25 May 2012

Interior in profit alert

16/01/2012 Miles Nolan

Shares in international construction services concern Interior Services (ISG) have slumped 18 per cent this morning following a profit warning.

Trading conditions in the UK have proved difficult, but have deteriorated further in recent months. The result of which means key clients in both the food retail and banking sectors have either cancelled or deferred major projects. Due to the lower volume, and hit on margins, Interior now expects its profits to fall £3 million below expectations.

The London fit out and construction arms are trading in line, even against a relentless backdrop of pricing pressure. But the overseas business is still doing well, largely thanks to clients stepping up their international expansion plans - indeed this should deliver just over one third of profits this year. New start ups are planned for Qatar and Johannesburg to help fuel its overseas growth.

Interior secures 80 per cent of its profits from the private sector. It boasts a £700 million strong order book and has a healthy net cash balance in the region of £30 million.

Due to the uncertainty, house broker Numis has scaled back its 2012 pre-tax profits (to June) by £4 million to £8 million, which would deliver EPS of 18.4p and a dividend of 15.1p a share. The shares are currently trading at 120p, which implies a yield of a chunky 12.6 per cent. Though a blow, the balance sheet strength provides comfort. At current levels Interior looks oversold.

Tags: AIM market, Cash strong, International orders, Numis Securities, Profit warning

Sector: Support Services

Companies: Interior Services

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