Problem contracts for ISG make loss
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The UK construction division at ISG suffered a £16m loss for the last 6 moths trading to December 31 2014 this was caused by problem contracts.
UK construction firm suffered heavy losses due to “the deterioration in project performance since 30 June 2014 on contracts procured over 18 months ago.” which is a massive blow for the firm.
The losses have been made mostly from the former Tonbridge, Kent office and the discontinued luxury London residential business.
UK construction division at ISG has now agreed a settlement on its largest problem contract which is believed to be job at Center Parcs in Woburn to the amount of £61m.
ISG has confirmed that is it planning a £16m equity round of funding “due to the impact of the losses and provisions in UK Construction.”and has also negotiated an extra £10m short-term loan with its bankers to see it through this sticky period.
The construction problems saw ISG make a total loss during the six months of £20.8m compared to a £1.7m profit last time as revenue rose to £819m from £682m.
In contrast the companies fit out division enjoyed a strong performance as well as its , retail and engineering services arm.
The new of this loss has led ISG’s share price to fall 20% in early Stock Exchange trading this morning.
Chief Executive David Lawther commented: “We have taken decisive steps to reform our UK Construction division and the issues caused by older contracts will be closed out.
He added:“Higher quality and larger contracts are now in progress. The Group has been restructuring its UK Construction division over the past 18 months in response to the widely reported difficult trading conditions in this market.
“This has involved strengthening management, improving procurement, bid and risk management and assessing the core strengths of each business region and refocusing accordingly.
“Excluding these older contracts, the division has been profitable reflecting the Group’s restructuring and refocusing initiatives.
“Contracts procured since the start of the financial year continue to be secured on significantly improved terms.”