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£4m procurement savings aim for ISG

ISG aims to make a total of £4m in procurement savings over two years in UK construction and plans to lift the division’s margin above over 1 per cent during 2015, its chief executive has said.

Speaking to Construction News, David Lawther said the company aimed to bring its UK construction operating profit margin, which was negative in the financial year 2014, up beyond 1 per cent in the calendar year 2015.

Operating margin for the group as a whole in 2014 was 0.8 per cent excluding exceptional items such as £2.4m of restructuring costs, but will go beyond 1 per cent as the market continues to recover, Mr Lawther added.

In its results for the year to 30 June 2014, published on Tuesday, ISG said growth in construction orders, the completion of some older projects won at lower margins and improvements in the market would aid its return to profitability in UK construction.

The firm’s UK construction order book grew to £444m from £391m in 2014 compared to 2013.

ISG’s UK construction arm made a £1.2m pre-tax loss in 2014, reversing a £2.1m pre-tax profit a year earlier. Revenues in the division fell from £498.8m to £463.4m in that time.

The firm is focusing on repeat clients and frameworks and less on open market tendering in UK construction.

In June, the UK construction arm closed its office in Tonbridge, Kent generating a loss of £2.8m in 2014 as part of a restructure of the division from seven regions to four.

Mr Lawther said the large-scale restructuring of the company’s regional business was now done and there is “nothing of the same size of scale” to come.

ISG bought two companies in Spain specialising in data centres, office and retail fit out after the financial year ended and one in Germany almost a year ago.

Mr Lawther said ISG did the deals because its Spanish client business was seeing more opportunities in the country, especially in retail and also the office market.

He added that Germany has been strong for ISG and the company’s exporting manufacturers could benefit if the Euro weakened. France and Italy were weaker markets for ISG, he added.

Mr Lawther said ISG grew by 300 people in 2014 and said the group planned to expand its workforce by a similar number in 2015.

With the referendum on Scottish independence just a week away, Mr Lawther said the outcome would make little difference to ISG.

He said: “Our customer base in Scotland is international names and they will continue. If there are changes and some of the investment companies decide to move elsewhere we would expect to see that reflected in terms of increased office fit-out.”