LONDON (Alliance News) - Construction services and fit-out company ISG PLC saw its shares plunge on Tuesday after the company said it swung to a loss in the first half of its financial year owing to issues with contracts secured in the past and said it will raise GBP16 million in a discounted share placing.
ISG said its pretax loss for the six months to the end of December was GBP15.6 million, compared to a GBP4.6 million profit a year earlier.
Revenue rose to GBP828.6 million from GBP694.3 million last year, but the company saw a rise in its cost of sales to GBP808.2 million from GBP657.8 million, offsetting the rise in revenue. The rise in costs was related to a deterioration in project performance in its UK construction arm over the half year on contracts procured more than 18 months earlier, the closing out of contracts on discontinued operations, and losses in its London Exclusive Residential business.
Overall the UK construction business generated a GBP16 million loss in the half, offsetting strong performances in its UK fit-out, engineering services, UK retail and international divisions.
The group's order book was broadly flat at the end of the half at GBP967 million, compared with GBP968 million last year, with GBP655 million due for delivery in the current year.
ISG scrapped its interim dividend on the loss, but expects to pay a final dividend of 4.91 pence, flat year-on-year. As a result its full-year dividend will fall to 4.91p, from 9.45p the year before.
"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," said ISG Chief Executive David Lawther.
"As previously flagged, we expect the operational performance of the group in the second half to be in line with the board's expectations. We anticipate returning to our previously expected growth path in 2015/16," Lawther added.
In a separate statement, ISG said it will raise GBP16 million via a two-tranche share placing. The company will issue 3.2 million shares via Numis Securities Ltd and will issue 6.2 million shares to Cathexis Capital. All the shares will be issued at 170 pence per share and will raise a total of GBP16 million.
ISG shares were down 29% to 170.00 pence on Tuesday morning, comfortably the worst performer in the AIM All-Share.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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