ISG.L Regulatory News (ISG)

ISG plc

Trading Update

ISG plc ("ISG" or the "Group"), the international construction services group, provides the following trading update in advance of the announcement of its preliminary results for the year ended 30 June 2015, on 8 September 2015.

Trading

The overall performance of our specialist fit out, engineering services and retail businesses in the UK and internationally has been excellent and trading has been ahead of management's expectations. This provides a firm basis for our confidence in the Group results for next year, supported also by a turnaround in UK Construction where performance of the pipeline of new contracts procured over the past eighteen months is meeting management's expectations. We continue to improve the risk profile of this division by strengthening delivery and management and by focussing on repeat customers and frameworks in key sectors.

As has been previously announced this year's results have been materially affected by sizeable losses on a limited number of contracts taken on in UK Construction during 2012 and 2013. These contracts are being progressively completed and closed out. A number of important negotiations and adjudications will continue in the period up to the preliminary announcement of our audit results.

Overall, the reported results for the year ended 30 June 2015 are expected to be in line with the Board's previously indicated expectations although the outcome of the negotiations and adjudications mentioned above may impact the current judgements made by management on these contractual entitlements under IFRS by up to £2m.

Discontinued Operations

As previously reported, the Group has discontinued the London Exclusive Residential and Tonbridge businesses of UK Construction and has been completing the remaining live contracts and continuing to pursue all contractual entitlements. In order to now accelerate final closure of these areas and collection of final accounts the Group is making a further provision of £5.5m for London Exclusive Residential and £5m for Tonbridge. This covers unexpected cost overruns and delays on the remaining four live projects, unanticipated sub-contractor insolvencies and a mixed outcome of final account settlements and adjudication decisions, all of which have recently arisen.

We believe the poor performance and painful restructuring of the UK Construction division is now behind us.

Cash

The Group ended the year with a net cash balance of £50m as at 30 June 2015 (June 2014: £46m) having raised £17m of new equity in March. Notwithstanding the additional provisions in UK Construction (continuing and discontinued operations) the Group's cash position is projected to improve through the new financial year in line with the strong trading outlook.

Dividend

In view of the improved second half operating performance of the Group the Board expects in the absence of unforeseen circumstances, to pay a final dividend of 5p (2014: 4.91p).

Outlook

Our current order book stands 6% higher at £1,106m (May 2014: £1,045m) of which £875m (May 2014: £820m) relates to the financial year ending June 2016. Of the order book £376m (May 2014: £219m) relates to our overseas activity.

Our strategy of diversifying the Group by services, geography and by sector and at the same time developing our higher margin activities will stand the Group in good stead going forward. Demand in our key sector offerings of fit out for offices, retail, hospitality and engineering services both in the UK and overseas continues to be strong and stable.

14 July 2015

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