annual report and accounts 2015 - isgltd.com/media/files/annual report 2015.pdf · chief executive...

Annual report and accounts2015

Cover imageHospitality & Leisure, Kempinski Mall of the Emirates Hotel, Dubai, UAE

The Strategic Report as defined opposite was approved by the Board of directors on 8 September 2015

David Lawther Chief Executive Officer

In this report

Strategic report 02-49Our performance at a glance Corporate overview Creating value Chairman’s statement Chief Executive Officer’s statement Business segment reviews Financial review How we manage risk Sustainability report

Governance 50-71Board of DirectorsDirectors’ reportDirectors’ remuneration reportCorporate governanceStatement of directors’ responsibilities

Financial statements 72-127Independent auditor’s report (Group)Consolidated income statementConsolidated statement of comprehensive incomeConsolidated balance sheetConsolidated statement of changes in equityConsolidated cash flow statementNotes to the consolidated financial statementsIndependent auditor’s report (Company)Company balance sheetNotes to the company financial statements

2 ISG plc Report and Financial Statements 2015

Office, BP, Bedfont Lakes, UK

ISG plc Annual report and accounts 2015 3

Str

ateg

ic r

epo

rt

Our performance at a glance 04Corporate overview 06Creating value 08Chairman’s statement 12Chief Executive Officer’s statement 15Business segment reviews 18Financial review 36How we manage risk 42Sustainability report 46

1 from continuing operations (Note 5)2 from underlying items (Notes 5 and 7)3 2014 restated for the classification of the London Exclusive Residential operations as

a business to be discontinued within non-underlying items (Notes 5 and 7)4 from earnings attributable to owners of the company from underlying items (Note 15)5 from earnings attributable to owners of the company (Note 15). The basic loss per share from continuing and discontinued operations was (66.99p) (2014: earnings of 6.19p)

Revenue 1,2,3

£1.6bn(£m)

46.3

1,45

5 1,62

9

30.5

5

15.3

11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

11 12 13 14 15

172

170

113 14

0

390

377

32 20 9 8 26 35

31.0 36

.1

UK

Fit O

ut

Con

tinen

tal

Euro

peFi

t Out

Mid

dle

East

Fit O

ut

Asia

Fit

Out

Food

Ret

ail

Con

stru

ctio

n

11 12

9.45

984

1,24

5

1,17

4

1,28

1

1,11

8

750

760 85

4

7.0

12.4

7.5 9.

1

22.0

9

10.4

2

29.1

9

18.0

3

5.0

15.0

6

9.00

9.00

52.7

36.1

36.1

25.4

15

Underlying profit before tax 1,2,3

£7.0m(£m)

Underlying basic earnings 1,2,3,4

per share

10.42p(p)

Dividend per share

5.00p(p)

Net cash

£52.7m(£m)

Order book 1,2,3

£1,118m(£m)

Profit for the year

£(27.8)m(2014: £2.4m)

Basic earnings per share 1,5

(33.20)p(2014: 13.53p)

Our performance at a glance

Financial

46.3

1,45

5 1,62

9

30.5

5

15.3

11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

11 12 13 14 15

172

170

113 14

0

390

377

32 20 9 8 26 35

31.0 36

.1

UK

Fit O

ut

Con

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tal

Euro

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Mid

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East

Fit O

ut

Asia

Fit

Out

Food

Ret

ail

Con

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11 12

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1,24

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750

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4

7.0

12.4

7.5 9.

1

22.0

9

10.4

2

29.1

9

18.0

3

5.0

15.0

6

9.00

9.00

52.7

36.1

36.1

25.4

15

46.3

1,45

5 1,62

9

30.5

5

15.3

11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

11 12 13 14 15

172

170

113 14

0

390

377

32 20 9 8 26 35

31.0 36

.1

UK

Fit O

ut

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11 12

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12.4

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9

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2

29.1

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18.0

3

5.0

15.0

6

9.00

9.00

52.7

36.1

36.1

25.4

15

Net equity raise

£16.0m

46.3

1,45

5 1,62

9

30.5

5

15.3

11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

11 12 13 14 15

172

170

113 14

0

390

377

32 20 9 8 26 35

31.0 36

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UK

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1

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9

10.4

2

29.1

9

18.0

3

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9.00

9.00

52.7

36.1

36.1

25.4

15

46.3

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30.5

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11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

11 12 13 14 15

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113 14

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12.4

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9

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3

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6

9.00

9.00

52.7

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25.4

15

46.3

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11 12 13 14 15

11 12 13 14 15

13 14 15

11 12 13 14 15

11 12 13 14

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9.00

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52.7

36.1

36.1

25.4

15


£118,000 donated to CARE International, including in-kind donations

Accident Incident Rate (AIR) of 1.71 remains well below the industry average of 5.23

41 Royal Society for the Prevention of Accidents (RoSPA) Awards

8 British Safety Council (BSC) International Safety Awards

2 Business in the Community Responsible Business Awards (BiTC)

24% of our employees are women, well above the UK industry average of 13%

ISG

Industry average

Health and safety Diversity

Community Environment

(2014: 23%)

1

2

Industry average

0

3

4

5

6

(2014: 2.11)

15 Considerate Constructors Scheme National Site Awards

(2014: 15)

(2014: 31)

(2014: 15)

ISG

£150,000

£125,000

£100,000

£75,000

£50,000

£25,000

Target

93B CDP climate change score

(2014: N/A)

87% waste diverted from landfill (UK)

(2014: N/A)

(2014: 2)

(2014: N/A)

Disclosure Score

ISG

Average

93

58

Performance Band

A B C D E

Hospitality & Leisure, Exhibition Centre, Liverpool, UK

ISG’s strong reputation in the international office, retail, data center and hospitality sectors underpins our long-standing reputation for working with repeat, blue-chip multinational customers across our world and we manage our business on both geographic and service offering bases.

Consistent delivery is what differentiates our business. Our customers have confidence in what to expect every time they choose to work with us; regardless of where in the world, no matter what service we provide or the sector they are in. Whether theirs are unique, bespoke developments or projects of global significance, both multinational and local customers trust ISG to serve their needs through a consistent, values-driven approach.

Our valuesOur values underpin our ability to deliver first-class customer service and high quality outcomes across geographies, sectors and services. It enables us to build strong, long-lasting relationships with customers and develop fresh and relevant solutions to their evolving needs.

Our values lie at the heart of our business and guide our working practices worldwide. To us they remain the bedrock for the way we conduct our business and are celebrated every year around the world through our Values Awards for our employees.

Our values are as follows:

Passionate about our workOur passion drives our commitment to excellence and continuous improvement.

Committed to customer relationshipsWe will grow by having satisfied customers who choose to work with us again and again.

Fulfilling our people’s potentialWe will give our people the opportunity to reach their full potential and help them achieve their ambitions.

Dedicated to detailOur care and attention to detail drives exceptional quality. Acting responsibly and safely

We will not compromise on safety and will act responsibly in all that we do.

In line with our values, we also remain committed to a sustainable future and since its launch in 2013, we have continued to develop our 2020 Sustainability Vision, increasing the number of targets we will measure ourselves against.

Our servicesOur range of construction services spans small, fast turnaround fit outs to the construction of Olympic venues. Across these, one thing remains the same, consistent service delivery.

We provide the following:

Fit out Construction Engineering services Specialist solutions

These services are provided across a number of sectors and reported within our geographic and product segments in the financial statements.

Corporate overview

ISG is an international construction services company delivering fit out, construction, engineering services and a range of specialist solutions.

Office, Meraas, Dubai, UAE

Fit outISG’s award-winning fit out service extends throughout the UK, continental Europe, the Middle East and Asia. Our projects range from the bespoke fit out of an entire building, through to providing detailed finishing touches to a single room. With an international client base representing numerous industry sectors, we have extensive experience in every aspect of fit out. Our portfolio illustrates the scope of our fit out work across key sectors including office, retail and hospitality, demonstrating experience across all levels of project size, value and technical complexity.

ConstructionISG provides a comprehensive and fully integrated construction service across the UK. We work in both the public and private sectors delivering high quality schemes, which span the whole turnkey delivery process. We deliver projects ranging in value from £0.1m to over £100m, providing consistent national delivery through regionally focused teams covering a number of core sectors.

We are unique as a main contractor, having developed from an end-user perspective in the fit out market. From these roots, we have a greater appreciation for the construction of the end product with an emphasis on efficiency and continuous, tangible improvements. Our award-winning health and safety record is coupled with our approach as an engaging, proactive and educated construction partner.

Engineering servicesISG’s comprehensive engineering services includes audit, analysis and consultation, design and delivery, through to testing and commissioning of the plant and equipment that makes a building function, as well as all of the components that facilitate the technology-reliant activities that occur in that building. Furthermore, we build and commission data centers in the UK and overseas.

Specialist solutionsISG provides a number of specialist solutions, each of which complements our core services. These are delivered through our professional services companies Realys and Commtech. Services include portfolio management, design management, design and build, project management and commissioning management.

Hospitality & Leisure, Marina Bay Sands,Singapore

Focus on maximising operating efficiencies and sector focus in our UK Construction business

Recruit, develop and retain the best people in our industry

Grow our Specialist Solutions under the Realys and Commtech brands

Expand on our established engineering services offer to deliver data centers for new customers, in new geographies and work in new sectors

Further establish ourselves in new high-growth global sectors such as hospitality

Further improve our leading positions in the London office fit out and UK retail markets

Increase our geographic reach and market penetration where there is demand from our customers

Focus on increasing repeat business from framework andblue-chip multinational customers

To be the leading global construction services company delivering the built environment for international and local customers

• Focus our operations on repeat and framework business

• Simplify our structures to improve pro�tability

• Work in sectors where we add the most value

• Review and re�ne our supply chain

• Focus on repeat business • High-quality delivery

through our Absolute Completion methodology

• First-rate customer service• Understanding our

customers’ brands • Supplying best project

teams

• Instil our Key Customer Programme throughout our international operations

• Award our people through the “committed to customer relationships” Values Awards

• Improve winning-work methodologies

• Develop added value services

• Identify opportunities for organic and non-organic growth

• Work closely with our repeat customers to partner them into new geographies

• Enter geographies where there is opportunity in our core services and sectors

• Continue to focus on core customers in the data center sector, working with an expanded range of customers

• Increase the number of multinationals choosing ISG to deliver their data centers

• Establish ISG in the pharmaceutical and research and development sectors

• Strategic identi�cation of the hospitality sector as a new market for our international operations

• Establish international delivery capability

• Focus on four-star and �ve-star hotels where our high-quality delivery and �nish is most in demand

• Target opportunities at airports

• Extend range of services provided by Realys to target design and build opportunities in Asia

• Identify demand outside our Asia region for our this offer

• Manage, launch and delivery of �rst projects in new geographies

• Set up innovative ways to secure new talent where there is high demand for our services

• Establish a global learning and development platform for our people

• Recognise our people’s achievements

Vision

Strategicgoals

Strategicimperatives

2020Sustainability Vision

Values

Results

Creating value

Our vision is to be the leading global construction services company delivering the built environment for international and local customers. Our resulting strategic goals and imperatives form the foundation of our plan to grow our business in its sectors, services and

geographies, the progress and results of which are shown in the operational KPIs on the next page. The strategic financial and non-financial KPIs of the business are shown previously in “Our performance at a glance”.

Our strategic business model, Creating Value, demonstrates how we are setting the standard for construction services as our company progresses towards its vision: to be the leading global construction services company delivering the built environment for international and local customers.

Our geographies

UK

Middle East & Africa

Continental Europe

Asia

S.America

Fit Out

Engineering Services

Construction

Specialist Solutions

Our services Our sectors

Office

Retail

EducationHealthHospitality & Leisure

LivingPublic & Community

Technology & IndustrialAustria

BelgiumFinlandFranceGermanyHollandItalyLuxembourgRussiaSpainSwitzerland

UAEAbu DhabiDubaiSouth AfricaJohannesburgQatarDoha

ChinaBeijingShanghaiHong KongJapanTokyoSouth KoreaSeoulMacauMalaysiaKuala LumpurSingapore

BrazilRio de JaneiroSão Paulo

UKBirminghamBradfordBristolCardiffChorleyExeterGlasgowHuntingdonIpswichLeedsLiverpoolLondonManchesterReadingWhitstable



















teams





















Vision

Strategicgoals



Values

ISG is the market leader for the London of�ce �t out market*................................................................ Working on London’s largest �t out project, the £125m UBS of�ce scheme in Broadgate................................................................ ISG is the clear leader** for the �t out of retail environments across all sector including food, banks and the high parts of the street

................................................................ ISG has remained the number one framework partner for four major high street banks

* Metropolis Property Research** Retail week

Results

Number of active frameworks has increased from 25 to 30................................................................ Total percentage of work coming from repeat customers and frameworks stands at 53% (2014: 52%)

................................................................ Values Awards programme established across the group................................................................ 8 out of 10 satisfaction score established as goal across the group................................................................ Increasing our focus on quality outcomes for customers by driving Absolute Completion through our operations

Numerous projects in Asia including a new VIP area at Sha Tin Race Course for repeat customer the Hong Kong Jockey Club

................................................................ Continued work on c£21m project in the iconic Kempinski Mall of the Emirates Hotel in Dubai................................................................ Completion of London boutique The Sanderson and St Martin’s Lane hotels for Morgan’s hotel group................................................................ Numerous commissions for luxury brands at Heathrow Terminal 5

Rebrand and relaunch of Realys into the global consultancy market

................................................................ Realys achieved BS11000 status in the period adding value to clients through strategic collaboration ................................................................ Growing range of international Realys clients now include IKEA, UBS, Nokia, Porsche and Mercedes Benz ................................................................ First major UK client for Realys in the retail banking sector ................................................................ Second successful year of design-led construction offer in Singapore

Delivery of our Values Awards internationally................................................................ Launch of innovative digital onboarding system for new people joining the company

................................................................ Launch of the Futures Group - designed to facilitate Generation Y input to board-level decision making................................................................ Launch of "every1@ISG" employer brand................................................................ Net 300 new people introduced to the global company

UK Construction business now focused on core sectors................................................................ Improve and maximise value through our supply chain................................................................ Increase in frameworks and repeat business................................................................ Strengthened leadership in this business................................................................ Awarded a £59m of�ce refurbishment scheme in London’s Old Bailey, the eleventh project for repeat customer Blackstone................................................................ Successful reappointment to the UK North-West Construction Hub framework................................................................ Focus on to core sectors where we have signi�cant expertise................................................................ Closure of Tonbridge and London Exclusive Residential operations

Results

Results

Results

Hong Kong Jockey Club, Hong Kong

Digital onboading system

Prime Minister visits TTP

Realys re-brand

Brent Cross Shopping Centre, London, UK

No 1 America Square, London, UK

Currently working on over £800m worth of data centers across Europe................................................................ Second campus in Western Europe for multinational technology customer................................................................ Successful entry to the R&D sector with projects for Catapult

Digital Catapult Ltd, London, UK

2014 German acquisition Tecton contributed pro�t in the year and helped ISG achieve its goal of working across major German cities

................................................................ Majority share in Brazilian acquisition ACE................................................................ Successfully integrated Spanish acquisitions Diadec and Emerald into ISG’s global operations

EmeraldTelecom & Data Center, S.A.

Results

Results

Results

Results

Office, One America Square, London, UK


















teams





















Vision

Strategicgoals



Values

ISG is the market leader for the London of�ce �t out market*................................................................ Working on London’s largest �t out project, the £125m UBS of�ce scheme in Broadgate................................................................ ISG is the clear leader** for the �t out of retail environments across all sector including food, banks and the high parts of the street

................................................................ ISG has remained the number one framework partner for four major high street banks

* Metropolis Property Research** Retail week

Results

Number of active frameworks has increased from 25 to 30................................................................ Total percentage of work coming from repeat customers and frameworks stands at 53% (2014: 52%)

................................................................ Values Awards programme established across the group................................................................ 8 out of 10 satisfaction score established as goal across the group................................................................ Increasing our focus on quality outcomes for customers by driving Absolute Completion through our operations

Numerous projects in Asia including a new VIP area at Sha Tin Race Course for repeat customer the Hong Kong Jockey Club

................................................................ Continued work on c£21m project in the iconic Kempinski Mall of the Emirates Hotel in Dubai................................................................ Completion of London boutique The Sanderson and St Martin’s Lane hotels for Morgan’s hotel group................................................................ Numerous commissions for luxury brands at Heathrow Terminal 5

Rebrand and relaunch of Realys into the global consultancy market

................................................................ Realys achieved BS11000 status in the period adding value to clients through strategic collaboration ................................................................ Growing range of international Realys clients now include IKEA, UBS, Nokia, Porsche and Mercedes Benz ................................................................ First major UK client for Realys in the retail banking sector ................................................................ Second successful year of design-led construction offer in Singapore

Delivery of our Values Awards internationally................................................................ Launch of innovative digital onboarding system for new people joining the company

................................................................ Launch of the Futures Group - designed to facilitate Generation Y input to board-level decision making................................................................ Launch of "every1@ISG" employer brand................................................................ Net 300 new people introduced to the global company

UK Construction business now focused on core sectors................................................................ Improve and maximise value through our supply chain................................................................ Increase in frameworks and repeat business................................................................ Strengthened leadership in this business................................................................ Awarded a £59m of�ce refurbishment scheme in London’s Old Bailey, the eleventh project for repeat customer Blackstone................................................................ Successful reappointment to the UK North-West Construction Hub framework................................................................ Focus on to core sectors where we have signi�cant expertise................................................................ Closure of Tonbridge and London Exclusive Residential operations

Results

Results

Results

Hong Kong Jockey Club, Hong Kong

Digital onboading system

Prime Minister visits TTP

Realys re-brand

Brent Cross Shopping Centre, London, UK

No 1 America Square, London, UK

Currently working on over £800m worth of data centers across Europe................................................................ Second campus in Western Europe for multinational technology customer................................................................ Successful entry to the R&D sector with projects for Catapult

Digital Catapult Ltd, London, UK

2014 German acquisition Tecton contributed pro�t in the year and helped ISG achieve its goal of working across major German cities

................................................................ Majority share in Brazilian acquisition ACE................................................................ Successfully integrated Spanish acquisitions Diadec and Emerald into ISG’s global operations

EmeraldTelecom & Data Center, S.A.

Results

Results

Results

Results


Prospects for our markets for the current and future years continue to look brighter

We continue to bring talented new people into the organisation, while investing in our existing people through the Academy, our global learning and development facility

The problems that beset our UK Construction division at the end of 2014 required us to ask shareholders for additional equity funding. This has been a matter of huge regret by the Board, particularly as the issue price was at a substantial discount to the then prevailing share price, but it has allowed the Group to strengthen its capital base and support our other growth opportunities. We are very grateful for the support we received from shareholders.

Underlying profit before tax1 for the year ended 30 June 2015 amounted to £7.0m compared to the restated3 profit for the previous year of £15.3m. With the benefit of the placing in March, which raised approximately £16m after expenses, net cash at the year end amounted to £52.7m, an increase of £6.4m over the last year end. Underlying basic earnings per share2 amount to 10.42p per share compared to restated earnings per share2,3 of 30.55p.

I am also pleased to report that the company plans to resume the payment of regular dividends to shareholders. The Board is proposing a final dividend of 5p per share (2014: 4.91p). No interim dividend was paid (2014: 4.54p).

It would be remiss of me not to start the overview of our business performance by commenting on our UK Construction division. The problems facing the UK construction industry have been well documented and we have not been immune from these. It has taken two years to work through the legacy of poor contracts taken on in the recession.

