ISG.L Regulatory News (ISG)

The following amendment has been made to the 'AGM Statement and Trading Update' announcement released on Friday, 07 December at 07:00 under RNS No 9628S.

The spelling of Center Parcs was corrected.

All other details remain unchanged.

Interior Services Group plc

AGM Statement and Trading Update

Interior Services Group plc ("ISG" or the "Group"), the international construction services group, today issues this trading statement covering the period 1 July to 6 December 2012 ahead of its AGM which will be held later today.

Against a continuing difficult economic background, the Board is pleased to announce that trading for the period has remained in line with expectations. Revenues in the period are anticipated to see modest growth albeit with margins in the UK remaining under pressure.

At the end of October our total order book has increased by 7% to £761m (October 2011: £709m), of which £587m (October 2011: £573m) is for delivery in the current financial year. Our balance sheet remains robust and we anticipate a net cash position of approximately £23m at December 2012 (December 2011: £29.5m).

Our UK Fit Out business has seen a significant increase in activity in the first half principally driven by the delivery of a £100m+ data centre project for Santander. In line with our strategy, our reputation for delivering large data centre projects continues to grow and since October we have been appointed as lead contractor on a circa £120m project for a global technology customer in the Nordics. We continue to maintain a leading position in the London Office fit out market, and we were particularly pleased to secure recently a £23m project for a leading insurance broker, as well as being appointed as preferred bidder on a £25m project, which adds to the steady pipeline of mid-sized projects.

Our Retail business continues to increase market share and adapt to the challenging landscape of the sector. As food retailers restrict their ambitions for new space, lower revenues are being maintained through refresh projects and international expansion. Underlying profitability in the business remains strong and our relationships with customers are positive. As such, ISG as market leader is well positioned to benefit from the current sustainable level of activity in the food, banking, telecommunications and fashion sectors.

We expect our UK Construction business to increase revenues in the first half in comparison to the same period for the prior year. During the period the business has continued to benefit from additional works from the London Organising Committee of the Olympic and Paralympic Games (LOCOG) as well as a recovery in activity levels of our South West region. The business has secured a number of significant projects including the £61m Center Parcs development in Woburn, a £30m new warehousing project for Diageo in Scotland and a £40m Exhibition Centre in Liverpool. We have continued to focus the business on repeat customers and frameworks, which now account for 50% of our activity, reducing the dependence on the open-tender market. However, we have seen particularly tough trading conditions in our East region where we are in the process of a reorganisation to reflect current market conditions and focus the business on repeat customers.

Demand for the services of our overseas businesses is strong albeit with activity weighted towards the second half of the financial year. In Continental Europe, we have maintained activity levels in line with prior year, and the order book and pipelines are robust. Yet the uncertain eurozone climate raises the risk of deferrals and cancellations in the second half. In the Middle East, our order book suggests that a rising revenue trend in the first half should be sustained in the second half. In Asia, we have seen increasing demand from our retail and hospitality clients in North Asia. Demand has been weaker in South East Asia, but after recently securing a number of larger projects in Singapore we expect a significant second half increase in activity levels.

The industry continues to experience challenging economic conditions, particularly in the UK. Our response is to continue to target growth sectors such as data centres, international retail and hospitality, to invest in our overseas businesses and to manage our cost base in areas of contraction or low profitability. We remain confident of meeting the Board's expectations for the full year, with a bias towards the second half of the year.

Shareholders will next be updated on the Group interim results for the six months to 31 December 2012 on 5 March 2013.

7 December 2012