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ISG set to reduce dividend as retail work falls

ISG is set to reduce its dividend to shareholders on the back of a drop in work from supermarkets and banks and ongoing pressures on the construction industry, it said today.

The Olympic contractor and fit out specialist will instead use the funds to bolster its overseas business, it said.

Providing a pre-close trading statement for the year to 30 June 2012, ISG said it had been increasing the dividend by 5 per cent each year “reflecting the success of its policy of diversifying the business through organic growth and acquisition”. 

The firm issued a profit warning in January, after retail clients cancelled a number of projects.

It said today: “The impact of the reduction in the spending plans of UK supermarkets and banks in the second half is now expected to continue into 2012/13 and given the continuing uncertainty over the Euro, general tightening in credit markets and the significantly reduced pace of recovery in the UK economy, the board has concluded that a more cautious approach should be taken. 

“The board believes that in the longer term the group will benefit from conserving its internal resources to continue to support the growth of its overseas businesses.“

It still plans to pay a final dividend of 4.6p (2011: 10.7p) making a total for the year of 9p (2011: 15.1p).

The current order book is at £760m (June 2011 - £750m), with £690m (June 2011 - £706m) relating to the financial year ending 30 June 2013. The group had net cash of £25m on 30 June (June 2011 - £36.1m).

ISG said its UK construction business “continues to experience competitive pressure on margins” but its revenues have been boosted by legacy works at the 2012 Olympics. Its South-west division has returned to profit following a restructure, it said.

In fit out, ISG said it has held its position in “a highly competitive London corporate office market” where projects have reduced in size, while a drop in retail revenue is in line with expectations. 

The firm said it remains the “number one service provider” to the retail sector, adding that it has also expanded into data centre market with a £100m contract in the East Midlands.

ISG is also continuing to expand outside of the UK, in both Continental Europe and Asia.

The company said:  “In the UK in the short term we anticipate that trading conditions will continue to be difficult. We are looking to target areas where we see growth opportunities, particularly in the data centre, hospitality, high-end residential and international retail markets.

“Outside the UK, we continue to see robust pipelines and strong demand for our services from our international clients..

Its preliminary result are out on 11 September.

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