ISG issues new construction profit warning

Having in September claimed to have put problems at its construction division behind it, new issues have emerged to drag on contract volumes, which are forecast to result in a loss for the year that will have a £5m impact on group results.

Broker Numis calculated this would result in a 28% reduction in pre-tax profit and earnings per share.

Management said they continued to work on the recovery plan for the construction arm, which in the last two full years resulted in restructuring and office closures as it sought to work through the legacy of unfavourable contracts taken on during the recession.

Yet, ISG said it continued to experience "disappointing project outcomes on some older contracts", despite the steps taken.

"In addition, with margin and risk control remaining our priority rather than volume and some customers delaying the start on site of their projects, volumes this year will be below our expectations with profit deferred to later periods."

Numis said this could be explained by the time taken to close out older contracts, together with a volatile cost backdrop leading to two-stage contracts taking longer to begin.

All other divisions are anticipated to be in line with management expectations, with a strong performance at the office fit-out and engineering division, and a greater second half weighting expected in this year's results.

The resumption of interim dividend payments is expected "in the absence of further unforeseen circumstances", with a 3.8p payout at the half year.