This has been a costly exercise in which we have closed our Tonbridge office, announced the closure of our loss-making London Exclusive Residential activities, and recognised significant losses on a small number of projects that are now complete. Margins on new work won over the past two years have been on significantly improved contracted terms and tightened control as we have improved management focus on repeat, framework and lower risk contracts. We believe the poor performance and painful restructuring of the UK Construction division are now behind us.

I am pleased to report that, by contrast, the rest of our businesses have had a successful year. Our UK Fit Out and Engineering Services division has again exceeded our expectations with revenue in the year of £630m (2014: £520m).

Having virtually doubled its operating profits last year, they have increased by a further 62% this year to £16.0m. UK Retail remains a challenging market but we have maintained our market leading position, having increased both sales and operating profits whilst continuing to develop our Realys consultancy service. Our overseas businesses, which principally operate in Continental Europe, Middle East and Asia have all, with the exception of Western Europe, exceeded last year’s results. We continue to develop our overseas businesses around the office, retail, engineering services and hospitality fit out sectors delivering increasingly larger, more complex projects for our blue-chip customer base.

1 from underlying items (Notes 5 and 7)2 from earnings attributable to owners of the

company from underlying items (Note 15)3 restated for the classification of the London

Exclusive Residential operations as a business to be discontinued within non-underlying items (Notes 5 and 7)

Roy DantzicChairman

Chairman’s statement

This has been a year of mixed fortunes. Our businesses in fit out, both office and retail, in engineering services and overseas have all performed extremely well. At the trading level, their profits have increased by 50%.

This excellent performance has been offset by the continued losses in UK Construction as we close out the remaining contracts entered into during the recession and shut down loss making activities.


Despite the challenges in the year, we have continued to focus on the important issue of health and safety and it gives me great pleasure to be able to report that across all our markets, we have achieved an outstanding record in health and safety, with an Accident Incident Rate score of 1.71 against a UK industry average of 5.23. This achievement has also been reflected in the number of The Royal Society for the Prevention of Accidents (RoSPA) awards we have won in the year, with 41 awards across our UK businesses for 2014/2015. These include five president awards, seven gold medals, 26 gold awards and three silver awards.

We are also pleased to have been recognised by the Business in the Community Responsible Business Awards for the fourth successive year for our London apprenticeship

programme and charity partnership with CARE International.

It is our people who drive change and improvement in our business. We continue to bring talented new people into the organisation, while investing in our existing people through the Academy, our global learning and development facility. In line with this, we have once again retained our Investors in People status. My thanks to all our employees for their commitment and passion for our business.

We have added additional skills to the Board during the year, with the appointment of two new Non-Executive Directors, Amanda Jobbins and Alun Griffiths. Amanda’s career has been in the technology sector, specialising in marketing with a number of leading technology companies, working across multiple international markets.

Alun spent a large part of his career with W S Atkins, a leading engineering and design consultancy, and brings specialist skills in corporate strategy, marketing and HR. I welcome them to the Board and look forward to their contribution as we continue to develop the business.

Prospects for our markets for the current and future years continue to look brighter. Global economic growth may slow down, but demand for quality delivery in our specialist sectors remains strong. Supported by a significant improvement in UK Construction, a rising Group order book (up 14% to £1.1bn), and a healthy cash position, this should enable us to deliver a much improved performance to shareholders in the year ahead.

Roy DantzicChairman8 September 2015

Top left - BiTC 2015 Awards, UK; Top middle - Fit Out, London, UK; Top right - World Kidney Day, Malaysia; Left - The Academy, UK; Bottom left - Collecting for CARE, UK; Bottom right - RoSPA 2015 Awards, UK

Strategic report: Chairman’s statement

Office, Realys, Gracechurch Street, London, UK


In line with other providers in this market, ISG has been affected by sizeable losses on a limited number of contracts entered into by this business during 2012 and 2013. Additionally, as part of the restructuring of this division, we have made provisions for the closure of the London Exclusive Residential and Tonbridge activities.

Our performance, outside of UK Construction, has been excellent and this improvement is as a result of our strategy to:

Maintain our market-leading positions, particularly in the London office fit out and UK retail markets

Focus on increasing repeat business across the world from our core framework and blue-chip multinational customers

Develop our overseas businesses across our core office, retail, engineering services and hospitality sectors in fit out and refurbishment specialist services

Increase our geographic reach and market penetration where there is demand from our core customers

Grow our consultancy services under the Realys and Commtech brands

Recruit, develop and retain our talented people

As a result of the issues in UK Construction, both underlying profit before tax1 and margins are down on the previous year, despite an increase in revenue2. We now believe that the problems arising from these older projects in this division have been dealt with and that the projects we are currently working on have been procured under more favourable terms. During the

last two years, as part of our recovery plan, we have introduced new leadership and strengthened management across its operations. Equally, we have refocused the strategy of the business on core sectors and repeat customers, while simplifying its structure to four regions.

Our core business of fit out across the office, retail and hospitality sectors, alongside our fast-growing engineering services and consultancy offers, continues to grow in the UK and internationally through our reputation for excellence in delivery, customer service and ability to deliver major and complex projects. Our success in these activities, alongside improvements made to UK Construction, provide a firm basis for our confidence in delivering an improved performance for next year.

Highlights of the year include the ongoing success of our Engineering Services business in the data center sector, where we are currently working on a number of projects with a value in excess of £800m across Europe for both the financial sector and leading technology companies. Similarly, we continue to develop our reputation in the hospitality sector in our Middle East and Asia businesses. We have also invested significantly in the expansion of our Realys consultancy business across the UK and Asia. Through its strategic portfolio, project and design management services, Realys is increasing our exposure to end-user customers and is helping us to provide a broader range of consultancy services across country borders.

Importantly, we have maintained our leadership position in our key traditional markets, despite a highly competitive trading environment. In line with this, we continue to be the premier contractor in the London office fit out market3.

David LawtherChief Executive Officer

1 from underlying items (Notes 5 and 7)2 from continuing operations (Note 5)3 Metroplis Property Research

Chief Executive Officer’s statement

It has been a challenging year for ISG. The overall performance of our specialist fit out, engineering services and retail businesses in the UK and internationally has been excellent, with trading ahead of management expectations but our UK Construction division has underperformed.

Strategic report: Chief Executive Officer’s statement

Trading: A summary of revenue and order book for each of the Group’s business segments

Revenue (£m) Operating profit (£m) Order Book (£m) 2015 2014 Change 2015 2014 Change 2015 2014 Change

UK Fit Out and Engineering Services 630 520 21% 16.0 9.9 62% 398 290 37%

UK Retail 320 283 13% 9.0 6.1 49% 161 173 -7%

UK Construction2 446 436 2% (18.1) 2.5 n/a 447 417 7%

Continental Europe 81 103 -21% 1.1 1.3 -15% 29 28 4%

Middle East 51 35 47% 1.2 0.5 130% 33 34 -3%

Asia 102 79 28% 3.5 2.7 28% 50 42 19%

Group activities (4.1) (7.0) -59%

Total2 1,629 1,455 12% 8.5 15.9 -47% 1,118 984 14%

Net financing costs (1.5) (0.6) -214%

Profit before tax 7.0 15.3 -54%

Revenue by segment

Forward order book by sector

Of�ce

Retail

Hospitality & Leisure

Technology & Industrial

Living

Education

Public & Community

Health

36%

39% 19%

20%

31%

27%

7%

5%

5%

6%

2%

3%

2014UK Fit Out and Engineering Services

UK Retail

UK Construction

Continental Europe

Middle East

Asia

28%

30%

18%

8%

15% 19% 10%

4%

4%

11%

6%

26%

7%

2014

2015

20151% 1%

2% 2014

19%

7%

13%

19%

10%

29%

Of�ce

Retail



Living

Education

Public & Community

Health

36%

39% 19%

20%

31%

27%

7%

5%

5%

6%

2%

3%


UK Retail

UK Construction

Continental Europe

Middle East

Asia

28%

30%

18%

8%

15% 19% 10%

4%

4%

11%

6%

26%

7%

2014

2015

20151% 1%

2% 2014

19%

7%

13%

19%

10%

29%

Of�ce

Retail



Living

Education

Public & Community

Health

36%

39% 19%

20%

31%

27%

7%

5%

5%

6%

2%

3%


UK Retail

UK Construction

Continental Europe

Middle East

Asia

28%

30%

18%

8%

15% 19% 10%

4%

4%

11%

6%

26%

7%

2014

2015

20151% 1%

2% 2014

19%

7%

13%

19%

10%

29%

Of�ce

Retail



Living

Education

Public & Community

Health

36%

39% 19%

20%

31%

27%

7%

5%

5%

6%

2%

3%


UK Retail

UK Construction

Continental Europe

Middle East

Asia

28%

30%

18%

8%

15% 19% 10%

4%

4%

11%

6%

26%

7%

2014

2015

20151% 1%

2% 2014

19%

7%

13%

19%

10%

29%

Of�ce

Retail



Living

Education

Public & Community

Health

36%

39% 19%

20%

31%

27%

7%

5%

5%

6%

2%

3%


UK Retail

UK Construction

Continental Europe

Middle East

Asia

28%

30%

18%

8%

15% 19% 10%

4%

4%

11%

6%

26%

7%

2014

2015

20151% 1%

2% 2014

19%

7%

13%

19%

10%

29%

Of�ce

Retail



Living

Education

Public & Community

Health

36%

19%

31%

7% 5%

23%

21% 41%

7%

2%

2% 6%

2013


UK Retail

UK Construction

Continental Europe

Middle East

Asia

30%

19% 12%

12%

7%

9%

8%

201328%

18%

12%

19%

4%

11%

7%

2014

1%

3%

During the year, we worked on the UK fit out market’s largest project, the £125m fit out for UBS in London’s Broadgate Circle. We are expanding our office fit out offer into other major UK cities in line with demand from our blue-chip repeat customer base. ISG remains the clear market leader3 for the delivery of retail environments across all parts of the sector including food, fashion and banks. In particular,

we have seen increased investment in the retail banking sector where our customers have a strong focus on the development of the use of technology in their physical environments.

Overseas, a growing market reputation for high-quality delivery across the hospitality, retail and office sectors underpins our growth in the Middle East and Asia markets. In Continental

Europe, our sustained progress in Germany and Spain has been outweighed by the impact of slower markets in Italy and France.

During the year, we reaffirmed our long-term commitment to the developing Brazilian market where our core customers continue to invest by acquiring a controlling stake in our Brazilian office fit out partner, ACE.


The recruitment, development and retention of people are key issues in our industry and we have continued to focus on this area. In the period, we have expanded our leadership training and succession strategies and continued to invest in our apprenticeship and undergraduate programmes, talent management initiatives and online training modules to ensure that we offer leading employment opportunities in our industry.

Results from underlying operations1

The Group has seen a substantial improvement in underlying profit before tax in the second half after reporting an underlying loss in the first half. Hence, for the year ended 30 June 2015, underlying profit before tax1 decreased to £7.0m (2014 restated2: £15.3m) on revenue4 of £1,629m (2014 restated2: £1,455m). Underlying basic earnings per share5 decreased to 10.42p (2014 restated2: 30.55p).

In order to strengthen the balance sheet, in March the company raised a net £16m of new equity through a placing. We finished the year with an improved net cash position of £52.7m (2014: £46.3m). The average net cash position in the year was £29.8m (2014: £40.1m). During the year, we renewed our banking facilities with a revolving credit facility of £20m through to September 2017. There was a net cash inflow from operating activities from continuing operations for the year of £2.6m (2014: £35.1m), reflecting improvements in working capital performance offset by £19.5m of non-underlying trading losses.

Non-underlying items and discontinued operationsThe Group has identified its London Exclusive Residential activities as a business to be discontinued and losses of £15.5m have been recognised within non-underlying items. In addition, the Group is making further post-tax provisions for increased losses of £14.1m related to the closure of its Tonbridge business and associated contracts announced last year. Further details of these items are set out in the Business Segment review and Notes 7 and 13 in the financial statements. Net cash outflow from discontinued operations was £3.2m (2014: £9.2m).

DividendThe Board is proposing to pay a final dividend of 5.00p (2014: 4.91p).

No interim payment was made (2014: 4.54p). The ex-dividend date will be 22 October 2015 and the dividend will be payable on 8 December 2015 to shareholders on the register on 23 October 2015. A scrip alternative is again being offered. The final dividend for the previous financial year of 4.91p was paid on 9 December 2014.

OutlookLooking ahead, the London office fit out market remains strong and, in the short-term, will be focused on medium-sized and refurbishment projects, whilst in the medium term, we will see larger-scale projects feature more prominently again. The UK’s economy is stable and we expect further opportunity in other major UK cities. The pipeline of opportunities in the European data center market continues to be robust and we expect further success in this area.

In the UK Retail market we will continue to position our Realys consultancy services offer to strengthen our relationship with our key customers as they focus on innovating and integrating technology into their built environments.

With strengthened management, a simplified structure, a focus on repeat business and more favourable market conditions, a significant improvement in the performance of our UK Construction division is expected.

Overseas, we are on track to see continued growth across our core sectors of office, retail, hospitality and engineering services, particularly in the Middle East and Asia.

Our current order book stands circa 14% higher at £1,118m (2014 restated1,3: £984m) of which £1,030m (2014 restated1,3: £899m) relates to the financial year ending 30 June 2016, and £318m internationally (2014: £203m).

Overall, we expect a much improved performance in the year ahead.

David Lawther Chief Executive Officer8 September 2015

Our core business of fitout across the office,retail and hospitalitysectors, alongsideour fast-growingengineering servicesand consultancy offers,continues to grow in theUK and internationally

We now believe that theproblems arising fromthe older projects in UKConstruction have beendealt with and that theprojects we are currentlyworking on have beenprocured under morefavourable terms

1 from underlying items (Notes 5 and 7)2 restated for the classification of the London


3 Retail Week4 from continuing operations (Note 5)5 from earnings attributable to owners of the

company from underlying items (Note 15)

The London fit out market remains buoyant and we have maintained our market leading position

Our portfolio of data center projects continues to grow within the UK, the Nordics and across Western Europe

UK Fit Out and Engineering Services

Revenue: £630m +21%

Operating profit: £16.0m +62%

Operating margin: 2.5% +34%

Order book: £398m +37%

In line with the continuing economic recovery in the UK, the London fit out market remains buoyant and we have maintained our market leading position. The division also continued to grow its engineering services reputation in the data center market, and is currently working on over £834m worth of data centers across Europe. Additionally, the division has been delivering on its strategy to grow its specialist R&D engineering services offer.

In the year, the division delivered a strong performance, with revenue increasing by 21% to £630m (2014: £520m) and operating profit increasing by 62% to £16.0m (2014: £9.9m) resulting in an

operating margin of 2.5% (2014: 1.9%). This improvement has been generated by the increased scale of the division, the completion of higher margin projects and the recognition of gains from foreign exchange hedges.

Our UK Fit Out business accounted for 41% of the division’s revenue (2014: 54%), of which 79% was within London (2014: 83%) and 21% was outside London (2014: 17%), whilst 59% of revenue related to fitting out of existing space (24% refurbishment “in occupation”) compared to 41% which was new office fit out.

After the return of larger scale office projects in the past year, the market now has a bias towards mid-sized projects and refurbishment. In the year, we successfully completed the 450,000 sq ft refurbishment project of London’s Aldwych Quarter, a 335,000 sq ft fit out project for a leading international media group and the 40,000 sq ft fit out of the new UK headquarters for legal firm, CMS Cameron McKenna.

Business segment reviews

Office, International Media Company, London, UK

Digital CatapultDavid Sparks Head of Operations

Area: 15,000 sq ft Programme duration: 15 weeks Completion date: November 2014

What happens at the Digital Catapult Centre?The Digital Catapult is one of nine Catapults funded by Innovate UK. It provides support based upon available facilities, expertise and by bringing partners together. We help UK businesses unlock new value from sharing proprietary data in faster, better and more trusted ways.

What were your main objectives when identifying a location?As a national centre we wanted to choose somewhere that would be an easy commute for those working with us. One of the key factors in choosing the location was the short walking distance from King’s Cross, Euston and St Pancras International.

Given the industry you work in, how important was the connectivity in the building?Being digitally-focused, we have to have the best connectivity we can get. We have two very fat pipes that come in from two separate internet providers, both through different channels into the building. We are completely failsafe.

What were the challenges during the fit out?We have a brand new hotel underneath us which was being completed at the same time. The landlord was always particularly strict about the way the work was conducted and the timeframes it was conducted in. In overcoming these challenges, it would have been impossible for ISG to have performed better.

What has the feedback been like from those using the centre?Within three weeks of opening we were voted one of the coolest places to work in the whole of Europe by the Guardian newspaper. We have a lot of small businesses working alongside us and the space provides a really collaborative way for us to work together. Everybody who comes here comments on how great the centre is and its views.

What would you say about ISG to other companies looking for a building contractor?It would be a horrendous mistake if you went with anybody else, and I mean that from the bottom of my heart. When I talk about ISG, I refer to the team that worked with us and it was that team that was truly special.

“It would be ahorrendous mistakeif you went withanybody else, and I mean that from the bottom of my heart.”

Strategic report: Business segment reviews

Work underway includes London’s largest fit out project, the £125m, 700,000 sq ft construction management project of the UK headquarters for UBS at 5 Broadgate, a 166,000 sq ft CAT B fit out for a global technology company at St Pancras Square, and a 120,000 sq ft refurbishment project for a US-based financial services institution, ISG’s tenth project for the customer.

The recovery of the London fit out market has now permeated other major cities in the UK and this is leading to new demand from our repeat customers. In line with this, the business recently negotiated further projects for leading global professional services firm, KPMG, to fit out the firm’s new office in Leeds following the successful delivery of their new office in Manchester in

2014. In addition, the business has recently secured a 137,000 sq ft office fit out project in the Thames Valley region.

The division continues to grow its Engineering Services business which now accounts for 59% of the division’s revenue (2014: 46%), of which 88% was delivered in Continental Europe.

Office, CMS Cameron McKenna, London, UK


Our portfolio of data center projects continues to grow within the UK, the Nordics and across Western Europe. During the year, we successfully handed over the third circa £100m Nordic data center project in June, and we anticipate completing the fourth in October 2015. In addition, this year, the business was awarded two data center schemes in Western Europe with a combined value in excess of £230m, and is preferred contractor on a third substantial data center. In the UK, the business is currently working on data centers for UBS, HSBC and HP. Furthermore, our Engineering Services offer is continuing to attract customers from the R&D

sector where we continue to secure and deliver in highly demanding and technically challenging environments, including three of the seven UK Catapult innovation centres.

The buoyant activity in the office fit out market and our expanded success in Engineering Services continues to boost the order book. As at 30 June 2015, it stands at £398m (2014: £290m), all of which (2014: £281m) will be delivered in the current financial year. With the increased order book, we anticipate continued improvement in revenue and profit in the current financial year.

Top - Technology & Industrial, Kings College Hospital, London, UK

Bottom - Office, KPMG, Manchester, UK

UK Retail




Order book: £161m -7%

Whilst maintaining our market-leading position, the division continues to adapt to the maturity of the market by focusing on the needs of our repeat and framework customers who are operating in an increasingly competitive environment, with an overall trend towards reducing property portfolios and smaller retail environments, but greater use of technology. This competition is driving retailers to innovate their offer, providing new revenue streams for ISG and underpinning an improved set of results for the business.

