ISG’s UK construction arm lost £18.1m during 2014/15, contributing to an overall loss of £27.8m.
The construction business incurred “sizable losses on a limited number of contracts” taken on during 2012 and 2013, ISG said this morning.
The group also set aside a total of £13.3m in the second half of the year to cover the costs of the closure of its loss-making London residential and Tonbridge offices.
Those provisions came “in addition to the £18m of losses reported in the first half”.
In a statement to the City, ISG said the problem contracts had “largely been closed out”, while the closure of the London residential business was also close to completion.
Across the group, pre-tax profit, stripping out the non-underlying losses, more than halved from £15.3m in 2013/14 to £7m, while revenue grew 12 per cent from £1.46bn to £1.63bn.
However, these losses were in line with expectation following a February profit warning and the City has reacted positively to the results.
ISG shares were 7 per cent up on their overnight price after the first hour of trading this morning, while analysts broadly welcomed the news.
“All of the problems seem to be behind them,” said Howard Seymour, equity analysis director at Numis Securities. “We are very happy with them.”
ISG chairman Roy Dantzic admitted it had been “a difficult year” for the group but insisted that “the poor performance and painful restructuring of the UK construction division are now behind us”.
Mr Dantzic also said margins on new work in the past two years had improved significantly.
He added: “The problems facing the UK construction industry have been well documented and we have not been immune from these.
“It has taken two years to work through the legacy of poor contracts taken on in the recession.
“This has been a costly exercise in which we have closed our Tonbridge office, announced the closure of our loss-making London exclusive residential activities, and recognised significant losses on a small number of projects that are now complete.”
Chief executive David Lawther (pictured) added: “It has been a challenging year for ISG.
“The overall performance of our specialist fit-out, engineering services and retail businesses in the UK and internationally has been excellent, with trading ahead of management expectations, but our UK construction division has underperformed.
“In line with other providers in this market, ISG has been affected by sizeable losses on a limited number of contracts entered into by this business during 2012 and 2013.”