Firm posts slightly improved margin as it reorganises its UK construction business in bid to improve efficiency
ISG is reorganizing its UK construction business into three regions in a bid to drive down costs and improve its margins as the firm gears up for an upturn in the market.
Reporting its results for the year to 30 June 2013 this morning, the firm posted revenue in its UK construction business of 拢538m, down 3% on the previous year (2012: 拢554m), with an operating profit of 拢1.1m.
This gave the business an operating margin of 0.2%, a slight improvement on 0.1% last year.
However, the firm said it was now reorganizing the UK construction business into three regions 鈥渋n order to optimise operational efficiency鈥�.
The firm said its UK Construction order book stood at 拢391m, level with last year, (2012: 拢390m), of which 拢338m is for delivery in the current financial year (2012: 拢335m).
The firm added: 鈥淲e would anticipate revenue for the current financial year being slightly below prior year, however we are targeting to improve margins.鈥�
ISG said it had incurred 拢3.1m in costs following a reorganization of the UK construction business in the South-west and the South-east last year, as well as consolidation of its retail operations into a single management structure.
ISG chairman Roy Dantzic said: 鈥淣otwithstanding that the market for our UK Construction business remains highly challenging, the business achieved a modest improvement in profitability.
鈥淗owever, we are taking significant steps to restructure with the aim of improving margins further and reducing costs. These actions are expected to underpin improved performance in the future.鈥�
Revenue across the group remained flat at 拢1.28bn (2012: 拢1.28bn), but pre-tax profit across the group more than doubled to 拢2.5m (2012: 拢1.2m).
The group鈥檚 underlying operating profit, before the deduction of accountancy costs and the 拢3.2m in restructuring costs, stood at 拢15.4m (2012: 拢13.2m), giving an underlying operating margin of 1.2%.
The firm鈥檚 fit-out and engineering business reported revenue of 拢288m, up 42% on last year (2012: 拢202m), with 拢88m relating to overseas engineering work.
Operating profit in the business rose to 拢5m (2012: 拢3.9m), giving an operating margin of 1.7%, slightly down on 1.9% last year, which the firm said was 鈥渁 reflection of the continued competitive pressures in the market鈥�.
The retail business posted revenue of 拢267m, down 17% on last year (2012: 拢323m), with the firm saying the sector was 鈥減articularly affected by the UK economy鈥�.
However, operating profit in the business rose 10% from 拢5m last year to 拢5.5m, giving an improved operating margin of 2.2% (20212: 1.6%).
David Lawther, ISG chief executive, said: 鈥淚SG has delivered an improved performance and growing order book.
鈥淚n the UK, we have seen signs of improvement in the London office fit out market and have maintained our market leading positions in the office fit out and retail sectors.
鈥淲e have had considerable success in the data centre sector. Our UK Construction business has increased its level of repeat work through its focus on key customers and frameworks.
鈥淥verseas, our businesses are performing well and we are entering new markets and strengthening our existing presence through selective acquisitions.
鈥淲e are looking forward to the future with growing confidence.鈥�
Meanwhile, ISG has appointed James Weekes as a divisional director in its fit-out business.
Weekes will head up the projects team in the business, with a focus on projects up to a value of circa 拢1.5m.
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