Gieves & HawkesRay ClacherManaging Director

Area: 5,802 sq ft Programme duration: 52 weeks Completion date: November 2014

In November 2014, luxury menswear brand Gieves & Hawkes opened the doors to their newly-restored No.1 Savile Row store following a 52-week refurbishment programme. The iconic store was redesigned to suit a modern retail experience, but also acknowledged the heritage of the 200 year-old fashion brand and their Grade II listed home. We spoke to Gieves & Hawkes Managing Director, Ray Clacher, about the project.

What criteria did you have in mind when selecting a contractor for this project?It was very clear we needed an end-to-end solution from one company. I have known ISG and ISG’s business for over 15 years so they weren’t new to me. For me it was a no-brainer to use them.

How did the team add value?It’s a Grade II listed building and therefore whatever we did at No.1 Savile Row was subject to scrutiny from Westminster Council, landlords and so on. Therefore, we needed someone who had contacts between all those conduits. With ISG, we could go to sleep at night knowing that whatever we wanted to do, they could find out before we went to the next level.

How do you decide when a store requires a refurbishment?Our parent company acquired Gieves & Hawkes in 2012. Although I have been associated with this brand for 15 years, it was important that whatever we did next appealed not only to the consumer but also the aspirations of our new owners. What you see today is a tremendous blend between the old and the new.

Has the refurbishment resonated with your customers?Our average footfall is up by 30 per cent, so 30 per cent more people have visited us since September 2014.

Retail, Home Retail Group, Newcastle, UK

“With ISG, wecould go to sleepat night knowingthat whatever wewanted to do,they could find outbefore we went tothe next level.”

Customers have a major focus on the integration of technology into their offer and ISG has developed further expertise in this area

We expect the investment made in the Realys business to drive higher margin opportunities

Revenue for the year increased by 13% to £320m (2014: £283m), with operating profit increasing by 49% to £9.0m (2014: £6.1m), resulting in an improved operating margin of 2.8% (2014: 2.1%).

We saw substantial growth in activity in the retail banking sector, where we have framework agreements with the four major high street banks and the UK’s largest building society. These customers have a major focus on the integration of technology into their offer and ISG has developed further expertise in this area. During the year, we have undertaken 568 separate ATM installations across their branch networks, and undertook refurbishment work on 350 branches.

The business has maintained its framework agreements with key customers in the food retail sector. In what is a mature and competitive sector, ISG has worked on

120 stores for Tesco and we continue to work for all of the other major brands including Sainsbury’s, Asda, Morrisons, Waitrose, Marks & Spencer and The Co-operative. Our work in the year included successfully completing Sainsbury’s new £19m Thanet store in April, the first Sainsbury’s store using Building Information Modelling (BIM) technologies.

In a new framework, ISG is rolling out key stores for Home Retail Group, including 19 Argos stores and 13 Habitat projects with the first two store-in-store roll-outs including new digital concept stores for both. In the past 12 months, we have delivered a number of large projects for the John Lewis Partnership. We are currently on site for the company’s Birmingham New Street store; this £15.5m project will transform the 250,000 sq ft developer’s shell to high-end retail space.


The business continues to grow its airside offer at major airports, with commissions from multiple international luxury brands at Heathrow Terminal 5 in the period.For repeat customer Selfridges, we are currently delivering projects in Birmingham and Manchester. In London, we have delivered a refurbishment at No.1 Savile Row for repeat customer Gieves & Hawkes. The fit out of shopping centres has been a strong sector for ISG. We completed the £7.2m fit out of the west court extension in Brent Cross in London, gaining “Absolute Completion” on budget and with zero defects. We are currently on site at Yate in South Gloucestershire constructing 72,000 sq ft of leisure and retail space.

In the hotel and hospitality sector, we have commenced work on an £11.5m project to create a luxury private members’ club in two historic Grade II Listed buildings in Devonshire Square in the City of London. We have also secured a scheme to convert a former West End bank into an exclusive private members’ wine club, 67 Pall Mall.

This division has invested in the launch of our Realys consultancy offer in the UK and, as a result, is now offering strategic portfolio, project and design management services. Realys, which is increasing our exposure to end-user retail and banking customers, continues to perform well in its three year appointment for one of the world’s leading financial institutions, and has attracted three new clients in the year. Realys achieved BS 11000 status in the year adding value to clients through strategic collaboration.

This business is successfully diversifying its offer to anticipate changes in its markets. Looking ahead, we expect the investment made in the Realys business to drive higher margin opportunities. The forward order book for this business remains healthy at £161m (2014: £173m), all of which is for delivery in the current financial year.

Hospitality & Leisure, Whitworth Art Gallery, Manchester, UK

Left - Retail, Selfridges Bullring, Birmingham, UK

Top right - Hospitality & Leisure, Devonshire Square, London, UK

Bottom right - Retail, Sainsbury’s, Thanet, UK


UK Construction

Revenue: £446m +2%

Operating profit: (£18.1m) n/a

Operating margin: -4.1% n/a


During the year, we announced that our overall results would be materially affected by sizeable losses on a limited number of contracts taken on in UK Construction during 2012 and 2013. These contracts have now largely been closed out. We also completed the closure of non-profitable operations in Tonbridge and largely completed the closure of our London Exclusive Residential business.

Revenue1 in respect of the continuing operations for the year increased by 2% to £446m (2014 restated2: £436m), whilst the losses on the four larger contracts reported on previously at the interims contributed substantially to the operating loss for the year of £18.1m (20142: profit of £2.5m).

In terms of discontinued operations, as previously reported, the Group has discontinued the Tonbridge business of UK Construction with the London Exclusive Residential operations classified as a business to be discontinued, and has been completing the remaining live contracts and continuing to pursue all contractual entitlements. In addition to the £18m of losses reported in the first half, the Group

in the second half has made further provisions of £8.5m for London Exclusive Residential and £4.8m for Tonbridge. These covered unexpected cost overruns and delays on the remaining four live projects, unanticipated sub-contractor insolvencies and a mixed outcome of final account settlements and adjudication decisions. As a result of these additional provisions, the closure of the Tonbridge business has resulted in pre-tax losses in the year of £15.8m (2014: £3.6m) and has been treated as discontinued operations. In respect of the London Exclusive Residential activities, the closure of this business has resulted in pre-tax losses in the year of £15.5m (2014: £3.7m) and has been treated as a business to be discontinued within non-underlying items.

1 from continuing operations (Note 5)2 restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Notes 5 and 7)


As part of the recovery plan implemented over the last two years, we have strengthened and stabilised its management and structure with new leadership, made operational improvements and established a simplified structure comprising four regions. We now believe the business will benefit from an improved market. The division has an improved order book and its pipeline is strong, with the contracts we have procured over the last 18 months performing in line with expectations. We now have a strong operational focus on excellence in delivery and are targeting work in a restricted number of core sectors that best suit our capability and experience.

A major focus for the business is success through repeat business and frameworks. Our repeat relationship with global investment firm Blackstone goes from strength to strength through new wins in London on 20 Old Bailey (£59m, secured post year end), and the second phase of the iconic Adelphi building, in addition to the completion of One America Square. New wins have also been secured with key customers, BAE Systems, Aviva Investors and a leading drinks manufacturer.

During the year, we have been reappointed to the North West Construction Hub (NWCH) Medium Value Framework and secured a place on the Southern

Construction Framework. In addition, we have secured our latest project for Cleveland Fire Authority through the four year capital build framework, worth more than £22m in total, on which we are the sole appointee. Our long-standing relationship as a primary delivery partner for Alliance Leisure has seen us secure three new schemes in this period with a combined value of £10m.

Across the regions, the key focus is on the core sectors of office, education, hospitality, leisure and industrial, and technology has seen us awarded a £50m project to create a new home for the Faculty of Business and Law at UWE Bristol, and a major R&D facility in the South of England for a leading technology company. We are currently delivering a £22m three-phased development programme at the American School in London and nearing the completion of the £66m+ Exhibition Centre, Liverpool.

Looking ahead, the UK Construction business has high-quality opportunities in its pipeline. It is targeting a significant improvement in 2015/16 through maintained revenues with higher margin opportunities, driven by repeat business and sector focus. The order book stands at £447m (20141,2: £417m) with £364m (20141,2: £348m) to be delivered in the current financial year.

We have strengthenedand stabilised themanagement andstructure with newleadership, madeoperational improvementsand established asimplified structurecomprising four regions

The business is targeting a significant improvement in 2015/16 through maintained revenues with higher margin opportunities, driven by repeat business and sector focus

Left - Office, One America Square, London, UK

Right - Education, Cardiff Business School, Cardiff, UK

1 from underlying items (Notes 5 and 7)2 restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Notes 5 and 7)

“If I had to sumup workingwith ISG inthree words,it would becollaborative,personable,and dedicated.”


PetrocJason QuinnEstates Manager,

Area: 36,683 sq mProgramme duration: 84 weeksCompletion date: March 2015 (engineering block); March 2016 (lifestyle and tourism centre)

Petroc is a further education college in Barnstable, Devon, UK. Throughout 2015-2016, we delivered two new teaching facilities for Petroc; the first consisted of a dedicated engineering block, and the second phase involved the construction of a lifestyle and tourism centre. During the works, we spoke to Estates Manager, Jason Quinn, who oversees the campuses in Barnstable and Tiverton.

What was the motivation to construct these two new buildings at the college?The buildings are so specific to the curriculum need and they were designed to meet that need. The learning experience is absolutely key. Further education is becoming more competitive, so having a state-of-the-art, dedicated facility for specific curriculum areas is really important, and it does give you that competitive edge.

What has it been like working with ISG?The overall experience so far has been outstanding. The staff has been so supportive, welcoming, and helpful. Nothing’s ever too much. There’s always somebody there to answer that question.

What have been the main challenges on the project?It is always a challenge with construction sites and tight accommodation which we have here...in the mornings, there is no construction traffic before 8.30-9am. It may seem like the simplest thing on the planet, but it works. We haven’t got lorries being backed up or hundreds of students walking past lorry entrances. It has been a really functional and proactive way of addressing health and safety.

How would you describe the team at ISG?It’s all very personable. I think that’s why the overall experience to date has been outstanding. We are all trying to achieve the same thing. I want to develop and deliver a first class building and ISG want to do the same.

How would you sum up ISG in three words?If I had to sum up working with ISG in three words, it would be collaborative, personable, and dedicated.


Continental Europe

Revenue: £81m -21%

Operating profit: £1.1m -15%



In Continental Europe, our performance continues to reflect the markets in which we operate. The continued strength of the German economy, and recovery in Spain, have both helped to underpin stronger performance in these geographies. However, France and Italy continue to lag the recovery and here market opportunities remain subdued.

Revenue in the year declined to £81m (2014: £103m) with operating profit lower at £1.1m (2014: £1.3m) resulting in a margin of 1.3% (2014: 1.2%).

Our office fit out activity in Germany continues to perform strongly, where we are targeting the growing markets of Berlin, Munich and Frankfurt. We recently secured our first win with investment company HIH Property Management GmbH in Berlin, and schemes with Hammer AG, Terrania AG and Polycom in Munich where we are also currently delivering an €18m project for a global technology company. In Frankfurt, we have recently completed projects for Morgan Stanley and State Street Bank. Tecton Engineering GmbH, acquired two years ago, has been successfully integrated with ISG and this has expanded our geographic reach and service offering. We are now providing infrastructure services to landlords and developers including a project for ECE Projektmanagement GmbH & Co KG, a private German property company.

Our performance continues to reflect the markets in which we operate

Our office fit out activity in Germany continues to perform strongly, where we are targeting the growing markets of Berlin, Munich and Frankfurt

“ISG worked brilliantly throughout the entire project and particularly in light of the tight schedule.”


Office, Informatica, Stuttgart, Germany

MicrosoftNicole Klein Solution Sales Specialist – Business Productivity Infrastructure Optimisation (BPIO), Microsoft (Germany)

Area: 1,300 sq mProgramme duration: 16 weeksCompletion date: May 2015

In 2014, global technology company Microsoft decided to rebuild its existing office located in the picturesque town of Bad Homburg, north of Frankfurt, Germany, in line with its Workplace Advantage concept which focuses on creating flexible, informal and collaborative workspaces. The challenging refurbishment project was completed in only four months. We speak to Solution Sales Specialist, Nicole Klein, about the new office and working with ISG.

What is it like working for Microsoft?Microsoft cancelled compulsory attendance some time ago. Apart from customer and partner meetings, we can work whenever and wherever we want. We have the technology to work in virtual teams no matter where we are. When I come into the office I simply look for an empty seat, connect my tablet computer and can work immediately.

What were the main challenges during the refurbishment?It was challenging because the construction was to be completed in just four months, and the alterations took place in a fully occupied office building which required a sophisticated co-ordination of logistics. Moreover, it was not just a renovation with things like new carpet and new paint on the wall, but a significant transition and a consistent implementation of our Workplace Advantage concept.

What is the thinking behind the Workplace Advantage concept?People want to work in places where they get new inspiration and motivation, and can learn new things and accelerate innovation so as to be more productive. From this perspective, our new office is primarily a place of communication. Communication with customers and partners can be held in our modern meeting rooms, but also communication with colleagues in the co-working space. Of course, my colleagues want to be able to concentrate in the office. ISG implemented an ingenious solution to this challenge. There are very efficient acoustic measures to control the noise level and there are phone booths and focus rooms where we can retreat to not disturb anyone.

What was it like working with ISG?The project coordinator from ISG worked brilliantly throughout the entire project and particularly in light of the tight schedule.


ISG took a significant step forward in the Spanish office, retail and engineering services markets with the acquisition of Diadec and Emerald in July 2014. The business, in which ISG has taken a 50.1% interest, has made a significant positive contribution in the year and delivered projects for several ISG customers including Forever 21 and a global technology company.

Our office and retail fit out activities in France and Italy continue to experience challenging markets. In France, we delivered an office refurbishment for Verlingue Neuilly, an international insurance broker, and also a project for a benchmark leader in Paris’ commercial property market. In retail, ISG completed the fit out of Nike’s Factory Outlet in Aubergenville, and a notable luxury brand’s store on Avenue de Montaigne. In the hospitality sector, the number of opportunities in France has increased, and we undertook work for repeat client Carlson Radisson and other independent hotels.

In Italy, we delivered office fit out projects for BMW, Coca-Cola, Informatica and Criteo, and are working for an international financial institution on a brand roll-out programme. In addition, we have now established a presence in the Italian retail market with successful delivery for Size? and Paşabahçe, the Turkish glassware brand.

In Russia, we have traded profitably in the year and we have focused the business on the retail market as international opportunities in the office fit out market have reduced. We are currently delivering a showroom reconstruction for a leading automotive company and have completed fit outs in Moscow for leading luxury brands Prada, Piaget and Lange & Söhne.

Overall, across our businesses we are seeing a modest improvement in pipelines and, as such, we enter the current year with a greater sense of optimism and a stable forward order book of £29m (2014: £28m), all of which is for delivery in the current financial year.

Top - Office, AFIAA Speicher, Düsseldorf, GermanyMiddle - Retail, Piaget and Lange & Söhne, Moscow, RussiaBottom - Office, Informatica, Milan, Italy


Middle East

Revenue: £51m +47%



Order book: £33m -3%

In the Middle East, we continue to be active in the office fit out sectors, though with the drop in oil prices, customers are tending towards caution and smaller projects. In line with this, we are diversifying our activities across the hospitality, leisure and engineering services sectors, leading to strong growth in revenue and profit.

The division had a strong year, with revenue up 47% at £51m (2014: £35m), and with operating profit increasing by 130% to £1.2m (2014: £0.5m), resulting in an improved operating margin of 2.3% (2014: 1.5%).

In Abu Dhabi, we continue to build on our market presence delivering a number of large commercial office fit out projects including a new headquarters office for Tourism and Culture Authority Abu Dhabi, National Insurance Company Daman and a Mubadala affiliate. We have extended our offer also to the owners of major sporting and entertainment facilities on Yas Island.

We continue to diversify our activities across the hospitality, leisure and engineering services sectors, to support our growth strategy

Office, Daman, Abu Dhabi, UAE


In Dubai, our focus has been on hotel and hospitality refurbishment projects as a key growth sector. The refurbishment of the first two phases of the Kempinski Hotel at the Mall of the Emirates has been completed and this project will continue throughout 2015. In addition, we have recently secured a key destination venue leisure project for Meraas. We have also been active in the Dubai International Financial Centre, and completed a strategic new facility for Lloyds of London.

In line with strategy, we have secured our first engineering services project within the growing regional health sector, as well as establishing a commissioning management activity in the region under our Commtech brand.

Confidence remains high in the Dubai hotel and hospitality sector where we expect this to continue to be a key growth driver for ISG in the future. The forward order book has been maintained at £33m (2014: £34m). With the market conditions allowing us to further diversify into dynamic growth sectors, we are expecting further improvement in performance in the current year.

Top - Office, Lloyds of London, Dubai, UAEBottom - Office, Tourism and Culture Authority, Abu Dhabi, UAE


Our success has beendriven by our breadthof service and diversityacross the office, retailand hospitality sectorscombined with agrowing reputation forour high-quality teamsand delivery

Asia





In Asia, our businesses under the three brands, ISG, Realys and Commtech, recorded another year-on-year increase in overall revenue and profit. This success has been driven by our breadth of service and diversity across the office, retail and hospitality sectors, combined with a growing reputation for our high-quality teams and delivery.

In the year, the division delivered a strong performance, with revenue increasing by 28% to £102m (2014: £79m) and operating profit increasing by 28% to £3.5m (2014: £2.7m) resulting in an operating margin of 3.4% (2014: 3.4%).

The office sector continues to strengthen in Asia and in the financial year we secured projects for local and international organisations including Standard Chartered Bank, DKSH, AmGeneral Insurance, Ericsson, Intel, Marvel and Asurion. We are providing refurbishment services to a number of office developers including two projects delivered for Pamfleet that entailed the complete overhaul of office blocks in Singapore and Hong Kong.

In the hospitality sector, our reputation for working successfully in live environments was behind a 90-room upgrade and new ballroom for the Concorde Shah Alam in Kuala Lumpur, the fit out of The Club on level 55 of Tower 2 at Marina Bay Sands, and several areas of the Langham Place Hotel in Mong Kok, as well as a new VIP area at Sha Tin Racecourse for the Hong Kong Jockey Club. In Singapore, we also delivered extensive interior and

exterior refurbishment of The Club, a boutique hotel in a heritage building, over a nine month programme. The fit out of new hospitality space included the Four Points by Sheraton in Kuala Lumpur and three restaurants for Le Comptoir at Repulse Bay in Hong Kong. Recent wins include a 419-room upgrade for Le Meridien in Kuala Lumpur, which is the Malaysian team’s fifth project for the Starwood brand since 2014.

Our retail teams delivered projects around Asia that included additional assignments for existing customers including Abercrombie & Fitch, Dior, Bath & Body Works, Frey Wille, Hogan, Tesco and UGG. We also undertook projects for new brands Alexander McQueen, Vivienne Westwood, Calvin Klein, Hugo Boss, Vera Wang and DKNY. We also completed a significant flagship store for an international technology retailer in Hong Kong.

