ISG’s turnover jumped from £1.71bn to £2.24 in 2018, a significant jump of more than £500m in one year.

The main factors behind the increase were more work from the public sector; expanding in the small to medium fit-out market and increased work in continental Europe.

Chief executive Paul Cossell welcomed the growth but told Construction News it was not his company’s main focus. “We try not to talk about turnover growth, which has been the sector’s norm. We’re really interested in margin and cash growth”.
“There is no pressure to chase volume or to do anything that brings cash flow in,” he added.

Pre-tax profit for ISG tripled from £9.1m in 2017 to £27.4m for the year ending 31 December 2018, according to its accounts, with the corresponding margin increasing from 0.5 per cent to 1.2 per cent.

Mr Cossell said the margin for 2018 was “okay” and the company expected to do better in 2019. “We will be disappointed if we don’t break the 2 per cent barrier in 2019,” he said.

The company has a margin target of 4 per cent by 2024.

All five of ISG’s operating areas reported increases in revenue for 2018 with four of them also reporting increases in underlying pre-tax profit.

UK construction, the second largest division after UK fit-out, was the only operation to falter. Profit slipped from £6.8m to £5.7m while revenue increased from £480m to £520.2m.

Mr Cossell said 2018 was a transitional year for the UK construction business, which was the last division in ISG to be “modernised”.

Management has been overhauled, with Interserve’s former construction managing director Gordon Kew taking over as chief operating officer and Steven McGee coming in as new MD for the South.

The business has also started to win projects larger than the sub-£100m jobs that ISG was known for, Mr Cossell said.

Over the past year the firm secured four jobs in £200m-£400m range and another £300m-plus job in London is in the pipeline for 2019.

“It’s all for selected clients in targeted sectors,” Mr Cossell added. “It’s not growth for growth’s sake.”

Aside from public sector work won mainly through frameworks, ISG construction is focused on the higher education, hospitality and leisure, office, residential build-to-rent and the industrial market, especially distribution centres and warehouses.

Mr Cossell said the construction business’s order book was “pretty full” and that “2019 will be okay, but 2020 is going to be very good” for the business.

With the construction business overhauled, the ISG group was now capable of delivering up to £3bn of work a year, but Mr Cossell said it would ideally be less than that.

“£2.5bn [annual revenue] feels like the natural level, but that can flex down or up,” he added.

“We would like to think [for 2019] it’ll be around £2.5bn with a 2 per cent margin.”

To manage the growth the company is on a hiring spree and expects to recruit somewhere in the region of 600 to 700 new people this year.

“From a talent acquisition point of view we’ve certainly seen more good people in the marketplace that we think helps us, so we’re receptive to talent that wants to come to a different business,” Mr Cossell said.

Source: Construction News