ISG chief executive David Lawther expects an 18-month wait until the private sector recovers enough to take up the slack from a decline in public sector spending.
The fit-out and construction firm’s turnover fell 7 per cent to £972 million in the 12 months to 30 June 2010, while pre-tax profit was down 15 per cent to £8.7m.
In an attempt to participate in the future private sector recovery and reduce its exposure to the public sector, ISG instigated a plan to increase its work with private companies.
Mr Lawther said: “We have been positioning ourselves in a number of sectors and this has helped protect revenue over the last year. Our exposure to the private sector has been increasing as we have expanded into new areas.”
He said that about 80 per cent of future profits were likely to come from the private sector.
But he added: “Public sector cuts will hit the market and the private sector recovery could still be 18 months away.”
The firm has benefited from winning a place on Lloyds TSB’s £340m construction framework earlier this year.
The win was a demonstration of the firm’s desire to win work from large, blue-chip clients, including banks and supermarkets, while continuing its diversification away from the central London market.
Mr Lawther said: “We have been receiving good allocations of work on the Lloyds TSB framework and this will be reflected in the figures for the first half of the 2011 financial year.”
The central London commercial sector will also be a contributor to revenue in years to come as the firm tries to take advantage of an expected recovery in the capital.
London’s status as a global financial sector and the anticipated future lack of new office space are expected to underpin growth in the
London commercial sector as developers sign off schemes that were put on hold during the recession.
Increasing exposure to overseas markets is also part of ISG’s diversification strategy.
Some of its retail clients are looking into overseas expansion and ISG sees itself as well placed to carry on the relationships it already has in place into new markets.
In another diversification strategy, ISG hired a number of senior members of staff from Harry Neal, which went into administration in March.
Harry Neal specialised in the interior fit-out of private residences for very wealthy individuals.
ISG has now entered this sector and sees it as an area for growth in a market that is generally well protected from turbulent economic conditions.
Revenue in the firm’s London fit-out division increased to £170m, from £163m last year, while its largest division, regional construction, saw revenues fall £30m to end the year at £337m.