Retail, Vera Wang Bride, Singapore


Concorde Hotel Shah AlamKarl Muir General Manager, Concorde Hotel Shah Alam (Malaysia)

Area: 26,159 sq ft and 180 guest rooms Programme duration: 17 weeks (guest rooms); 21 weeks (main lobby); 12 weeks (guest rooms continued); 8 weeks (ballroom and pre-function space) Completion date: April 2015

Karl Muir has spent over 20 years managing some of the world’s most recognisable hotel brands. In 2012, Karl awarded the 90-room refurbishment of the Concorde Hotel Shah Alam in Malaysia to ISG. Three years on ISG has been back to the Concorde to refurbish a total of 180 rooms, remodel and renovate the hotel’s stunning 32 ft high main reception and construct Shah Alam’s most sought-after ballroom.

Why did you engage ISG?ISG has the advantage of having delivered maybe hundreds of similar projects so there is an element of trust and you’ve got to listen to their advice. Most importantly they gave me options and solutions and yes sometimes there was a cost involved but more often than not it was cost neutral which was great. The other key thing was their ability to meet deadlines. This built trust and moved us to engage ISG again and again – from the rooms to the reception to the ballroom project.

Were there any challenges?It’s a hotel and for us business continues despite construction taking place. Of course there were disagreements like in any good marriage, but as long as the discussion is robust and respectful it works fine. The regular meetings were a key factor in the success of the projects I’ve done with ISG. We understood their needs and they understood ours.

Are you pleased with the quality of the finished product?We set the benchmark of what we expected fairly early on. Mock-ups played a large part. For example, looking back on the deluxe executive rooms, the mock-ups were probably very frustrating from ISG’s point of view because we kept changing our mind. However, ISG were flexible and able to accommodate the associated time and costs incurred throughout other elements of the projects and that gave us a lot of confidence.

How would you describe working with ISG?There was always mutual respect, information was very forthcoming, meetings were very clear and on time, their work ethic on site was good, and they kept the site clean. I think they’re very ethical, trustworthy, and they deliver what they say they will deliver.

“I think they’revery ethical,trustworthy,and theydeliver whatthey say theywill deliver.”


The Realys design-led construction team in Singapore completed their second full year of trading with projects for international as well as local organisations including SG Enable, Affinity, King Content, Changi Airport Group, Electrolux, Noble Agri and Autodesk. Realys also continued to deliver a diverse range of project management commissions across Asia, with an order book in hospitality, education and development. Key clients include owners and operators of Starwood, Marriott and Santiburi branded hotel properties, as well as commercial office and retail clients including IKEA,

UBS, Standard Chartered Bank, Nokia, Porsche and Mercedes Benz.

Commtech continued to secure work from its clients that require mission critical and environmental consultancy services with a raft of projects throughout Asia for organisations such as Citi, Equinix and Digital Realty. In addition to its traditional data center and commercial offices sector work, Commtech also secured and delivered assignments in the aerospace, education, retail, hospitality, healthcare and diplomatic sectors. These include the Riverside 66 Plaza in Tianjin, China, an international

embassy in Jakarta and a resort comprising over 7m sq ft in the Philippines.

The outlook for the region continues to be positive. The office fit out market is continuing its recovery and we now have an established reputation in the hospitality sector. This, combined with our retail and growing Realys and Commtech consultancy offers, are providing a balanced portfolio of opportunities that is closely aligned to the market opportunity. In line with this, the current order book is £50m (2014: £42m). We expect continued growth in the year ahead.

Top - Hospitality & Leisure, Marina Bay Sands,Singapore

Bottom - Office, Ericsson, Kuala Lumpur, Malaysia

The Group results for the year have been affected by issues in our UK Construction division, with outperformance in our other businesses. The issues faced in UK Construction principally relate to the deterioration in project performance since 30 June 2014 on contracts procured in 2012-2013, the closing out of contracts in discontinued operations and losses within our London Exclusive Residential business which has been identified as a business to be discontinued.

Looking beyond our UK Construction operations, our businesses have delivered improved performance in the year. Demand for our Engineering Services offer continues to grow, whilst our leadership positions in the London Fit Out and UK Retail markets have contributed to their strong performance. In Asia and the Middle East, we continue to see significant growth, and in Continental Europe, whilst we have been impacted by the economic situation in France and Italy, our recent acquisitions in Spain have provided a positive contribution in their first year as part of the Group.

Revenue and operating profitRevenue1,2,3 for the year has risen significantly by 12% to £1,629m (2014 restated3: £1,455m). This reflects an increase in revenue across all of our business segments with the exception of Continental Europe. Our UK Fit Out and Engineering Services division benefited from a continuing strong London office fit out market, albeit the number of larger projects was lower than prior year. In addition, the continuing development of our Engineering Services business, which during the year delivered projects within the UK, the Nordics and Western

Europe, resulted in an increase in revenue for the division of 21% to £630m (2014: £520m). Despite a competitive retail market, our UK Retail business showed a 13% increase in revenue to £320m (2014: £283m) as we saw substantial growth in activity in the retail banking sector, maintained our activity under our food retail frameworks and with our repeat high-street fashion clients, and developed our Realys consultancy offer in the UK. Our UK Construction business saw revenue2,3 increase by 2% to £446m (2014 restated3: £436m). In Continental Europe our performance reflected the markets in which we operate, with revenue overall declining by 22% to £81m (2014: £103m) on the back of our French and Italian businesses continuing to be impacted by the difficult economic conditions, whilst our German office fit out business and recently acquired Spanish businesses performed well. Middle East has seen strong growth in the year with revenue up 47% to £51m (2014: £35m), underpinned by the large-scale Kempinski hotel refurbishment project in Dubai. In Asia revenue grew by 28% to £102m (2014: £79m) as we have continued to benefit from the strength of the office, retail and hospitality sectors, particularly in Hong Kong, Singapore and Malaysia.

Group underlying operating profit1,2 decreased by 47% to £8.5m (2014 restated2,3: £15.9m), with the significant increases in profitability of our UK Fit Out and Engineering Services, UK Retail, Middle East and Asia divisions, being overshadowed by the substantial losses in UK Construction as well as a small decline in the operating profit of Continental Europe.

Jonathan HoultonGroup Finance Director

1 from continuing operations (Note 5)2 from underlying items (Notes 5 and 7)3 restated for the classification of the London


Financial review

Demand for our Engineering Services offer continues to grow, whilst our leadership positions in the London Fit Out and UK Retail markets have contributed to their strong performance.

The issues faced in UK Construction principally relate to the deterioration in project performance since 30 June 2014 on contracts procured in 2012-2013.


Revenue (£m)

Overall increase of 12% with growth in most segments, especially 21% in UK Fit Out and Engineering Services (54% increase for data center work), 13% in UK Retail (strong year in retail banking) and 8% overseas (growth in hotel and hospitality work, especially in the Middle East and Asia).

Our UK Fit Out and Engineering Services division increased its operating profit by 62% to £16.0m (2014: £9.9m) resulting in an operating margin of 2.5% (2014: 1.9%) principally from the improving London office fit out market and the significant growth in our engineering services offering. UK Retail increased its operating margin to 2.8% (2014: 2.1%) assisted by the growth in our Realys consultancy services business, resulting in its operating profit increasing to £9.0m (2014: £6.1m) on higher revenue.

As reported at the half year, performance from our continuing activities in UK Construction in the first half of the current financial year had been adversely affected by the deterioration in project performance experienced in closing out four large contracts procured in 2012-2013 and resulted in a reported first half loss of £16.0m. In the second half of the year, we have seen some significant improvement, and have reported a reduced loss of £2.1m. Hence, overall for the year the continuing business generated a loss of £18.1m (2014 restated2,3: profit of £2.5m).

In Continental Europe, the first time contribution from Diadec/Emerald helped limit the decline in profitability with a total operating profit of £1.1m (2014: £1.3m) as we continued to see margin pressures and high fixed costs in our French and Italian businesses. Our Middle East division increased its operating profit to £1.2m (2014: £0.5m) as revenue improved, resulting in an operating margin of 2.3% (2014: 1.5%). In Asia, operating profit increased to £3.5m (2014: £2.7m) with the operating margin stable at 3.4% (2014: 3.4%) as a result of its focus on the office, retail and hospitality sectors and its higher margin consultancy businesses.

During the year, the Group moved from submitting research and development expenditure related tax claims under the previous large company super deduction scheme (which resulted in additional tax deductions accounted for within the tax charge) to the R&D Expenditure Credit (“RDEC”) scheme (which results in credits accounted for within operating profit). This treatment is expected to continue in future periods and is therefore treated as an underlying item in line with market practice. This resulted in total net income in the year of £4.0m of which £2.0m related to a catch up in respect of prior years.

Costs from Group activities decreased by 40% to £4.1m (2014: £7.0m) as a result of no annual bonuses paid to Group directors, the reversal of stock option accruals and the reversal of central contract provisions now segmented to UK Construction. Total underlying administrative expenses1 have increased by 10% to £66.4m (2014: £60.2m) reflecting the strong growth in volumes.

Reported operating loss1 was £11.0m (2014 restated3: profit of £7.4m) reflecting the impact of the non-underlying items below.

Non-underlying itemsNon-underlying items amounted to a cost before tax of £19.9m (2014 restated3: £8.5m) and can be summarised as in the table below.

In January 2015, the Group announced that it had discontinued its London Exclusive Residential activities following a review which concluded that the rewards of this market do not meet the division’s new bid and risk management policies.

2015 2014 £m £m

Discontinuation of business 15.5 3.7

Amortisation of intangible assets (Note 17) 2.0 2.0

Administrative expenses: Accordion costs 1.2 - Acquisition related expenses 1.2 0.4 Restructuring costs - 2.4

Total non-underlying loss before tax 19.9 8.5

Non-underlying items

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Operating pro�t - Overseas

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Gross cashNet cashAverage gross cash

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Order book (£m)

14% overall growth driven by 37% increase in UK Fit Out and Engineering Services and 57% increase overseas to £319m (2014: £203m) which has increased to 28% of total order book (2014: 20%).

As a small number of the related projects have not completed as at 30 June 2015, the operations do not meet the definition of “discontinued operations” as stipulated by IFRS 5. Accordingly, the results of this operation for the current and prior year have been included within non-underlying items, and therefore differ from the presentation for applicable discontinued operations. The loss in the year of £15.5m (2014: £3.7m) reflects the losses incurred in the year as well as the Board’s assessment of the losses to close out the remaining contracts.

The charge for the amortisation of intangible assets has remained at £2.0m (2014: £2.0m) as the customer contracts intangible assets acquired from Tecton in July 2013 have now been fully amortised and replaced by the intangible assets acquired by Interior ISG Espana SA (“Diadec and Emerald”).

During the year, the Group secured a further short term credit facility of £10m from HSBC and the Royal Bank of Scotland plc in association with the share placing for which professional fees and banking charges (“Accordion costs”) of £1.2m were incurred.

In addition, we have incurred £1.2m of acquisition related expenses in respect of the acquisition of Diadec and Emerald in July 2014 and a further 49% interest in ACE in Brazil of which £0.6m was in respect of the foreign exchange loss on the deemed disposal of the original 20% investment in ACE. £0.2m of costs were incurred in the prior year in respect of Diadec and Emerald.

During the prior year, the Group recorded restructuring costs of £2.4m as a non-underlying item. This completed the exercise that commenced in the previous years in respect of the UK Construction operations with the reorganisation of its South West and the South East activities, and was completed by the restructuring of the division from seven regions to four. Furthermore, during the prior year we restructured our Continental Europe division to bring together our retail and office fit out activities under a geographic management structure.

Further details are provided in Note 7 to the financial statements.

During the year, the Group recognised a post-tax loss from discontinued operations of £14.1m (2014: £2.8m) relating to the closure of the Tonbridge operations which includes further provisions for increased losses in closing out the contracts tendered and managed from that office.

Profit before taxUnderlying profit before tax1,2 of £7.0m was 54% behind last year’s restated3 total of £15.3m and is stated before non-controlling interests of £0.4m (2014: £48k). The non-controlling interest at 30 June 2015 principally related to the 10% shareholding in Tecton, 49.9% shareholding in Diadec and Emerald and 31% shareholding in ACE, all held by local management. Finance income was £0.1m (2014: £0.1m) with interest rates continuing to be at historic lows whilst finance costs increased to £1.6m (2014: £0.8m) primarily due to the dual impact of our significantly increased data center workload in Continental Europe and the losses suffered in UK Construction which have resulted in increased Euro cash balances for which interest returns remain historically low and lower sterling balances on which we have suffered overdraft interest.

Loss before tax2 was £12.9m (2014: profit of £6.8m) after a net cost of £19.9m (2014 restated3: £8.5m) from non-underlying items as described above.

Taxation The Group’s underlying effective tax rate2 was 32.6% (2014 restated3: 23.2%) with the reported effective tax rate1 of (6.0)% (2014: +23.2%).

The reported effective tax rate was higher than the weighted average UK Corporation standard tax rate for the current year of 20.75% (2014: 22.50%) due primarily to the trading losses incurred in UK Construction in the year on which only limited group relief was available and for which only limited deferred tax assets were established and the implementation of the RDEC (as noted previously).

At the balance sheet date, deferred tax assets have been recognised in relation to £29.0m (2014: £5.1m) of unutilised tax losses, and we have carried forward unutilised tax losses of £24.6m (2014: £5.3m).

1 from underlying items (Notes 5 and 7)2 from continuing operations (Note 5)3 restated for the classification of the London


4 from earnings attributable to owners of the company from underlying items (Note 15)

Strategic report: Financial review

Underlying profit before tax1 (£m)

Increase of 50% in underlying profit for trading segments excluding UK Construction (volumes and margins) offset by significant trading losses in UK Construction resulting in overall 46% reduction.

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Gross, net and average cash (£m)Earnings per share and dividendsThe underlying basic earnings per share4

shows a decrease of 66% to 10.42p per share (2014 restated3: 30.55p). The decrease reflects the reduced level of profit as well as the increased average number of shares in issue due to the successful placement of approximately 10m shares in March 2015. Basic earnings per share from continuing and discontinued operations for the year was (66.99p) (2014: +6.19p), based on the statutory result.

The Board is proposing to increase the final dividend by 2% to 5.00p (2014: 4.91p) giving a total dividend for the year of 5.00p (2014: 9.45p), a decrease of 47%. At this level the dividend is covered 2.1 times (2014: 2.4 times) based upon the underlying basic earnings per share4.

Total equityDuring the year, total equity decreased by £16.8m to £40.1m (2014: £56.9m).

The Group generated a loss for the year from continuing operations of £13.7m (2014: profit of £5.2m) and a post tax loss from continuing and discontinued operations of £27.8m (2014: profit of £2.4m). Dividend payments of £1.9m (2014: £3.5m) were made during the year. The foreign currency movement for the year was a loss of £3.0m (2014: £4.1m) and represented the translation loss on the revaluation of the assets and liabilities of foreign subsidiaries and related goodwill using rates of exchange at the balance sheet date.

The number of ordinary shares in issue at 30 June 2015 increased to 49,179,325 (2014: 39,122,139), principally as a result

of the shares issued for the share placing in March 2015 as well as those issued in connection with the Diadec and Emerald acquisition. The total number of shares held by the Jersey Trust company at 30 June 2015 declined to 662,743 (2014: 766,000) as a result of the vesting of shares linked to long-term incentive plans. Shareholders’ funds are stated after deducting the Group’s investment in its own shares of £1.3m (2014: £1.5m).

The weighted average number of ordinary shares after deducting the Group’s investment in its own shares as at 30 June 2015 is 41,729,093 (2014: 38,199,749) largely reflecting the equity placing in March 2015 and the reduction in shares held by the Jersey Trust. The company’s share price was 169.5p at the close of business on 30 June 2015, a decrease of 44% on the closing price on 30 June 2014 of 303.0p. Cash flow and treasuryThe Group’s gross and net cash positions at the year end were as follows:

2015 2014 £m £m

Gross cash 53.7 49.8

Less: bank loans (1.0) (3.5)

Net cash 52.7 46.3

Average net cash balances during the year decreased to £29.8m (2014: £40.1m), primarily due to the contract losses in UK Construction. The Group continues to explore its options to strengthen its balance sheet and maintain sufficient cash levels with funds raised via equity during the prior year, as well as traditional bank debt sources.

Cash performance by component (£m)

14% increase in year end net cash balances underpinned by equity placing (£16m net proceeds) and positive movement in working capital management (inflow of £11m) partially offset by trading losses in UK Construction. Average net cash balances throughout the year decreased to £30m (2014: £40m).

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£40m

£45m

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.7

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30

40

50

60

70

80

+£50m

+£14m

+£11m

-£19m-£3m

-£8m-£2m

+£16m

-£3m

Openinggross cash

Other(inc taxation)

+£54m

Closing gross cash

Share placing net proceeds

Dividends paid

Net debt repayments

Investingactivities

Non-underlyingitems

Discontinuedoperations

Movement in net workingcapital

UnderlyingEBITDA

-£2m

Strategic report: Financial review

During the year we drew down £20.0m of the revolving credit facility for working capital purposes (2014: £10.0m), and this was repaid in full before year end. In addition, after a net repayment of £2.4m in our loan facilities in the year (2014: £2.7m) following the renewal of the banking facilities in January 2015, the Group had bank loan facilities totalling £1.0m at the year end (2014: £3.5m).

Net cash inflow from operating activities from continuing operations decreased to £2.6m (2014: £35.1m). Losses before interest, tax, depreciation and amortisation were £6.0m in the year (2014: profits of £12.0m).

The movement in working capital between the year-end dates was an inflow of £11.3m (2014: £25.0m) due to the continued focus on working capital management and the retention of a number of larger more cash positive contracts. Net tax payments were £2.5m in 2015 (2014: £2.5m) driven by the profits generated overseas.

The net cash outflow from investing activities decreased to £7.8m (2014: £9.0m). Net interest paid increased to an unusually high balance of £1.5m (2014: £0.3m) as noted previously. Net capital expenditure increased to £5.2m (2014: £4.5m) as a result of investment in IT and leasehold improvements to some of our regional offices. A 50.1% controlling interest in Diadec and Emerald was acquired by the company in July 2014 for a combination of cash (£1.3m) and shares in conjunction with an equity injection of £0.2m in their parent company whilst a further 49% interest in ACE was acquired in June 2015 for £0.3m in cash.

The net cash inflow from financing activities was £12.2m (2014: outflow of

£6.4m). The key movements in the year were the net £16.5m received from the share placing in March 2015, the dividend payments of £1.8m (2014: £3.4m) and net debt repayment of £2.4m (2014: £2.7m).

The Group secured new banking facilities during the year with the Royal Bank of Scotland plc and HSBC. These facilities consisted of a revolving credit facility for working capital purposes of £20.0m, which bears a variable interest rate with reference to LIBOR. The facility expires in September 2017. At 30 June 2015, a balance of £1.0m (2014: £3.5m) was outstanding on the loans in Asia and Spain whilst the revolving credit facility was not drawn at year end. These banking facilities are subject to bank covenants, including total interest cover, net debt to earnings before interest, tax, depreciation and amortisation, cash flow cover and minimum earnings before interest, tax, depreciation and amortisation target. There have been no breaches of bank covenants throughout all periods.

The Group continues to have bonding facility lines with Euler Hermes, HCC International, Liberty Mutual, Norwich Union, The Royal Bank of Scotland plc, HSBC, Société Générale and Intercredit Bank.

Foreign exchangeThe key exchange rates used to translate the Group’s overseas operations were as shown in the table above.

The Group manages its foreign currency exposures by taking out forward exchange contracts or other suitable hedging instruments as appropriate and monitors its currency risk on a regular basis. During the year we made a gain of £1.6m (2014: £0.1m). The effect of volatile short-term currency movements on profits is reduced because the Group

accounts for foreign profits using average exchange rates.

