ISG: retail fit-out business 'will struggle' later this year

Contractor ISG has confirmed its retail fit-out business will struggle in the second half of the year, after the group overall posted a 60% drop in profit in its latest results.

David Lawther, ISG chief executive, said a number of the firm’s food retail and banking clients had pushed back or cancelled work, which caused the firm to issue a £3m profit warning in January.

In its first half results to 31 December 2011, pre-tax profit at the group overall fell to £1.8m, compared with £4.5m over the same period the previous year.

But overall revenue rose marginally from £621m to £623m, thanks to growth in the contractors’ international markets. ISG now generates 27% of operating profit from overseas.

Lawther told Building the group’s UK construction profit margins would “continue to be squeezed” in the second half of the year due to “shrinkage in the public sector”.

But he added he could see “some light at the end of the tunnel” for the firm’s UK fit-out business after this year, with a number of large commercial schemes in London expected to come to tender in 2013-14.

He added that difficult trading conditions for the firm’s domestic fit-out business were partly being off-set by work overseas from its UK retail clients.

ISG is working with Marks & Spencer in Paris and Tesco in China.

ISG is targeting growth in international markets and in the technology sector, Lawther said. He added that the firm was focusing on more data centre work after picking up a £100m-plus data centre for Spanish bank Santander in the East Midlands last month.

Lawther said the contractor was close to opening offices in South Africa and Qatar and would be trading in both countries by the end of the current financial year.