ISG to slim down UK construction business

In a trading update to the City today, ISG said conditions in its UK construction business were particularly challenging in the regions and it was now planning to “reduce volumes” in the business.

The firm said: “In our UK construction business, trading conditions in the year have remained difficult, in particular in our Eastern and Midlands regions, where we are in the process of reorganisation to reflect the current market conditions.

“Overall for the year we anticipate a small decrease in revenue with a small recovery in margins before reorganisation costs.”

ISG predicted however that its core London office market would “continue to improve” and said it was continuing to target growth in data centres, high end residential and international work.

The group also announced that it has conditionally agreed to acquire a minority interest in Brazilian fit out and refurbishment firm Ace and had won a £127m data centre job in the ‘Nordic region’.

ACE, which boasts a turnover of £10m and employs around 115 staff, provides services in Rio and Sao Paulo and to international clients.

Under the terms of the acquisition, ISG will purchase an initial 20% minority interest in Ace for £1.9m and will have a 12 month option to acquire the remaining 80% of shares in Ace for a maximum consideration of £12.7m, payable over four years.

David Lawther, ISG chief executive said: “We are delighted to have been able to find a point of entry into an exciting new geographic area for ISG, Brazil, the sixth largest economy in the world.

“Our method of entry via an initial minority interest in Ace will permit us to gain a deeper market knowledge and understanding of the business before we exercise our option to acquire the remaining shares over a four year period.

“We believe that we will be able to assist Ace’s future growth by introducing our international client base and enabling the development of new sectors.”

ISG also confirmed it had been appointed as lead contractor on a “second Nordic data center project for a global technology company” but declined to name the client or even the country

The contract win is a boost for the firm after it endured problems on its high-profile £100m data centre for Santander. As Building revealed in April, ISG left the job unfinished, with the project around 8 months behind schedule.

Lawther added: “Our overseas activities are making an increasingly significant contribution to the Group and our growing reputation with multi-national blue chip companies will underpin our continued targeted geographical expansion.”