Goodwill and other intangible assets The carrying value of goodwill is £85.1m, an increase of £2.3m from last year (2014: £82.8m) principally due to the impact of the goodwill generated by the acquisitions of Diadec and Emerald and ACE partially offset by the impact of foreign exchange movements. The Group carries out annual impairment tests in relation to these amounts. These tests use the cash flows derived from two year financial forecasts approved by the Board.

Revenue growth and future gross margins are the key assumptions within these forecasts with discount rates being the key sensitivity. The testing undertaken shows that there is no impairment of these assets.

Further details of the impairment tests performed and the associated sensitivities for UK Construction are set out in Note 16.

The carrying value of other intangible assets is £3.2m, a decrease of £0.6m from last year (2014: £3.8m), due to an amortisation charge of £2.0m (2014: £2.0m) and a foreign currency differences loss of £0.1m (2014: £0.2m), net of other intangibles created of £1.5m from the acquisition accounting for Diadec and Emerald.

Acquisitions and deferred considerationOn 16 July 2014, the Group acquired 50.1% of the shares in the holding company for Diadec, a Spanish based office and retail fit out company and Emerald, a Spanish based data center and engineering services company, for

Average Average Year end Year end (£ Sterling) 2015 2014 Change (%) 2015 2014 Change (%)

Euro 1.31 1.20 9.2 1.42 1.25 13.6

Singapore 2.06 2.05 0.5 2.12 2.13 -0.5

Hong Kong 12.22 12.60 -3.1 12.18 13.18 -7.6

UAE Dirham 5.79 5.97 -3.0 5.77 6.25 -7.7

Exchange rates


Hospitality & Leisure, Kartell Museum, Milan, Italy

an initial consideration of £1.7m (satisfied by £1.3m in cash and £0.4m in shares in ISG). £0.2m was invested as new capital into the holding company. A maximum deferred consideration of £2.0m (to be settled by cash and ISG shares) is to be paid over the three years to 31 December 2017 conditional on the business meeting certain annual profit targets.

Additionally, on 8 June 2015 the Group acquired a further 49% interest in ACE, a Brazilian fit out and refurbishment

business, with a commitment to acquire the remaining shares over a three year period. This 49% interest was acquired for £0.3m in cash. Our total shareholding in ACE is now 69% as at 30 June 2015.

Further details are provided in Note 36 to the financial statements.

Jonathan HoultonGroup Finance Director8 September 2015

Risk Nature of risk Impact Mitigation Additional comments Reporting & Monitoring

Market and economic environment

▼ Decreased risk

- difficult macroeconomic conditions in certain geographies

- geopolitical instability in certain geographies

- adverse impact on order book

- increased competition

- over-reliance on key clients

- adverse impact on profitability

- continual review of economic prospects including order book levels and market data

- constant engagement with customers to increase level of negotiated work (key accounts and frameworks represent 53% of revenue)

- tender work on basis of service offering and quality, not just price

- positioning of activities to maximise shareholder value

- regular review of resource levels against anticipated workload

- regular review of discretionary expenditure

- we continue with our ongoing strategy of diversification across a broad geographical and sector spread and focus on repeat business from blue-chip key customers and frameworks

- monthly/quarterly operations reviews

- long-term strategic plan

- budgeting and forecasting process

Attracting, developing and retaining staff

s Increased risk

- a high calibre workforce is crucial to the Group achieving its aims

- improving economic outlook in certain sectors

- increased levels of staff poaching by competitors

- adverse impact on project delivery

- adverse impact on growth

- salary inflation

- loss of key staff

- remuneration system firmly linked to performance

- remuneration includes long-term incentives such as multi-year bonus plans and SAYE and share option schemes

- overseas working opportunities including competitive relocation packages

- continual formal performance appraisal system providing regular assessment of individual performance and options for personal development

- succession planning

- employees are actively encouraged to develop their skills, training schemes are offered throughout the Group

- increased use of The Academy (our international learning and development facility) to identify and develop core competencies

- regular performance reviews


- Board review

- Remuneration Committee

Financial risk

◆ No change to risk

- interest rate risk

- currency rate risk

- credit risk

- liquidity risk (for cash and bonding)

- treasury counterparty

- management of working capital

- management of overheads

- investments/acquisitions

- potentially adverse impact on cost of funds borrowed at floating interest rates

- potentially adverse impact on profit and net assets from fluctuations in foreign exchange rates

- failure of any financial institution in which funds are placed could result in a loss of those funds

- insufficient bonding capacity to support business growth

- sub-optimal investments resulting in poor financial returns

- loss of acquired staff

- continual monitoring of interest rate movements

- use of interest rate swaps is regularly considered

- Group’s positive cash balance acts as a natural hedge

- continual monitoring of relevant foreign currency rates

- known foreign currency transactional exposures are managed via forward foreign exchange contracts

- use of financial hedge instruments to mitigate any foreign currency exposures on the translation of profits by overseas subsidiaries into sterling

- cashflow forecasts required for all projects; performance reviewed on a monthly basis

- continued focus on project cashflows (in addition to profitability) by both commercial and financial teams

- strong creditworthiness of Group’s customers

- financial stability of each subcontractor is monitored regularly and appropriate retentions held

- Group treasury function ensures that there are sufficient levels of committed facilities (including bonding), cash and cash equivalents to enable the Group to operate effectively and efficiently and to meet its liabilities as they fall due and operate within its financial covenants at all times

- funds are deposited with a range of institutions to ensure appropriate breadth of investment

- detailed due diligence by both external advisors and key staff

- forecast models to ensure appropriate financial returns

- lock-in of key management with use of deferred contingent consideration linked to future performance

- the level of foreign business is approximately 34% of the Group’s revenue

- the Group treasury function operates within policies and processes approved by the Board

- the Group has a positive net cash position

- the Group reviews its treasury position daily and places surplus cash on short-term deposits

- the Group does not speculate with derivative instruments

- longer term renewal and increase in banking facilities agreed during the year

- daily treasury monitoring

- daily/weekly rolling cash forecasts

- divisional working capital reviews

- monthly project cash and final account/ debtor/retention reviews

- monthly treasury summary to the Board




- integration plans

How we manage risk

Principal risks and uncertaintiesThe ability to identify and effectively manage the risks that impact the business is fundamental to the continued success of the Group. Accordingly, the key risks and uncertainties facing the Group are considered as part of the Group’s well established processes and systems for identifying, evaluating and managing risk. These processes have been reviewed and enhanced in the year, specifically in the area of financial risk and project risk and include a comprehensive annual business planning process for each division to agree key objectives and strategies, monthly board meetings attended by Group executive directors.

These meetings use common agendas and reporting packs to allow the consistent identification and discussion of risks and risk mitigation, clearly established bid and tender settlement procedures including levels of delegated authority to ensure that decisions are approved by the appropriate levels of management, up to and including the Group board as well as a number of other regular meetings and documents including quarterly Financial and Commercial reviews, weekly rolling cash forecasts and monthly operational project reviews. The impact of significant risks and their mitigation is continually monitored at both Group and divisional Board meetings throughout the year and are subject to annual review by the Board who maintain overall responsibility. The Group’s reporting structure ensures that risk appetite is determined and risks managed within levels acceptable and agreed to by the Board.

The risks considered to be the most significant by the Board are set out in the table to the right.



Market and economic environment

▼ Decreased risk

- difficult macroeconomic conditions in certain geographies

- geopolitical instability in certain geographies

- adverse impact on order book

- increased competition

- over-reliance on key clients

- adverse impact on profitability

- continual review of economic prospects including order book levels and market data

- constant engagement with customers to increase level of negotiated work (key accounts and frameworks represent 53% of revenue)

- tender work on basis of service offering and quality, not just price

- positioning of activities to maximise shareholder value

- regular review of resource levels against anticipated workload

- regular review of discretionary expenditure

- we continue with our ongoing strategy of diversification across a broad geographical and sector spread and focus on repeat business from blue-chip key customers and frameworks




Attracting, developing and retaining staff

s Increased risk

- a high calibre workforce is crucial to the Group achieving its aims

- improving economic outlook in certain sectors

- increased levels of staff poaching by competitors

- adverse impact on project delivery

- adverse impact on growth

- salary inflation

- loss of key staff

- remuneration system firmly linked to performance

- remuneration includes long-term incentives such as multi-year bonus plans and SAYE and share option schemes

- overseas working opportunities including competitive relocation packages

- continual formal performance appraisal system providing regular assessment of individual performance and options for personal development

- succession planning

- employees are actively encouraged to develop their skills, training schemes are offered throughout the Group

- increased use of The Academy (our international learning and development facility) to identify and develop core competencies

- regular performance reviews


- Board review

- Remuneration Committee

Financial risk


- interest rate risk

- currency rate risk

- credit risk

- liquidity risk (for cash and bonding)

- treasury counterparty

- management of working capital

- management of overheads

- investments/acquisitions

- potentially adverse impact on cost of funds borrowed at floating interest rates

- potentially adverse impact on profit and net assets from fluctuations in foreign exchange rates

- failure of any financial institution in which funds are placed could result in a loss of those funds

- insufficient bonding capacity to support business growth

- sub-optimal investments resulting in poor financial returns

- loss of acquired staff

- continual monitoring of interest rate movements

- use of interest rate swaps is regularly considered

- Group’s positive cash balance acts as a natural hedge

- continual monitoring of relevant foreign currency rates

- known foreign currency transactional exposures are managed via forward foreign exchange contracts

- use of financial hedge instruments to mitigate any foreign currency exposures on the translation of profits by overseas subsidiaries into sterling

- cashflow forecasts required for all projects; performance reviewed on a monthly basis

- continued focus on project cashflows (in addition to profitability) by both commercial and financial teams

- strong creditworthiness of Group’s customers

- financial stability of each subcontractor is monitored regularly and appropriate retentions held

- Group treasury function ensures that there are sufficient levels of committed facilities (including bonding), cash and cash equivalents to enable the Group to operate effectively and efficiently and to meet its liabilities as they fall due and operate within its financial covenants at all times

- funds are deposited with a range of institutions to ensure appropriate breadth of investment

- detailed due diligence by both external advisors and key staff

- forecast models to ensure appropriate financial returns

- lock-in of key management with use of deferred contingent consideration linked to future performance

- the level of foreign business is approximately 34% of the Group’s revenue

- the Group treasury function operates within policies and processes approved by the Board

- the Group has a positive net cash position

- the Group reviews its treasury position daily and places surplus cash on short-term deposits

- the Group does not speculate with derivative instruments

- longer term renewal and increase in banking facilities agreed during the year

- daily treasury monitoring

- daily/weekly rolling cash forecasts

- divisional working capital reviews

- monthly project cash and final account/ debtor/retention reviews

- monthly treasury summary to the Board




- integration plans


Project risk

▼ Decreased risk

- continuing to win contracts at appropriate margins in markets that are more competitive with appropriate terms and conditions

- failure to manage or deliver a project in accordance with the contract and agreed variations to an appropriate quality and on a timely basis

- settling of project disputes

- supply chain over-stretched as markets/sectors grow

- issues such as cost overruns, delays, variations and contractual disputes which may have an adverse impact on the profitability and reputation of the Group

- potential for loss-making contracts

- subcontractor failure

- a controlled approach to contract bidding and selection (within clearly defined delegated authority levels and agreed sector focus) to ensure that work undertaken matches the capability and resources available, that contractual terms are acceptable and that clear responsibility for scrutiny and approval is given to the appropriate level of management

- clear Corporate Governance and delegated authority levels

- refreshed bidding processes introduced to ensure consistency across regional teams

- enhanced management reporting and business information

- maintenance of Group Risk Register and key contractual risks

- differentiate offering on service and quality

- establishment and adherence to Group values

- use of suitably qualified third party experts in contractual disputes

- enhanced management and supervision of higher risk projects

- contracts in progress are controlled and managed through the Group’s operating structure and procedures, including detailed and regular reviews both divisionally and centrally of forecast revenue, costs to complete and project cash

- use of training and awards to embed corporate values


- monthly project reviews & reporting packs

- quarterly Financial & Commercial reviews

- monthly Board reviews

- systemised and centralised monthly project CVRs (with KPI reporting)

Health, safety, environmental and regulatory risks


- failure to manage these risks could result in serious harm to employees, subcontractors, the public or the environment

- breach of local regulatory requirements

- exposure to significant potential liabilities and reputational damage

- a comprehensive policy and framework is in place (including but not exclusively site visits, near miss and hazard reporting)

- best practice is shared via the Health and Safety forum with zero tolerance of unsafe practices

- HSE leaders appointed within each operating unit

- the accident incidence rate is monitored closely in all operating companies

- HSE committee meets regularly with representatives from all divisions

- regulatory requirements monitored by Company Secretary and divisional MDs/FDs

- the Group treats health, safety and environmental issues as a priority



- quarterly HSE Committee

Counterparty risk


- exposure to counterparty risk of clients, subcontractors, suppliers and financial institutions

- failure of any counterparties could lead to significant financial loss

- a credit risk assessment is performed on clients before a contract is signed

- where possible, credit insurance is taken out on clients or suitable arrangements, such as the use of escrow accounts, reduced credit terms or retentions, are put in place

- PCGs, third party bonds or other appropriate security is required from subcontractors

- thorough pre-qualification process required before appointing all new subcontractors

- subcontractors’ performance is continually monitored and shared across the Group once they have been approved and are working with the Group

- the Group monitors the level of funds held with each financial institution and mitigates the risk by limiting the level of funds held

- contracts are spread between subcontractors to the extent possible to reduce dependence on any one subcontractor


- quarterly Supply Chain & Procurement Committee

Strategic report: How we manage risk



Project risk

▼ Decreased risk

- continuing to win contracts at appropriate margins in markets that are more competitive with appropriate terms and conditions

- failure to manage or deliver a project in accordance with the contract and agreed variations to an appropriate quality and on a timely basis

- settling of project disputes

- supply chain over-stretched as markets/sectors grow

- issues such as cost overruns, delays, variations and contractual disputes which may have an adverse impact on the profitability and reputation of the Group

- potential for loss-making contracts

- subcontractor failure

- a controlled approach to contract bidding and selection (within clearly defined delegated authority levels and agreed sector focus) to ensure that work undertaken matches the capability and resources available, that contractual terms are acceptable and that clear responsibility for scrutiny and approval is given to the appropriate level of management

- clear Corporate Governance and delegated authority levels

- refreshed bidding processes introduced to ensure consistency across regional teams

- enhanced management reporting and business information

- maintenance of Group Risk Register and key contractual risks

- differentiate offering on service and quality

- establishment and adherence to Group values

- use of suitably qualified third party experts in contractual disputes

- enhanced management and supervision of higher risk projects

- contracts in progress are controlled and managed through the Group’s operating structure and procedures, including detailed and regular reviews both divisionally and centrally of forecast revenue, costs to complete and project cash

- use of training and awards to embed corporate values


- monthly project reviews & reporting packs

- quarterly Financial & Commercial reviews


- systemised and centralised monthly project CVRs (with KPI reporting)

Health, safety, environmental and regulatory risks


- failure to manage these risks could result in serious harm to employees, subcontractors, the public or the environment

- breach of local regulatory requirements

- exposure to significant potential liabilities and reputational damage

- a comprehensive policy and framework is in place (including but not exclusively site visits, near miss and hazard reporting)

- best practice is shared via the Health and Safety forum with zero tolerance of unsafe practices

- HSE leaders appointed within each operating unit

- the accident incidence rate is monitored closely in all operating companies

- HSE committee meets regularly with representatives from all divisions

- regulatory requirements monitored by Company Secretary and divisional MDs/FDs

- the Group treats health, safety and environmental issues as a priority



- quarterly HSE Committee

Counterparty risk


- exposure to counterparty risk of clients, subcontractors, suppliers and financial institutions

- failure of any counterparties could lead to significant financial loss

- a credit risk assessment is performed on clients before a contract is signed

- where possible, credit insurance is taken out on clients or suitable arrangements, such as the use of escrow accounts, reduced credit terms or retentions, are put in place

- PCGs, third party bonds or other appropriate security is required from subcontractors

- thorough pre-qualification process required before appointing all new subcontractors

- subcontractors’ performance is continually monitored and shared across the Group once they have been approved and are working with the Group

- the Group monitors the level of funds held with each financial institution and mitigates the risk by limiting the level of funds held

- contracts are spread between subcontractors to the extent possible to reduce dependence on any one subcontractor


- quarterly Supply Chain & Procurement Committee

Sustainability

Accident Incident Rate (AIR) 2015/16 Target - 1.99

People A great place to work for every1@ISG

Goal Performance measureFocus area

A safe working environment

% graduates / undergraduates

% employees 'proud to work at ISG'

No. training days per employee

% women

% ethnic minorities (UK only)

Happy customers

Sustainable growth

Customer satisfaction /10

Pro�t before tax (£)

% work from key accounts / frameworks

Performance

Benefitting local communities Average Considerate Constructors Scheme score (UK)

No. apprentices (direct or via supply chain)

No. students engaged through curriculum engagement activities

Benefitting global communities £ donated / fundraised / pro bono value

Community

Reducing our waste Overall tonnage of construction and demolition waste per £100,000 revenue

% construction waste diverted from land�ll

Reducing our emissions Scope 1,2,3 greenhouse gas emissions

Protecting our planet No. reportable environmental incidents

% projects by revenue completing environmental certi�cation

Environment

2015/16 Target - 90%

2015/16 Target - 8/10 (or equivalent for framework customers)

2015/16 Target - Above industry average

2015/16 Target - £150,000 for Group charity partner over 2 years

2015/16 Target - Improve reporting to determine accurate baseline

2015/16 Target - 95%

2015/16 Target - 5% reduction (2014/15 baseline) per £1m revenue by 2016/17

2015/16 Target - nil

We launched our 2020 Sustainability Vision in September 2013 which we continue to refine and develop. In 2014/15 we focused on improvements to our reporting to help ensure an accurate baseline. Progress against some of our key performance measures is included in the front of this report. Further detail is available in our Sustainability Report. This revised strategy builds on the previous version and sets out a number of targets for 2015/16.

2020 Sustainability VisionA clear strategy for a successful tomorrow

Further targets will be set after a robust baseline has been determined. Where information is commercially or market sensitive targets have not been disclosed


Accident Incident Rate (AIR) 2015/16 Target - 1.99

People A great place to work for every1@ISG

Goal Performance measureFocus area

A safe working environment

% graduates / undergraduates

% employees 'proud to work at ISG'

No. training days per employee

% women

% ethnic minorities (UK only)

Happy customers

Sustainable growth

Customer satisfaction /10

Pro�t before tax (£)

% work from key accounts / frameworks

Performance

Benefitting local communities Average Considerate Constructors Scheme score (UK)

No. apprentices (direct or via supply chain)

No. students engaged through curriculum engagement activities

Benefitting global communities £ donated / fundraised / pro bono value

Community

Reducing our waste Overall tonnage of construction and demolition waste per £100,000 revenue

% construction waste diverted from land�ll

Reducing our emissions Scope 1,2,3 greenhouse gas emissions

Protecting our planet No. reportable environmental incidents

% projects by revenue completing environmental certi�cation

Environment

2015/16 Target - 90%

2015/16 Target - 8/10 (or equivalent for framework customers)

2015/16 Target - Above industry average

2015/16 Target - £150,000 for Group charity partner over 2 years

2015/16 Target - Improve reporting to determine accurate baseline

2015/16 Target - 95%

2015/16 Target - 5% reduction (2014/15 baseline) per £1m revenue by 2016/17

2015/16 Target - nil

2020 Sustainability VisionA clear strategy for a successful tomorrow

Strategic report: Sustainabiliy report

Managing our greenhouse gas emissionsIn 2014 we voluntarily responded to the CDP climate change programme for the first time and achieved a score of 93B (industry average 57C). CDP is an international, not-for-profit organisation. It works with investors to motivate companies to disclose their environmental impacts and take action. The annual climate change questionnaire is issued on behalf of 822 institutional investors including banks, pension funds, asset managers and insurance companies.

