The rise and fall of ISG

[Updated on 19/09/2024]

ISG has been one of the top ten contractors in the UK for many years. But, a mix of poorly performing projects, tough economic climate, and changes in leadership has left the company in crumbles.

ISG was founded in 1989. Originally called Stanhope Interiors, it was formed through a management buyout from London developer, Stanhope. The buyout was led by David King, who served as CEO until 2006.

King began working with Stanhope in the mid-eighties, and convinced the founder Stuart Lipton to set up a fit-out division to offer clients a more rounded solution. King became a shareholder and Lipton provided the capital to get the new fit-out division off the ground.

In the years that followed, Stanhope’s core business dipped, but Stanhope Interior prospered. Their annual turnover started at £20 million and shot up to an impressive £90 million in just six years.

One of their key projects during this time was Broadgate, developing many of the amenities we see in the area today.

Throughout the nineties the company began to expand into construction management and consulting services. And in 1998, the company went public under a new name, Interior Services Group (ISG), listed on the Alternative Investment Market of the London Stock Exchange.

Throughout the 2000s, ISG expanded across Europe, Asia, and Africa, while also buying up companies like Pearse, Commtech and Realys Group along the way.

Some of ISG’s well known projects during this time were:

• Nido Spitalfields
• Ministry of Justice category D prison expansion
• The Olympic Velodrome
• KPMG headquarters in Canary Wharf

However, in 2015, the company began to run into difficulties. Profit warnings reported at the time caused by problem projects in their UK new build arm forced them to close their London exclusive residential construction business, an annual report at the time showed.

Some of the poorly performing contracts were their more than £100 million data centre for Santander which they later exited, also according to Building , as well as their £61 million Center Parc’s development at the Warren Wood Forest Village, according to the Enquirer.

A total loss of £27.8 million was made during that financial year in 2015. On top of this ISG saw senior executives in that division depart.

In June that year, US firm Cathexis made a bid for the company which was rejected by ISG.

In 2016 it was reported ISG agreed an £85 million bid by Cathexis for a 75 per cent stake, a deal which took ISG back to the private market. Cathexis immediately injected £30 million cash to boost the company’s financial position, according to their financial report that year.

With new owners and many of their overseas markets performing poorly, the company closed down their South Africa, Russia and China Realys businesses.

Under new ownership, and a new five-year vision plan in place, ISG bounced back in 2017 and saw some positive years of growth and winning many awards along the way.

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However, in 2022 ISG began to see a downturn, with income decreasing to £2.19 billion, compared with £2.26 billion the year before, and pre-tax profit was down 38 per cent to £11.5 million.

One of ISG’s key project wins during this time was the Britishvolt’s £3 billion gigafactory. It was worth £300 million to the company and was set to be delivered in 2027.

However, towards the end of 2022, Britishvolt fell into financial difficulties and filed for administration in January 2023. Although ISG did not lose money on the project, it left a hole to be filled in their order book.

In November 2022, ISG announced it had won the £600 million Hertfordshire Sunset Studios project. However, in the summer of the following year, the project was paused, and a report by Screen Daily stated the following…

“UK studios are facing a challenging few months as uncertainty about a potential rise in the rate of property taxes for facilities in England and Wales rages on, and the ongoing US writers’ and expected actors’ strikes force a slowdown in the once torrential flow of film and high-budget TV from Hollywood.

“Significant business rates hikes of up to 200%-300% are being mooted as a result of increases in the rateable value of these facilities made by the UK’s Valuation Office Agency (VOA).

“For existing studios, the increases, which were due to start in April, will be phased in over three years. However, new studios will have to pay the full amount from the outset.”

Again, potentially squeezing ISG’s order book and profit margins.

Then, in late 2023, news reports alleged ISG were running into ‘financial difficulties’ which it denied as “unsubstantiated, wholly inaccurate and false claims”. ISG did not publish its 2023 annual report yet, contrary to releasing it in H1 in previous years.

In March this year, CEO Matt Blowers and CFO Karen Booth left ISG as the company began to restructure its leadership. Blowers was in the role for two years. Chief Operating Officer, Zoe Price was appointed CEO, stating she was determined to “fundamentally reset how our business and the wider industry responds to the growing challenges to our sector”.

Last month, it was reported that Cathexis were close to selling ISG to South African and Australian investors, Andre Redinger and James Overton, under a new holding company called Antipodean Holdings Limited.

Mani Singh, senior account manager at insurance company Tryg Garanti, told Construction News: “The new owners have a real job to not only improve the financial profile of the UK business but also returning confidence for supply chains and clients alike moving forward.

“The immediate concern is the commercial sector if they decide to scale back their fit-out presence.

“With Lendlease’s decision to leave UK construction and now this ISG news, the pool of companies available to tender the larger projects, such as the skyscrapers in London’s pipeline, is really shrinking, which only adds to the cost pressures in play.”

Six subsidiaries of ISG offically entered administration on September 19th 2024.

ISG Construction Limited, ISG Engineering Services Limited, ISG Retail Limited, ISG UK Retail Limited, ISG Jackson Limited and ISG Central Services Limited were all the companies involved.

Administrators are yet to be appointed.