Contractor posts large UK construction loss, but other divisions post improved performance
ISG鈥檚 share price dropped more than a quarter in value in early trading this morning, after the firm posted a 拢15.6m pre-tax loss in half-year results to December 2014.
ISG鈥檚 share price was down 28% to 172p in early trading this morning, down from Monday鈥檚 close of 239p.
The share price fall came after the contractor said problem contracts in its UK construction division dragged down its results for the six-month period, .
The overall 拢15.6m pre-tax loss compared to a 拢4.6m pre-tax profit for the period the previous year. Revenue grew 19% to 拢828.6m, up from 拢694.3m.
ISG鈥檚 UK construction division posted a 拢16m operating loss, compared to a 拢3m operating profit the previous year, while revenue grew to 拢218.5m, up from 拢207.7m.
Commenting on the reasons for the UK construction loss, ISG said: 鈥淭he issues faced in UK Construction principally relate to the deterioration in project performance since 30 June 2014 on contracts procured over 18 months ago, the closing out of contracts in discontinued operations and losses within our London Exclusive Residential business which has been identified as a business to be discontinued.
鈥淎lso, within this division, the Group has been in protracted negotiations on one large construction contract entered into in 2012, and decided to make a significant provision against this contract at the half year. Since the trading update we have concluded a settlement agreement with the client within the level of the provision made at the half year.鈥�
ISG said it had restructured its UK construction division over the past 18 months, including 鈥渟trengthening management, improving procurement, bid and risk management and assessing the core strengths of each business region and refocusing accordingly鈥�.
Elsewhere, ISG鈥檚 UK retail, UK fit-out and engineering services, and overseas operations all posted operating profit and revenue growth.
The firm鈥檚 UK retail business posted 拢3.8m operating profit, up from 拢3.2m, and revenue of 拢180m, up from 拢155.5m.
UK fit-out and engineering services posted operating profit of 拢6.6m, up from 拢3m, and revenue of 拢308.3m, up from 拢210m.
The firm鈥檚 overseas operations 鈥� comprising Continental Europe, the Middle East and Asia 鈥� posted 拢2.4m operating profit, up from 拢2.2m, and revenue of 拢112.3m, up from 拢109.2m.
The firm鈥檚 overall order book was almost unchanged at 拢967m, down from 拢968m the previous year.
David Lawther (pictured), ISG chief executive, said: 鈥淲e 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.
鈥淓lsewhere, our UK Fit Out and UK Retail businesses continue to lead their markets and perform very well. We plan further progress for our Engineering Services business as it continues to build its reputation across Europe. Overseas, we are capitalising on increased market activity and a growing reputation.
鈥淎s previously flagged, we expect the operational performance of the Group in the second half to be in line with the Board鈥檚 expectations. We anticipate returning to our previously expected growth path in 2015/16.鈥�
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