This is the second year of reporting our global greenhouse gas (GHG) emissions in our Annual Report. We have taken the step to report our global emissions in anticipation of any decision by the UK Government to extend mandatory GHG emissions reporting regulations introduced in 2013 for quoted companies to all large companies in 2016.

The table below provides a summary of our emissions.

MethodologyISG plc quantifies and reports emissions according to the internationally-recognised Greenhouse Gas Protocol. In order to continuously improve reporting of our climate impact, all emissions included in the above table have been independently verified by Carbon Credentials Energy Services Ltd and are covered by an assurance report which is available in full on our website. Verification activities were performed in accordance with ISO 14064-3:2006. The reporting period is defined as 1 April 2014 to 31 March 2015.

Reporting Boundary and LimitationsWe consolidate our organisational boundary according to the financial control approach and have adopted a

materiality threshold of 5% - meaning we are confident that our reported emissions are accurate to within 5% of the total figure stated. We have reported all material emission sources using the UK Government Conversion Factors for Company Reporting 2014.

The GHG sources that constitute our operational boundary for the 2014/15 reporting period are:

Scope 1 emissions: Emissions from fuel combustion within owned vehicles

Scope 2 emissions: Indirect GHG emissions from the consumption of purchased electricity, heat or steam. Since our buildings and equipment are held under operating leases and we use the financial control approach to define our organisational boundary, indirect emissions from the use of purchased electricity are categorised as Scope 3 emissions

Scope 3 emissions: Emissions from combustion of gaseous fuels within upstream leased assets or rented buildings/facilities

Emissions from electricity purchased for all upstream leased or rented buildings/ facilities

Emissions from fuel purchased for all leased and hired plant or equipment

Emissions from business travel (fuel purchased for all leased vehicles and grey fleet)

Adopting the financial control approach to consolidating our organisational boundary means that electricity emissions are not categorised as Scope 2, which reflects the nature of our business as a contractor operating many leased assets. For example, electricity emissions from leased offices occupied by our employees are categorised as Scope 3.

Baseline yearDue to an increased reporting scope and a number of business acquisitions which materially change our emissions, 2014/15 is our new baseline year. We will be able to provide comparable emissions data in 2015/16. We have set ourselves a target of reducing emissions by 5% reduction per £m revenue by 2016/17 and 15% by 2019/20.

A Power Cube arrives on site in Warrington. The cube connects to the site’s generator to reduce energy, noise and fuel costs

Scope 1 114.08

Scope 2 0

Scope 3 8,099.40

Total tCO2e 8,213.48

tCO2e per £1m revenue 5.54 * emission factors for international electricity are available

in CO2 only, but included as CO2e within overall figures for ease of interpretation. In some cases, missing data has been estimated using extrapolation of available data from the reporting period.

Tonnes of carbon dioxide equivalent – tCO2e


Partnership with CARE InternationalIn September 2014 we launched our first-ever charity partnership with leading humanitarian organisation CARE International.

CARE helps people prepare for disasters, provides lifesaving assistance when a crisis hits, and helps communities recover after the emergency has passed. CARE has a key focus on construction via its emergency shelter team, and after a disaster is often one of the first agencies on the scene, working with local contractors, sourcing materials and building temporary homes until governments can implement long term plans.

How we have helped CARE

Fundraising: £88,000• 20 volunteers shook buckets in London train stations for

the Disasters Emergency Committee (DEC) Ebola and Nepal earthquake relief appeals

• 6 teams entered the CARE Construction Challenge

• 2 employees ran the London Marathon

• 5 employees took part in Walk in Her Shoes

Across the business our employees have also held football tournaments, golf days, bake-offs, curry-offs, gaming challenges and dress down days.

Pro bono support: £30,000 value• Secondment of Divisional Director Chris Bock to the

Philippines to provide Health & Safety / technical expertise in disaster response and recovery following Super Typhoon Haiyan

• Graphic design support for marketing materials

• Consultation on the development of a new office scheme in London

Total value of support to date: £118,000

Target: £150,000 by September 2016

50 ISG plc Report and Financial Statements 2015

Retail, John Lewis Partnership, Birmingham, UK


Go

vern

ance

Board of Directors 52Directors’ report 53Directors’ remuneration report 58Corporate governance 66Statement of directors’ 70 responsibilities

Board of Directors

The company is controlled through the Board of Directors which comprises three executive directors and six independent non-executive directors.

Directors01. R M Dantzic Non-Executive Chairman

02. S D Lawther Chief Executive Officer

03. J C B Houlton Group Finance Director

04. J R Stevenson Non-Executive

05. G V Aldridge Corporate Development Director

06. R G Whittington Non-Executive

07. R S Mully Non-Executive and Senior Independent Director

08. A H Griffiths Non-Executive

09. A Jobbins Non-Executive

Secretary J S P Cranney

Registered office Aldgate House 33 Aldgate High Street, London EC3N 1AG

Auditor Deloitte LLP 2 New Street, London EC4A 3BZ

Solicitor CMS Cameron McKenna LLP Cannon Place, 78 Cannon Street, London EC4N 6AF

Registrar Capita Asset Services The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU

Nominated advisor and broker Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square, London EC4M 7LT

Bankers The Royal Bank of Scotland plc 280 Bishopsgate, London EC2M 4RB

Lloyds Bank plc 25 Gresham Street, London EC2V 7HN

HSBC Bank plc 8 Canada Square, London E14 5HQ

01

02 03

04 05

08 09

06 07


Directors’ report

The directors present their annual report and the audited financial statements for the year ended 30 June 2015.

Principal activitiesThe principal activity of the company and its subsidiaries is to provide fit out, refurbishment, construction, design and project management services to its clients in the United Kingdom, Continental Europe, the Middle East, South Africa, South America and Asia. The Group has European operations in Ireland, France, Germany, Spain, Switzerland, Italy, Netherlands, Austria, Belgium, Finland, Luxembourg and Russia, Middle East operations in United Arab Emirates and Qatar, and Asian operations in Hong Kong, China, Japan, Singapore, Malaysia, Macau, South Korea, Thailand and Australia. It also operates in Brazil through a partnership with ACE.

Review of businessA review of the Group’s activities during the year, trends and factors likely to affect the business and its future prospects are set out in the Strategic Report comprising the Chief Executive Officer’s Statement on pages 15 to 17, the Business Segment Review on pages 18 to 35 and the Financial Review on pages 36 to 41 together with the Directors’ Report on pages 53 to 57 and the Corporate Governance report on pages 66 to 69. The key performance indicators are set out in the Group financial highlights on page 4, which are incorporated by reference to this report and should be deemed to form part of it.

The Directors’ Report is prepared for the members of the Group and should not be relied upon by any other party for any other purpose. The Directors’ Report (including the Chairman’s Statement, Chief Executive Officer’s Statement, the Business Segment Review, the Financial Review and the Corporate Governance report) contains certain forward-looking information and statements in relation to the Group’s operations, economic performance and financial conditions. These statements are made by the directors in good faith based on the information available to them at the time of their approval of this report and, although they believe that the expectations reflected in such forward-looking statements are reasonable, they should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking statements or information.

Basis for preparation of financial statements on a going concern basisInformation on the business environment in which the Group operates, including the factors that are likely to impact the future prospects of the Group, are included in the Chief Executive Officer’s Statement on pages 15 to 17. The principal risks and uncertainties that the Group faces are set out in the report on pages 42 to 45. The financial position of the Group, its cash flows, liquidity position and debt facilities are described in the Financial Review on pages 36 to 41. In addition, Notes 3 and 26 to the consolidated financial statements set out the Group’s objectives, policies and processes for managing its capital, financial risks, financial instruments and hedging activities and its exposure to credit risk and liquidity risk.

The directors have prepared cash flow forecasts for the Group for a period in excess of twelve months from the date of approval of these consolidated financial statements. These forecasts are based on the Group’s existing order book and workload together with assumptions in respect of new business and reflect an assessment of current and future market conditions and risks and uncertainties in the business, the successful implementation of the UK Construction recovery plan, their impact on the Group’s trading performance and the actions taken by management in response to current market conditions. These actions have included the equity fund raising completed in March 2015 which raised net proceeds of £16m and helped strengthen the Group’s equity capital base and provide additional resources following the trading update announced on 2 February 2015. The forecasts completed on this basis demonstrate that the Group will be able to operate within the current committed debt facilities and show continued compliance with the financial covenants. In addition, management has considered various mitigating actions that could be taken in the event that future market conditions deteriorate beyond their current assessment. Such measures include further improvements in working capital within management’s control, further reductions in costs and capital expenditure and use of the Group’s undrawn credit facilities.

On the basis of the exercise described above, the directors have a reasonable expectation that the Group and company have adequate resources to continue operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements of the Group and the company.

DividendsThe Board did not pay an interim dividend during the year (2014: 4.54p). The directors propose the payment of a final dividend of 5.00p per share (2014: 4.91p) to shareholders on the register on 23 October 2015, giving a total dividend for the year of 5.00p per share (2014: 9.45p). The ex-dividend date will be 22 October 2015. The closing date for submitting Scrip Mandate Forms is 10 November 2015.

Share capitalDetails are set out in Note 30 to the accounts.

Directors R M Dantzic (Non-Executive Chairman)A H Griffiths (Non-Executive) (appointed 5 January 2015)A Jobbins (Non-Executive) (appointed 26 March 2015)R S Mully (Non-Executive and Senior Independent Director) J R Stevenson (Non-Executive)R G Whittington (Non-Executive)S D Lawther (Chief Executive Officer)J C B Houlton (Group Finance Director)G V Aldridge (Corporate Development Director)

In accordance with the Articles of Association, J C B Houlton and R S Mully will retire by rotation at the Annual General Meeting. R M Dantzic, who has been a director of the company for more than nine years, will also retire. A H Griffiths and A Jobbins, having been appointed since the last Annual General Meeting, will also retire in accordance with the Articles of Association. All five directors, being eligible, offer themselves for re-election at the Annual General Meeting. Subject to his re-election, R M Dantzic will continue as Non-Executive Chairman of the company.

Directors’ interestsThe directors at the date of this report and at year end, except where indicated, and their interests (including those of their spouses and children) in the shares of the company, all of which were beneficial, are set out below:

Ordinary shares30 June 2015

Number30 June 2014

Number

G V Aldridge 84,450 60,545R M Dantzic 169,264 157,500A H Griffiths 11,764 N/AJ C B Houlton 133,273 97,319A Jobbins 0 N/AS D Lawther 227,769 196,251R S Mully 60,000 30,000J R Stevenson 57,434 45,670R G Whittington 44,552 38,670

There have been no changes in directors’ interests stated above between the year end and 8 September 2015.

Directors’ indemnitiesThe company has made qualifying third party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the date of this report.

Substantial shareholdersApart from the shareholdings of those parties listed below, the company has not been notified of any shareholdings which are three per cent or more of the total issued ordinary shares of the company.

No. of Ordinary Shares % Held

Cathexis Capital 12,331,570 25.07Octopus Investments 4,432,378 9.01River and Mercantile Asset Management 2,847,732 5.79Liontrust Asset Management 2,187,998 4.45Investec Wealth & Investment 1,879,983 3.82Investec Asset Management 1,815,249 3.69JPMorgan Asset Management 1,688,013 3.43

Per the share register on 17 August 2015

Directors’ report (continued)


Acquisition of the company’s own sharesAt the Annual General Meeting held on 5 December 2014, the shareholders authorised the company to make one or more market purchases of ordinary shares of 1p each in the capital of the company during the year. The company did not exercise this right during the year. The Interior Services Group Employee Share Trust (the Trust) is a trust established to hold shares to satisfy entitlements of employees to receive shares in the company pursuant to the company’s share schemes. During the year the Trust transferred 120,319 shares of 1p each in the capital of the company to employees pursuant to the company’s share schemes. During the year the Trust acquired a total of 17,062 shares of 1p each in the capital of the company. At the year end the Trust held a total of 662,743 (2014: 766,000) ordinary shares of 1p each in the capital of the company, representing 1.35% (2014: 1.96%) of the company’s called-up ordinary share capital. The Trust has, at the recommendation of the Board, waived its right to receive dividends.

Political DonationsDuring the year the company made no political donations (2014: £nil).

Employment policiesISG is an organisation with a culture of high performance based on a clear vision and a strong set of core values. Our employees’ achievements are recognised through awards aligned to those core values. The development of the Group’s employees is underpinned by a Performance Development Review process. This provides structured feedback aimed at continuous improvement and generates personal development plans in discussion between the employee and the manager. During the year Investors in People assessed ISG and the successful renewal of our accreditation put ISG in the top 20% of accredited companies.

Employee engagement is at the heart of everyday life across the Group. Our intranet, Horizon, displays the latest news and information for employees everywhere across the Group. It is the hub for the onboarding process containing the HR portal which houses information on policies, well-being, benefits and development. Horizon showcases our global examples of best practice, highlighting projects across the Group and the people making the difference. Horizon also displays business updates through latest video material and enables employees to track business commentary through our share price tracker or live twitter feed.

ISG provides a wide range of employee benefits including retirement planning, Employee Assistance Programmes, insurances and discount schemes. All UK employees who have completed six months service with a Group company are invited to join the company’s Savings-Related Share Option Scheme on an annual basis and thereby share in the success of the Group. The Group also operates a Buy As You Earn Scheme. Through our regular Engagement Surveys our employees tell us that ISG is a great place to work and they suggest ideas to help with continuous improvement.

There are numerous opportunities for our employees to take part in community based charity programmes alongside our projects. We provide matched support to individuals who undertake their own charity initiatives. Some employees opt to make regular donations through Payroll Giving. Across the business we are proud to work with our global charity partner, CARE International, including presenting the opportunity for employees to become CARE ambassadors.

Our employees have the opportunity to be involved in our community initiatives to encourage young people to be interested in the Construction industry. We regularly work with local schools to show people that there are exciting job opportunities in our modern high technology industry.

ISG is committed to equality and diversity in all of its business activities. Our Equality and Diversity policy applies to all. ISG is committed to engaging, promoting and training employees on the basis of their capabilities, qualifications and experience without discrimination. Over 24% of our employees are women compared with the construction industry average of 13%. Employees from black and minority ethnic (BME) background made up 5.5% of the workforce compared to an industry average of 5%.

The Academy at ISG provides comprehensive training and development. During the financial year approximately 6,000 training days were delivered using high quality and experienced trainers in long-term partnerships with the Academy. The management and leadership programmes at senior, middle and first line manager levels also continue to be rolled out in a number of different countries, with the material tailored to the specific cultural and operating context. The graduate development programme provides an industry-leading experience for a new generation of managers.

Hiring new talent is very important to us and is essential for the growth of our business, which is why ISG is committed to attracting the best. Candidates can apply directly via the website or through our recruitment channels such as [email protected]. Our induction programmes ensure a smooth transition and development focussed on technical and leadership capabilities.

Directors’ report (continued)

Employment policies (continued)ISG has a flexible graduate scheme which is tailored to develop each graduate to the level of Assistant Manager within an 18 month to two year period. We offer real on site experience which builds on the theory learnt at university. Our industrial placement year scheme provides students with practical, structured and supported experience before completing their final year studies and returning as part of our graduate scheme.

The Academy supports employees seeking Chartered status with one of the main industry professional bodies and a new Structured Training Agreement has been established with the Institution of Civil Engineers to underpin the professional development of the structural engineers in the business, and to complement our formal arrangements with the Chartered Institute of Building, the Royal Institution of Chartered Surveyors and the Chartered Institution of Building Services Engineers.

Health & safetyThe Board considers health & safety a key priority and has continued to maintain its focus on this throughout the year. It is essential that we take all reasonable measures to conduct our business to ensure the health, safety and welfare of all our employees and all other persons who may be affected by our activities. This includes members of the public, clients, designers and subcontractors that we work with. In the UK we support this with our certification to OHSAS 18001:2007 Occupational Health & Safety Management System and our dedicated teams of health & safety professionals achieving industry leading safety performance. In line with ISG’s global value ‘Acting Responsibly and Safely’ this year we have reduced our overall accidents by 16%.

Our commitment to health & safety is demonstrated by our Accident Incident Rate (calculated on the number of reportable accidents per 1,000 employees) which has continued to fall and is now 1.71 (2014: 2.11) (the industry average for the period April 2014 to March 2015 was 5.23). This figure includes our complete global safety operations and we continue to endeavour to ensure that the same high consistency of health & safety is applied by our overseas operations irrespective of the country standards.

Within the UK our ‘Target Zero Initiative’ builds on our commitment to provide a positive culture and health & safety performance by driving to achieve zero accidents or incidents within the business. This is linked with a behavioural change programme with worker involvement.

One of the best ways to raise standards is to recognise and reward those that lead the field and to encourage others to follow. That is why every year The Royal Society for the Prevention of Accidents (RoSPA) and the British Safety Council (BSC), two of the world’s leading health & safety organisations, invite companies of all sizes from the full spectrum of work activities and from all over the world to enter the RoSPA and BSC safety awards. This year, as a group, we gained five President’s awards which are given for over ten consecutive gold awards, seven gold medals (given for achieving 5-9 consecutive gold awards), 26 Gold awards and three silver awards from RoSPA. The British Safety Council (BSC) awarded ISG a total of eight International Safety Awards of which two were with merit for particular outstanding health & safety on two major projects. During the year the ISG Cardiff Business School team won the Health & Safety Award at the Constructing Excellence Awards for Wales.

All projects within ISG’s UK Construction business are equipped with the latest fully-automatic defibrillators to help prevent deaths from cardiac arrest. Our London businesses are registered with the London Ambulance ‘Shockingly Easy’ scheme which aims to build a network of publicly-available defibrillators around the capital helping us fulfil our commitment to the community.

The Considerate Constructors Scheme (CCS) is the national initiative set up by the construction industry in the UK to improve its image. ISG was a founder member of the Scheme and was one of the first Associate Members when membership was introduced in 2003. Membership remains restricted to companies with a proven track record of successful Scheme participation and the ability to make a strong future commitment on securing everyone’s safety, protecting the environment, respecting the community, caring for the workforce and enhancing the appearance of our operational projects.

ISG received 15 Considerate Constructors Scheme National Site Awards for projects completed in 2014, an accolade which recognises the commitment made in improving the image of construction and the part companies have played in working to the very highest levels of consideration.

Disclosure of information to the auditorEach of the persons who is a director at the date of approval of this report confirms that:

(1) so far as the director is aware, there is no relevant audit information of which the company’s auditor is unaware; and (2) the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant

audit information and to establish that the company’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.


AuditorA resolution to re-appoint Deloitte LLP as the Group’s auditor will be proposed at the Annual General Meeting.

Annual General MeetingThe Annual General Meeting of the company will be held at Cannon Place, 78 Cannon Street, London EC4N 6AF on 4 December 2015 at 10.00am. The formal notice convening the Annual General Meeting, together with explanatory notes, can be found in the separate circular accompanying this document and is available on the Company’s website at www.isgplc.com. Shareholders will also find enclosed with this document a form of proxy for use in connection with the Annual General Meeting. Proxy appointments can also be submitted online via the Capita Asset Services share portal, www.capitashareportal.com.

