deferred to later periods,” he warned.

“As a consequence, this division will be loss-making this year and will impact the Group results by up to £5m.

Lawther pledged that the board would remain resolute in its ambition to refocus the construction division on core sectors, regions and skills.

In September ISG reported a June year-end loss of nearly £28m following a “painful restructuring of the UK Construction division”.

Today he said: “Work on closing out the final projects on discontinued activities is proceeding in line with our expectations.

“We expect all projects to have reached practical completion by December 2015 and for the vast majority of outstanding commercial issues to have been settled by the financial year-end.”

He said the UK fit-out division had performed well and was currently working on six major London office fit-out schemes worth over £300m.

The engineering services had secured further data center contracts in Continental Europe and the UK while the retail division had seen growth from banking clients.

These divsiions helped to lift ISG’s total order book 12% to £1.13bn. Lawther said ISG expected to end the year with net cash in excess of £50m. (2014: £38.3m).

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