Shares of Interior Services Group Plc (ISG.L) declined around 11 percent in the morning trade on London Stock Exchange after the British construction services announced a sharp cut in dividends, while noting that its UK margins have been impacted by the current competitive environment.
The company's full-year trading has remained broadly in line with the revised management expectations. Looking ahead, it expects UK trading conditions to continue to be difficult in the short term.
In its pre-close trading statement for the year ended June 30, the company said it maintained UK revenues.
In the UK, Fit Out business has maintained its position in a highly competitive London corporate office market. The second half decline in revenues for Retail businesses has been in line with expectations. The company added that construction business continues to experience competitive pressure on margins, while revenues increased with a strong performance in the South benefited from work-related to 2012 Olympics.
Outside the UK, increased revenues and improving margins have led to a substantially higher contribution to operating profit, it said. In Asia, revenues and margins substantially improved, as expected, in comparison to last year.
The company is slated to release its preliminary full-year results on September 11.
Further, Interior Services said its Board now expects to pay a final dividend of 4.6 pence, compared to last year's 10.7 pence, making a total for the year of 9 pence, sharply lower than prior year's 15.1 pence.
According to the company, "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 company further said in the longer term it would benefit from conserving its internal resources to continue to support the growth of its overseas businesses.
Looking ahead, Interior Services said it is looking to target areas where it see growth opportunities, particularly in the data centre, hospitality, high-end residential and international retail markets. Outside the UK, the company continues to see robust pipelines and strong demand for services.
The current order book stands at about 760 million pounds, compared to last year's 750 million pounds.
"We continue to position the Group to benefit from international growth opportunities, new sectors and also for the eventual recovery in the UK," it said.
In London, Interior Services shares are currently trading at 119.94 pence, down 15.56 pence or 11.48 percent.
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by RTT Staff Writer
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