Approved by the Board of directors and signed by order of the Board.

J S P CranneyCompany Secretary8 September 2015

Directors’ remunerationreport

Statement from the Chairman of the Remuneration Committee

Role of the Remuneration CommitteeThe Remuneration Committee makes recommendations to the Board, within existing terms of reference, on remuneration policy and determines, on behalf of the Board, specific remuneration packages for each of the executive directors of the Company. Whilst the Remuneration Committee approves all share awards and share option grants made under the Group’s discretionary share schemes, in recent years it has become increasingly involved in the setting of salaries and bonus targets for the senior management of the Group’s subsidiaries to ensure a greater alignment of incentivisation against strategy across the Group.

During the financial year the Remuneration Committee comprised of the following independent non-executive directors:

J R Stevenson (Chairman)A H Griffiths (joined 1 May 2015)R S Mully R G Whittington (stepped down on 1 May 2015)

Our remuneration policyThe Group’s policy is to provide remuneration arrangements which are designed to attract, motivate and retain directors of the high calibre required to promote the long-term success of the company and to reward the executive directors for enhancing value to shareholders without encouraging inappropriate risk taking.

The Remuneration Committee applies a relatively uncomplicated pay structure which incorporates an appropriate mix of performance related and non-performance related elements. The components of remuneration are:

a) basic salary and benefits;b) performance related discretionary bonuses; andc) performance related share incentives.

Executive directors are also eligible to participate in the all-employee Save As You Earn scheme (SAYE Scheme) and Buy As You Earn scheme (BAYE Scheme) on the same terms as other employees.

Basic salary and benefitsBasic salaries are usually determined by the Remuneration Committee at the beginning of each financial year and when an individual changes position or responsibility. Executive directors receive an annual contribution to their personal pension scheme. The company operates an optional salary waiver arrangement which can result in additional pension contributions being made. Where annual or lifetime allowance limits have been reached, the executive directors receive a cash allowance in lieu of pension contributions. Executive directors are also entitled to receive other benefits, details of which are outlined underneath the table on page 61.

Performance related discretionary bonusesEach year the Remuneration Committee determines the key financial measures for inclusion in the annual bonus that are appropriate to complement strategic priorities for the year ahead. When determining bonus payouts at the year end, the Committee has the discretion, irrespective of performance against the specific measures, to take into account overall Group performance against other non-financial and financial factors in order to ensure that the bonus payouts are a fair reflection of Group performance in the year. If bonuses are due, they are paid in cash in the month of October following completion of the audit for the relevant financial year. Malus and clawback provisions will be applied to future bonuses.

Performance related share and share option incentivesThe Remuneration Committee annually approves the grant of share awards to executive directors under the Performance Share Plan and share options under the Unapproved Company Share Option Plan. In the Remuneration Committee’s opinion any share-based incentives should be linked to the interests of the shareholders. The principal measure of those interests is shareholder return, to which earnings per share (EPS) is the main contributor which can be determined by management performance. Therefore, the Remuneration Committee views a mixture of EPS and Total Shareholder Return (TSR), weighted towards the former, as the optimum balance for share award and share option vesting criteria. Performance is usually measured over a period of at least three years. Malus and clawback provisions are being drawn up and will be applied to future grants of share awards and share options.


Key decisions of the Remuneration Committee in the financial year ended 30 June 2015Basic salaryDetails of the outcome of the recent salary review for executive directors carried out by the Remuneration Committee are summarised in the table below. No salary increases have been awarded for the financial year ending 30 June 2016. For the financial year ended 30 June 2015 J C B Houlton received a higher increase than the other directors following an appraisal of his role within the group including significant increases in its scope and responsibilities.

Director 2015/16 salary 2014/15 salary % increase 2014/15 salary 2013/14 salary % increase

G V Aldridge £235,000 £235,000 0% £235,000 £228,000 3.1%J C B Houlton £335,000 £335,000 0% £335,000 £314,000 6.7%S D Lawther £422,000 £422,000 0% £422,000 £410,000 2.9%

The company’s payments to executive directors in respect of pensions remains unchanged for the financial year ending 30 June 2016 at 15% of salary for J C B Houlton and S D Lawther and 6% of salary for G V Aldridge.

Performance related discretionary bonusesFor the financial year ended 30 June 2015, the maximum bonus potential for G V Aldridge was 55% of salary and for each of J C B Houlton and S D Lawther it was 100% of salary. The bonuses were linked to financial targets ranging between 13% and 43% growth in underlying profit before tax. As the targets were not achieved, no bonuses will be paid in respect of the financial year ended 30 June 2015. The bonus figures for the executive directors for the previous financial year are stated in the ‘Single total figure of remuneration’ table on page 61.

For the financial year ending 30 June 2016 the bonuses will be capped at 100% of salary for J C B Houlton and S D Lawther and at 75% of salary for G V Aldridge. The bonuses will be linked to financial targets which represent stretching performance not only against previous years but also against demanding rates of return on equity. Against the immediately prior financial year, the financial targets would deliver growth in underlying diluted EPS ranging between 126% and 171%. Against the average for the five prior years since 2010-11, the financial targets would deliver growth in underlying diluted EPS ranging between 12% and 34%. The financial targets would also deliver post-tax return on equity during 2015-16 ranging between 16% and 19%. The Committee believes that these targets would place ISG towards the upper end of financial performance relative to its peers. The Committee will also use discretion over non-financial targets in determining the final bonus award.

Performance related share and share option incentivesThe share awards granted to the executive directors under its Performance Share Plan and the share options granted to the executive directors under its Unapproved Company Share Option Plan on 14 October 2011 matured during the financial year ended 30 June 2015. As reported last year, the underlying EPS target was not achieved; 75.64% of the TSR target was achieved therefore the directors received shares under the Performance Share Plan on 14 October 2014 and have the right to exercise the options granted under the Unapproved Company Share Option Plan until 14 October 2021. Details of the shares received on 14 October 2014 can be found in the ‘Performance related share incentives’ table on page 63. Details of the share options which remain exercisable can be found in the ‘Performance related share option incentives’ table on page 62.

The share awards granted to the executive directors under its Performance Share Plan on 10 October 2012 and the share options granted under the Unapproved Company Share Option Plan on 10 October 2012 will mature on 10 October 2015. Neither the EPS target nor the TSR target were achieved therefore these awards and options will lapse on 10 October 2015.

During the year the Remuneration Committee granted awards and options under the Group’s discretionary share schemes to the executive directors, details of which can be found in the tables on pages 62 and 63. In setting the targets the Remuneration Committee increased the underlying EPS target range by approximately 13% on the previous year. As a percentage of salary, the awards and options granted were as set out in the table below.

DirectorValue of share option grant as a

percentage of salary as at 1 July 2014Value of share award as a

percentage of salary as at 1 July 2014

G V Aldridge 95% 35%J C B Houlton 150% 50%S D Lawther 150% 50%

Directors’ remuneration report (continued)

Key decisions of the Remuneration Committee in the financial year ended 30 June 2015 (continued)This year the Remuneration Committee intends to grant share awards only. As no share options will be granted, share awards will be granted at higher levels than last year:

DirectorValue of share award as a

percentage of salary as at 1 July 2015

G V Aldridge 75%J C B Houlton 100%S D Lawther 100%

The awards will be granted following the announcement of the preliminary results in accordance with the rules of each scheme. The targets will be based on TSR (25%) and cumulative underlying EPS (75%) over the three financial years starting from 1 July 2015. One third of the TSR element will vest if the company’s TSR over the period meets the median of the Comparator Group, being the constituent companies of the FTSE SmallCap Index including ISG but excluding Oil & Gas, Basic Materials, Financials (but including Real Estate Investment and Services). The whole of the TSR element will vest if the company’s TSR over the period is in the upper quartile of the Comparator Group. If the company’s TSR over the period lies between these two points, the vesting will be based on a straight line calculation. The underlying EPS element will be based on a target range for cumulative underlying EPS over the three year period between 86.9p (equivalent to 5% annual growth in underlying EPS after achieving top end target EPS in 2015-16) and 95.7p (equivalent to 15% annual growth in underlying EPS after achieving top end target EPS in 2015-16). Against the reported EPS figure for 2014-15, this target range represents a much higher cumulative three-year annual growth rate than the normal 5% to 15% range. Given the significant fall in EPS during 2014-15, the Committee felt that it would be more stretching to set the top end 2015-16 target EPS as the base and apply the normal 5% to 15% annual growth range to the following two years of the award vesting period to 2017-18. The proportion of the award which will vest will increase from nil to 75% on a straight line basis between these amounts. An announcement will be made at the time of grant of the share awards.

The Remuneration Committee encourages the executive directors to build up and retain a significant holding of ISG shares. Based on basic salaries and the share price as at 30 June 2015 G V Aldridge has a shareholding equal to 61% (2014: 81%) of salary, J C B Houlton has a shareholding equal to 67% (2014: 94%) of salary and S D Lawther has a shareholding equal to 92% (2014: 145%) of salary. Further details on directors’ interests can be found in the Directors’ Report on page 54. During the year each director increased his shareholding; the fall in each shareholding as a percentage of salary is attributable to a fall in share price during the year. The Group intends to introduce a requirement for executive directors to build up a shareholding equal in value to 100% of salary within five years of the rule’s introduction or the director’s appointment. A requirement of 150% of salary will apply to the Chief Executive Officer.

The Annual Report on Remuneration will be subject to an advisory vote at the annual general meeting of the company to be held on 4 December 2015.

J R StevensonChairman of the Remuneration Committee8 September 2015


Audited information

The information provided in this section of the Directors’ Remuneration Report up until the ‘Unaudited information’ heading on page 65 is subject to audit.

Single total figure of remunerationThe following table sets out the total remuneration earned by the Board during the financial year ended 30 June 2015:

2015 2014

£’000 Sal

ary/

Fees

1

Ben

efits

2

Bo

nus3

LTIP

4

Pen

sio

n5

Oth

er6

Tota

l

Sal

ary/

Fees

1

Ben

efits

2

Bon

us7

LTIP

8

Pen

sion

5

Oth

er6

Tota

l

Executive directors

G V Aldridge 235 4 - - 14 2 255 203 4 85 42 41 - 375J C B Houlton 335 15 - - 50 - 400 312 15 188 84 49 1 649S D Lawther 422 17 - - 63 - 502 410 17 246 110 62 1 846

Non-executive directors

M J Barnes9 - - - - - - - 19 - - - - - 19R M Dantzic 85 - - - - - 85 75 - - - - - 75A H Griffiths10 21 - - - - - 21 - - - - - - -A Jobbins11 12 - - - - - 12 - - - - - - -R S Mully 44 - - - - - 44 42 - - - - - 42J R Stevenson 44 - - - - - 44 42 - - - - - 42R G Whittington 44 - - - - - 44 42 - - - - - 42

Total 1,242 36 - - 127 2 1,407 1,145 36 519 236 152 2 2,090

Notes to the table1 The salary figures in these columns are given after the deduction of salary waivers which are included in the figures given in the Pension columns. In the financial year ended 30 June

2015 the salary waivers were: G V Aldridge - £nil (2014: £25,181), J C B Houlton - £nil (2014: £2,175) and S D Lawther - £nil (2014: £nil).2 Benefits include, where applicable, car allowance, private medical insurance, income protection and life assurance.3 The bonus figures in this column are the bonuses payable for the financial year ended 30 June 2015. No bonuses are due in respect of the financial year ended 30 June 2015.4 The figures in this column represent the estimated gain arising from share options and share awards granted on 10 October 2012 which will vest on 10 October 2015 using the

average share price for the last quarter of the financial year. As the performance targets applicable to the share options and share awards granted on 10 October 2012 were not achieved, there are no amounts in this column.

5 Pension contributions made by the company in respect of directors are to personal pension schemes or as a cash allowance and represent 15% of salary for J C B Houlton and S D Lawther and 6% of salary for G V Aldridge. Additionally, executive directors are able to waive part of their salary into pension. The figures in the table represent a combination of the employer contributions or cash allowance in lieu of pension where annual or lifetime allowance limits have been reached plus the value of salary waived into pension (including the value of employers’ national insurance saved as a result of the waiver which the company adds to the individual contribution). Following the reduction of the lifetime allowance by HMRC the company ceased making contributions to personal pension schemes in April 2014 and now pays all of the pension entitlement as a cash allowance.

6 The figures in this column represent the value of options (being the number of options multiplied by the IFRS valuation of the grant) granted under the SAYE scheme during the relevant financial year plus the value of any matching shares awarded under the BAYE scheme. During the financial year ended 30 June 2015 G V Aldridge and S D Lawther each received matching shares with a value of £178.06 (2014: £147.98 (each executive director)).

7 The bonus figures in this column are the bonuses paid for the financial year ended 30 June 2014. The bonuses were paid in October 2014.8 The prior year figures in this column have been restated to reflect actual values as at the time of vesting, which took place after the production of last year’s report.9 M J Barnes retired from the Board on 6 December 2013.10 A H Griffiths joined on the Board on 5 January 2015.11 A Jobbins joined the Board on 26 March 2015.

Additional notes to the table- The table above does not include share options exercised during the financial year ended 30 June 2015 by J C B Houlton. On 10 September 2014 J C B Houlton exercised options

granted under the Group’s Approved Company Share Option Plan over 11,472 shares at an exercise price of 261.5p per share.- The table above does not include share options exercised during the financial year ended 30 June 2014 by S D Lawther. On 4 March 2014 S D Lawther exercised options granted

under the Group’s Unapproved Company Share Option Plan over 183,422 shares at an exercise price of 176.5p per share. The option exercise was satisfied by the issuing of 75,761 shares to S D Lawther, representing the value of the gain made on these options based on a market price of 300p per share (being the average mid-market closing price of the company’s shares on the three dealing days before the date that S D Lawther submitted his notice of exercise).

- There were no payments to past directors during the financial year.- There were no payments for loss of office to directors during the financial year.

Performance related share option incentives Below are details of the directors’ discretionary options at the year end and at the date of this report.

Date of grant1 July2014 Awarded Lapsed Exercised Cancelled

30 June2015

Exercise price

(p)

Earliest date from which exercisable

ExpiryDate

G V Aldridge14/04/092 71,475 - - - - 71,475 97 14/04/12 14/04/1916/10/092 63,534 - - - - 63,534 185 16/10/12 16/10/1914/10/113 75,000 - (60,817) - - 14,183 184 14/10/14 14/10/2110/10/124 118,085 - - - - 118,085 141 10/10/15 10/10/2227/09/135 90,817 - - - - 90,817 238½ 27/09/16 27/09/2309/10/146 - 73,679 - - - 73,679 303 09/10/17 09/10/24

J C B Houlton18/09/061 135,000 - - (11,472) - 123,528 261½ 18/09/09 18/09/1614/04/092 238,250 - - - - 238,250 97 14/04/12 14/04/1916/10/092 127,066 - - - - 127,066 185 16/10/12 16/10/1914/10/113 165,000 - (133,798) - - 31,202 184 14/10/14 14/10/2110/10/124 324,468 - - - - 324,468 141 10/10/15 10/10/2227/09/135 197,484 - - - - 197,484 238½ 27/09/16 27/09/2309/10/146 - 165,841 - - - 165,841 303 09/10/17 09/10/24

S D Lawther29/09/051 200,000 - - - - 200,000 223 29/09/08 29/09/1514/04/092 357,375 - - - - 357,375 97 14/04/12 14/04/1916/10/092 158,834 - - - - 158,834 185 16/10/12 16/10/1914/10/113 217,000 - (175,965) - - 41,035 184 14/10/14 14/10/2110/10/124 425,531 - - - - 425,531 141 10/10/15 10/10/2227/09/135 257,861 - - - - 257,861 238½ 27/09/16 27/09/2309/10/146 - 208,911 - - - 208,911 303 09/10/17 09/10/24

Notes to the table1 For the targets relating to the share options granted on this date to be achieved, the percentage increase in underlying EPS over the relevant three year performance period had to be

greater than the increase in the RPI plus 3% per annum over the same period. The targets were achieved.2 For the target relating to the share options granted on these dates to be achieved, the aggregate underlying EPS for the three year performance period had to be in the range of 72p

to 80p. 95.3% of the target was achieved.3 The targets relating to the share options granted on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to

be achieved, aggregate underlying EPS for the three year performance period had to be in the range of 85p to 95p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, had to be between median and the upper quartile. The underlying EPS target was not achieved. 75.64% of the TSR target was achieved. Consequently, a proportion of each share option lapsed on 14 October 2014.

4 The targets relating to the share options granted on this date were split between underlying EPS performance (two thirds) and TSR performance (one third). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 60p to 72p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile. The targets were not achieved. The options will lapse on 10 October 2015.

5 The targets relating to the share options granted on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 66p to 80p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile.

6 The targets relating to the share options granted on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 74.5p to 89.9p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile.

Additional notes to the table- Each of the exercise prices given in the table is the average of the closing mid-market prices of ordinary shares of 1 pence each in the company as quoted on the AIM market of the

London Stock Exchange plc on each of the three business days immediately preceding the date of the grant.- The market price of the shares at 30 June 2015 was 169.5p and the range during the year was 143.5p to 353.5p.



Performance related share incentivesBelow are details of the directors’ share awards at the year end and at the date of this report.

Date of award1 July 2014 Awarded Lapsed Vested Cancelled

30 June 2015

Market price of shares

(p) Date of vesting

G V Aldridge 14/10/111 45,244 - (36,688) (8,556) - 0 184 October 201410/10/122 49,645 - - - - 49,645 141 October 201527/09/133 33,459 - - - - 33,459 238½ September 201609/10/144 - 27,145 - - - 27,145 303 October 2017

J C B Houlton14/10/111 82,880 - (67,207) (15,673) - 0 184 October 201410/10/122 99,290 - - - - 99,290 141 October 201527/09/133 65,828 - - - - 65,828 238½ September 201609/10/144 - 55,280 - - - 55,280 303 October 2017

S D Lawther14/10/111 108,694 - (88,140) (20,554) - 0 184 October 201410/10/122 127,659 - - - - 127,659 141 October 201527/09/133 85,953 - - - - 85,953 238½ September 201609/10/144 - 69,636 - - - 69,636 303 October 2017

Notes to the table1 The targets relating to the share awards allocated on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to

be achieved, aggregate underlying EPS for the three year performance period had to be in the range of 85p to 95p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, had to be between median and the upper quartile. The underlying EPS target was not achieved. 75.64% of the TSR target was achieved. Therefore, a proportion of each award vested on 14 October 2014; the remainder lapsed.

2 The targets relating to the share awards allocated on this date were split between underlying EPS performance (two thirds) and TSR performance (one third). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 60p to 72p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile. The targets were not achieved. The awards will lapse on 10 October 2015.

3 The targets relating to the share awards allocated on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 66p to 80p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile.

4 The targets relating to the share awards allocated on this date were split between underlying EPS performance (75%) and TSR performance (25%). For the underlying EPS target to be achieved, aggregate underlying EPS for the three year performance period must be in the range of 74.5p to 89.9p. For the TSR target to be achieved, the ranking of the company’s TSR within a specified comparator group, must be between median and the upper quartile.

Additional notes to the table- Each of the market prices of the shares given in the table is the average of the closing mid-market prices of ordinary shares of 1 pence each in the company as quoted on the AIM

market of the London Stock Exchange plc on each of the three business days immediately preceding the date of the allocation of the award.

