ISG.L Regulatory News (ISG)

Interior Services Group plc

Trading Update - Downturn in retail sector impacts ISG

Interior Services Group ("ISG" or "the Group"), the international construction services company, is today issuing a trading update.

Since our last trading update in November 2011, UK trading conditions have further deteriorated. As a result we have seen a number of our key clients in the UK food retail and retail banking sectors reassess their strategies, which has led to the cancelling or deferring of projects due to be undertaken in the second half of our financial year. With the reduced volumes and continuing pressure on margins, this is likely to result in our UK retail businesses delivering profits £3.0m less than we had anticipated.

Our London Fit Out and UK Construction businesses continue to trade in line with our expectations, despite the relentless pressure on margins.

Our Overseas businesses continue to outperform compared to last year as they benefit from our key clients increasing their investment plans overseas.

Trading for the first half of the current financial year is in line with our expectations, but as a consequence of the above, Group profits for the year to 30 June 2012 will now be below expectations.

The Group's financial position remains robust with net cash balances at 31 December 2011 of circa £30m (December 2010: £37m).

The Group's order book remains in line with our last trading update at £700m (December 2010: £797m). Over 80% of our profits come from the private sector and the Group provides construction services to an enviable list of international and national clients.

Our ambition to service the UK retail sector remains undiminished. The sector will be an important contributor to the Group's results, albeit at a lower level than over the past few years. The Board remains confident about the long term robustness of the Group's business model and future strategy, and expects to maintain this year's dividend at the level paid last year.

David Lawther, Chief Executive, said:

"While we maintain our market leading positions in UK retail and fit out, we will continue to diversify the Group's earnings base away from the UK and expect our overseas businesses to contribute circa 35% of Group trading operating profits in the current year.

We continue to pursue overseas organic and acquisition opportunities that will provide us with wider service lines, emerging market positions and scale in key developed markets.

Last year we acquired a design & build capability in China and organically started up a retail fit out operation in Europe. The acquisition of Alpha International, a retail design and fit out specialist based in Paris completed in October 2011, has enhanced our organic offering. In addition in this calendar year we are investing in start up operations in Qatar and in Johannesburg to service the Southern African region."

The Group will announce its interim results for the 6 months to 31 December 2011 on 6 March 2012.

16 January 2012

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