ISG.L Regulatory News (ISG)

ISG plc

Pre-close Trading Statement

ISG plc ("ISG" or the "Group"), the international construction services group, provides the following pre-close trading statement in advance of the announcement of its preliminary results for the year ended 30 June 2014, on 9 September 2014.

Trading

The Board announces that underlying trading for the year ended 30 June 2014 will be in line with management's expectations. There is significant improvement in the majority of our core markets, both in the UK and internationally, albeit our UK Regional Construction business continues to face challenges in line with its market. The Group's financial position remains robust, with an improved estimated net cash balance of £38.0m as at 30 June 2014 (June 2013: £36.1m).

Our UK Fit Out and Engineering Services business has seen significant revenue and profit growth in the second half of the year. This is underpinned by a strengthened market-leading position in London office fit out. There has also been continued success and expansion in our delivery of data centers internationally and in the UK. In the Nordics we will complete the second project over the summer and have been awarded a third project. With a strong pipeline and order book, we expect continued growth for the business in the year ahead.

Despite the difficult retail marketplace, we have seen improvement in our UK Retail business. The picture across our retail frameworks is broadly one of stability and we are growing our expanded front-end service to selected key framework clients. Our diversification into the Hospitality sector is bearing fruit, with projects in Terminal 2 at Heathrow and refurbishment projects at three London hotels.

As previously reported, we are restructuring and reducing our UK Construction business to four regions focusing on repeat customers and frameworks in core sectors. To complete this restructuring, we have taken the decision to discontinue activities from our office in Tonbridge, which we expect will result in a loss from discontinued operations of £3.5m in the current financial year. Current margins continue to be commercially challenging on projects entered into more than a year ago. However, with the market now improving and with recent project wins generally being secured under better procurement routes, we anticipate seeing an upturn in margins from 2015.

In Continental Europe our performance has mirrored market conditions, with our German office fit out and French retail fit out businesses performing well. Market conditions elsewhere are more difficult, with particular sectors and geographies trailing the economic recovery in the UK. Our recent German acquisition, office fit out company Tecton, has performed well during the year exceeding our expectations. Overall we anticipate revenues being slightly ahead of last year, though margins have reduced.

In the Middle East, we have seen strong growth in revenue and profit, underpinned by the return of larger office fit out projects in Abu Dhabi and the securing of a large-scale hotel refurbishment in Dubai.

In Asia, we have continued to benefit from the strength of the retail and hospitality sectors, particularly in Hong Kong and Singapore, which has led to revenue growth and an improvement in margin in the year.

Outlook

Our current order book stands some 25% higher at £1,045m (May 2013: £843m) of which £820m (May 2013: £674m) relates to the financial year ending June 2015. Of the order book £219m (May 2013: £182m) relates to our overseas activity.

We are starting to benefit from the improvement in certain of our key markets both in the UK and overseas. We expect to see continued growth in the new financial year in all our key sector offerings.

30 June 2014

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