Interior Services Group sells its barely profitable ISG Occupancy division to FM consultant Erinaceous for £10m
Interior Services Group has sold ISG Occupancy, its facilities management arm, to Erinaceous Group for £10m.

David King, the chairman of ISG, said the move was intended to free resources for investment.

He said: "It was a case of to what extent the occupancy business would be a meaningful part of our profit stream. It was only in the past six months that it had become profitable and at £8.5m it represented less than 20% of our fee income."

King added that the company would invest in other areas of the business that would yield quicker returns, such as PFI bids. In the six months to 31 December last year, the occupancy division made a profit of just £97,000.

Despite getting £10m for the division, the disposal will in fact come at a loss of some £2.2m for ISG, which will be reflected in the full-year results.

ISG will now focus its attention on its Facilities Creations division, the result of a recent merger of its interior and exterior contracting businesses.

It had only in the past six months become profitable

David King, chairman, ISG

It is believed that the move will end the possibility of a management buyout at ISG – for the time being at least.

As part of the sale of ISG Occupancy, Robert Hovarth, group managing director of ISG, will move to Erinaceous and help to integrate the two firms.

Neil Bellis, the chief executive of Erinaceous, said: "There is, we believe, scope for significant commercial benefits from integrating the business and, in addition, ISGO's locations will allow us to begin to expand the group outside of the south-east of England."

ISG Occupancy operates from premises in London, Manchester, Bradford and Bristol. It is made up of four divisions: property management, facilities services, facilities management and workplace advisory services. It employs 1460 people, about 200 of whom are permanent.

The acquisition is part of Erinaceous' aggressive growth strategy.