SAYE SchemeBelow are details of the directors’ SAYE options at the year end and at the date of this report.

Date of grant1 July2014 Awarded Lapsed Exercised Cancelled

30 June2015

Exercise price

(p)

Savingscontract

start date

Earliest date from which exercisable

ExpiryDate

G V Aldridge05/11/12 6,428 - - - - 6,428 140 01/02/13 01/02/16 01/08/1604/11/14 - 2,990 - - - 2,990 301 01/02/15 01/02/18 01/08/18

J C B Houlton 05/11/12 6,428 - - - - 6,428 140 01/02/13 01/02/16 01/08/1608/05/14 2,970 - - - - 2,970 303 01/08/14 01/08/17 01/02/18

S D Lawther05/11/12 6,428 - - - - 6,428 140 01/02/13 01/02/16 01/08/1608/05/14 2,970 - - - - 2,970 303 01/08/14 01/08/17 01/02/18

Notes to the table- Each of the exercise prices given in the table is the average of the closing mid-market prices of ordinary shares of 1 pence each in the company as quoted on the AIM market of the

London Stock Exchange plc on each of the three business days immediately preceding the date of the grant.


BAYE SchemeParticipants in the BAYE scheme are entitled to receive matching shares. The matching shares are subject to forfeiture rules. The executive directors are members of the BAYE Scheme.

Director1 July 2014

Number of shares

purchased

Number of matching shares

awarded

Number of shares forfeited

30 June 2015

Date of share purchase

Price per share (p)

G V Aldridge 545 586 58 - 1,189 7 October 2014 307J C B Houlton 5,513 - - - 5,513 - -S D Lawther 4,901 586 58 - 5,545 7 October 2014 307

Notes to the table- During the financial year ended 30 June 2014, each executive director purchased 496 shares and each received 49 matching shares. The price per share was 302p.- Under the scheme rules shares are purchased using pre-tax salary.- Under the scheme rules shares can be withdrawn from the scheme free of income tax 5 years after the date of purchase.

Performance graphThe following graph shows the company’s performance, measured by total shareholder return, compared with the performance of the AIM share index also measured by total shareholder return. The AIM share index has been selected for this comparison as the company is a constituent of that index.

Total shareholder return (TSR)

June 10 June 11 June 12 June 13 June 14 June 15

£50

£0

£100

£150

£200

£250

TSR

ISG AIM

Data sourced from Google �nance and AIM websites

The graph shows the theoretical growth in the value of an initial £100 hypothetical shareholding over the five year period, assuming that dividends are re-invested to purchase additional units of equity at the closing price applicable on the ex-dividend date. Historical data is based on the constituent companies at each given date.

Non-executive directorsThe remuneration of the non-executive directors is determined by the Board within the limits set out in the Articles of Association.

Director 2015/16 fee 2014/15 fee % increase 2014/15 fee 2013/14 fee % increase

Non-Executive Chairman £85,000 £85,000 0% £85,000 £75,000 13.3%Non-Executive Directors £43,500 £43,500 0% £43,500 £42,500 2.4%


The fees have not been increased for the financial year ending 30 June 2016. Prior to the increases in July 2013, the fees had not been increased since July 2008. Last year the Board agreed that fees should be reviewed on an annual basis rather than triennial basis. The fee for the non-executive directors was increased by slightly less than the Group-wide salary settlement for the financial year ended 30 June 2015. Last year’s more significant rise for the Non-Executive Chairman followed a review of industry practice which revealed that the company’s fee is now below almost all other comparable companies by sector and size. The non-executive directors (including the Non-Executive Chairman) may be paid for professional services provided to the Group, but cannot participate in the company’s share option schemes. They do not have service contracts and are not eligible to join in any pension scheme operated by the Group. The letters of appointment for A H Griffiths, A Jobbins, R S Mully, J R Stevenson and R G Whittington are for a one-year term and subject to prior termination on notice of three months either way, while the letter of appointment for R M Dantzic is for a one-year term with twelve months’ notice.

Unaudited information

The information provided in this section of the Directors’ Remuneration Report is not subject to audit.

Shareholder voting on the Directors’ Remuneration Report for the financial year ended 30 June 2014The shareholders voted in favour of the resolution to approve the directors’ report to the shareholders on directors’ remuneration at the AGM held on 5 December 2014. The company received 17,901,639 proxy votes, 99.81% of which were in favour of the resolution, 0.06% against and 0.13% withheld.

Directors’ contractsNone of the service contracts of the executive directors includes provision for specific payment in the event of early termination, nor do they provide for extended notice periods in the event of a change in control. It is not the Remuneration Committee’s intention to introduce such provisions. If any existing contract of employment is breached by the company in the event of termination, the company would be liable to pay, as damages, an amount approximating to the net loss of salary and contractual benefits for the unexpired notice period. The Remuneration Committee will seek to ensure that the director fulfils his obligation to mitigate his losses and will also give consideration to phased payments where appropriate.

Details of the service contracts of the executive directors are shown in the table below.

Director Date of contractNotice period from company

(months)

G V Aldridge 11 January 2008 12J C B Houlton 1 August 2006 12S D Lawther 18 June 2001 12

With the approval of the Remuneration Committee, executive directors are entitled, under their service agreements, to perform duties outside the Group and to receive fees for those duties. Other than G V Aldridge, none of the executive directors received fees for duties performed outside the Group during the year. G V Aldridge earned £25,000 from his roles as non-executive chairman of Broker Profile, an investor relations consultancy, and, until April 2015, as non-executive chairman of Core Capital V VCT plc, a specialist private equity investor.

Approved by the Board of directors and signed by order of the Board.

J S P CranneyCompany Secretary8 September 2015

The UK Corporate Governance Code (September 2012) (the Code), as appended to the Listing Rules, sets out Principles of Good Corporate Governance and Code Provisions which are applicable to listed companies incorporated in the United Kingdom. As an AIM-quoted company, ISG plc is not subject to the UK Corporate Governance Code however the Board recognises the value of applying the principles of the code where appropriate and proportionate and has endeavoured to do so where practicable.

Narrative statement

The Code establishes 18 Principles of Good Governance which are split into five areas. Disclosures are provided in respect of those provisions which the Board has chosen to apply below, in the Directors’ Report on pages 53 to 57 and in the Directors’ Remuneration Report on pages 58 to 65.

DirectorsThe company is controlled through the Board of directors which comprises three executive directors and six independent non-executive directors. There is a separation of the roles and responsibilities of the Non-Executive Chairman and the Chief Executive Officer. The Non-Executive Chairman leads the Board and ensures that the directors have sufficient relevant information to enable them to make informed decisions on the strategy of the business and to assess the performance of the various business units. The Chief Executive Officer’s responsibilities focus on running the Group’s businesses and implementing Group strategy. The Board has considered and confirmed the independence of its non-executive directors. All directors are able to take independent professional advice in furtherance of their duties if necessary. They also have access to the advice and services of the Company Secretary.

During the year there were 21 Board meetings, three Audit Committee meetings and three Remuneration Committee meetings. The board meetings included meetings specifically to consider the trading update and the share placing announced in February and March of this year. Attendance by the directors was as follows:

BoardAudit Committee

Remuneration Committee

G V Aldridge 20 N/A N/AR M Dantzic 20 N/A N/AA H Griffiths1 15 N/A 1J C B Houlton 21 N/A N/AA Jobbins2 4 N/A N/AS D Lawther 21 N/A N/AJ R Stevenson3 20 3 3R S Mully 18 3 3R G Whittington4 18 3 2

1 A H Griffiths joined the Board on 5 January 2015 and joined the Remuneration Committee on 1 May 2015.2 A Jobbins joined the Board on 26 March 2015 and joined the Audit Committee on 1 May 2015.3 J R Stevenson stepped down from the Audit Committee on 1 May 2015.4 R G Whittington stepped down from the Remuneration Committee on 1 May 2015.

The Chairman also regularly meets with the non-executive directors without the executive directors present to discuss the performance of the Group and any other matters as they arise.

The Board has a formal schedule of matters reserved to it which includes:

• approval of the Group’s long-term objectives and commercial strategy• approval of annual budgets and business plans• approval of contracts exceeding prescribed thresholds• approval of acquisitions and disposals• approval of all capital expenditure projects not covered by budget• approval of Group policies

It is responsible for overall Group strategy, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. It monitors the exposure to key business risks and reviews the strategic direction of individual trading subsidiaries, their codes of conduct, their annual budgets, their progress towards achievement of those budgets and their capital expenditure programmes. The Board has regular presentations from the divisional managing

Corporate governance


directors which cover performance, strategy, market conditions, expectations for the future and any key issues relevant at the time. The Board also considers environmental and employee issues and key appointments. It ensures that all directors receive appropriate training on appointment and then subsequently as appropriate. All directors submit themselves for re-election at least once every three years.

The Board has two committees, the Audit Committee and the Remuneration Committee. Details of the Remuneration Committee can be found in the Directors’ Remuneration Report on pages 58 to 65. As at the financial year end the members of the Audit Committee were R G Whittington (Chairman), A Jobbins and R S Mully. R G Whittington is a qualified accountant and former senior partner at KPMG. He is considered to be the non-executive member of the Board with the most recent experience necessary for the role of Chairman of the Audit Committee.

During the year, the Audit Committee of the Board:

a) meets regularly with the external auditor and executive directors attending by invitation to review the financial statements, the suitability of the accounting policies and financial reporting of the company, its internal management and financial controls and matters arising from the external auditor’s work with specific attention in respect of contract judgements and goodwill impairment reviews;

b) approves the nature and extent of non-audit work undertaken by the external auditor; andc) makes recommendations to the Board on these matters and in relation to the re-appointment of auditor to be

recommended to the shareholders at the Annual General Meeting.

In forming their opinion of the independence and objectivity of the external auditor, the Audit Committee takes into account the safeguards operating within the external auditor and ensures that the level of audit fee is sufficient to enable them to fulfil their obligations in accordance with the audit Letter of Engagement. Fees for non-audit work are reviewed by the Group Finance Director and then passed to the Audit Committee for approval.

The Chairman of the Audit Committee makes a report to the Board following each Committee meeting and the Board receives the minutes of all Audit Committee meetings.

The Audit Committee’s terms of reference are available from the Company Secretary and will be available for inspection at the Annual General Meeting.

An evaluation of the Board, the Audit Committee, the Remuneration Committee and the individual directors was conducted post year end by the Chairman and the Company Secretary (and by the Senior Independent Director and the Company Secretary in the case of the Chairman’s evaluation) by means of questionnaires followed by meetings on a one to one basis to review the results. The evaluation evidenced a common understanding amongst the directors of the difficulties of the past financial year and of the areas which the Board needs to focus on in the next financial period and beyond. The Board has a healthy culture that encourages candid discussion and rigorous decision-making and it has proven itself to be sufficiently prepared to handle unexpected events as they arise.

Directors’ remunerationThe Remuneration Committee measures the performance of the executive directors and key members of senior management as a prelude to recommending their annual remuneration, bonus awards and awards of shares and share options to the Board for final determination. The Directors’ Remuneration Report is set out on pages 58 to 65. The Remuneration Committee’s terms of reference are available from the Company Secretary and will be available for inspection at the Annual General Meeting.

Relations with shareholdersThe Board encourages two way communication with both its institutional and private investors and responds quickly to all queries received. The executive directors have met with analysts and institutional shareholders on a regular basis in the year ended 30 June 2015. Non-executive directors are fully briefed by the executive directors on the views of major shareholders about the company and are available for meetings with major shareholders. All shareholders have at least twenty working days’ notice of the Annual General Meeting at which all directors and Committee chairs are introduced and available for questions.

Bribery ActOn 8 April 2010, the UK Bribery Act (the Act) was passed into law in the UK with the new legislation coming in to force on 1 July 2011. ISG has a strict zero tolerance policy towards bribery and corruption by anyone at any level within its business or otherwise. ISG’s policy is that it is better not to do business at all than to risk doing corrupt business. To ensure compliance with the Act the Board established an anti-bribery training and assessment programme. The anti-bribery training and assessment programme is mandatory for those employees selected to undertake it. All agencies, contractors, associates or other business partners connected to ISG are obliged to maintain their own anti-bribery polices and to adhere to the Act.

Corporate governance(continued)

Accountability and auditFinancial reportingA review of the performance and financial position of the Group is included in the Financial Review. The Board uses this, together with the Chairman’s Statement, the Chief Executive Officer’s Statement, the Business Segment Review and the Directors’ Report on pages 53 to 57, to present a balanced and understandable assessment of the company’s position and prospects with particular consideration given to contract judgements and the carrying value of goodwill. The statement of directors’ responsibilities for the financial statements is described on page 70.

Internal controlAn ongoing process for identifying, evaluating and managing the significant risks faced by the Group has been established and that process is regularly reviewed by the Board and accords with the revised version of Internal Control Guidance for Directors on the UK Corporate Governance Code produced by the Turnbull working party. Following the latest review, the significant risks faced by the Group now total 33, of which six are considered principal risks as described on pages 42 to 45. Steps continue to be taken to embed internal control and risk management further into the operations of the business and deal with areas of improvement coming to management and Board attention including the work of the Group Risk Director who reports directly to the Group Chief Executive Officer. As part of the internal control and risk management processes, a Corporate Governance Manual setting out the principal business policies and procedures operating within the Group has been produced previously and adopted by all businesses across the Group.

The reporting systems include formal consideration of all significant business risks at the monthly Board meetings and are still subject to continuous review by the Board throughout the year. The monthly management information includes key risk indicators with the emphasis on early warning systems. Risk management principles are embedded within all significant projects.

The directors are responsible for the system of internal control and reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable but not absolute assurance against material misstatement or loss.

The key risk management activities are described under the following headings:

• Strategic control The Board reviews the Group’s strategic plans each year and monitors progress throughout the year. On a regular basis,

the Group’s significant risks are updated and appropriate control strategies and accountabilities are agreed.

• Allocation of responsibilities and control environment The Board has set clear terms of reference for each of its committees and the Group has an organisational structure with

clear reporting lines for financial results, risk exposure and control assessment, and defined and documented delegated authorities are in place which ensure, for example, that project approval is obtained at the appropriate levels of management.

• Quality and integrity of personnel The Group is committed to competence and integrity of management and staff at all levels, through its values statement,

comprehensive recruitment, training and appraisal programmes.

• Role of the executive directors Day-to-day management of the Group’s activities is delegated by the Board to the executive directors. They monitor

the effectiveness of the operating units in meeting Group objectives and controlling major business risks and make recommendations to the Board.

• Risk management reporting and Board review The Board has overall responsibility for identifying, evaluating and managing major business risks facing the Group. It

regularly reviews all operating unit assessments of business risk exposure and control, including compliance assessments, and determines appropriate action, taking into account the recommendations of the executive directors.

• Operating unit controls Key controls over major business risks include reviews against performance indicators and exception reporting. Each

operating unit’s senior management is responsible for identifying, evaluating and managing major business risks. They make regular assessments of their exposure to major business risks and the extent to which these risks are controlled, which are reported to the Board and the Group Risk Director on a monthly basis.


• Financial control The Group has a comprehensive system for reporting financial results to the Board. The performance of each business is

reviewed monthly by local and Group management. Each operating unit prepares monthly results in a common, consistent and comparable format with a comparison against budget or forecast. The Board reviews these for the Group as a whole and determines appropriate action. Certain members of the Board sit on the boards of the main operating companies. Following the trading announcement in February 2015 and the subsequent equity fund raising in March 2015, additional resources have been allocated to the short and medium term cash forecasting processes to enhance focus in this area, to ensure that they are robust and to make certain that the individual business units operate processes that challenge and validate key assumptions.

• Internal audit While there is no dedicated internal audit function, internal audit resources are provided by the central functions which are

considered sufficient by the Group. They support the risk management activities and help to identify key risk areas across the Group. Any significant issues are reported to the Board via monthly reports. In particular, the Group Risk Director’s and the Group Commercial Director’s roles include the implementation of, and the monitoring of adherence to, the Group’s policies on key commercial issues, assisting in the validation of key commercial judgements taken, and ensuring that relevant training is provided for all key commercial staff as appropriate.

• Controls over central functions A number of the Group’s key functions, including Commercial, Taxation, HR, Health and Safety, IT and Finance, are

monitored centrally. Each function is required to report to the Board on a regular basis.

• IT systems The Group has established controls and procedures over the security of data held on computer systems and suitable

disaster recovery arrangements are in place.

An ongoing review of the effectiveness of the system of internal control for the year ended 30 June 2015 has been maintained. There have been no material developments since the year end.

Statement of directors’ responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing the parent company financial statements, the directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and accounting estimates that are reasonable and prudent;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and

explained in the financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will

continue in business.

In preparing the group financial statements, International Accounting Standard 1 requires that directors:• properly select and apply accounting policies;• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and

understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to

understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

• make an assessment of the company’s ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement We confirm that to the best of our knowledge:• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair

view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board.

S D Lawther J C B HoultonDirector Director 8 September 2015 8 September 2015


Office, The Prospex, Singapore

Hospitality & Leisure, Exhibition Centre, Liverpool, UK


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Independent auditor’s report 74Consolidated income statement 75Consolidated statement of 76comprehensive income Consolidated balance sheet 77Consolidated statement of 78changes in equity Consolidated cash flow 79statement Notes to the consolidated 80financial statements Independent auditor’s report 124(Company) Company balance sheet 125Notes to the company financial 126statements

Independent auditor’s report to the members of ISG plc

We have audited the group financial statements of ISG plc for the year ended 30 June 2015 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement of Changes in Equity and the related notes 1 to 38. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the group financial statements:• give a true and fair view of the state of the Group’s affairs as at 30 June 2015 and of its loss for the year then ended;• have been properly prepared in accordance with IFRSs as adopted by the European Union; and• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

Other mattersWe have reported separately on the parent company financial statements of ISG plc for the year ended 30 June 2015 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Claire Faulkner (Senior statutory auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory AuditorLondon United Kingdom8 September 2015


2015 20141

Underlying items

Non- underlying

items TotalUnderlying

items

Non- underlying

items TotalNotes £’000 £’000 £’000 £’000 £’000 £’000

Continuing operationsRevenue 5 1,629,352 19,288 1,648,640 1,455,225 27,664 1,482,889Cost of sales (1,554,507) (33,318) (1,587,825) (1,379,144) (30,156) (1,409,300)Gross profit/(loss) 74,845 (14,030) 60,815 76,081 (2,492) 73,589Share of profits of associates and joint ventures 8 22 - 22 59 - 59Amortisation of intangible assets 17 - (2,002) (2,002) - (1,988) (1,988)Administrative expenses 6 (66,370) (3,482) (69,852) (60,195) (4,017) (64,212)Operating profit/(loss) 5 8,497 (19,514) (11,017) 15,945 (8,497) 7,448Finance income 10 74 - 74 122 - 122Finance costs 11 (1,562) (397) (1,959) (816) - (816)Profit/(loss) before tax 5 7,009 (19,911) (12,902) 15,251 (8,497) 6,754Taxation 12 (2,284) 1,508 (776) (3,532) 1,966 (1,566)Profit/(loss) for the year from continuing operations 4,725 (18,403) (13,678) 11,719 (6,531) 5,188

Discontinued operationsLoss for the year from discontinued operations 13 - (14,102) (14,102) - (2,803) (2,803)Profit/(loss) for the year 4,725 (32,505) (27,780) 11,719 (9,334) 2,385

Attributable to:Owners of the company 4,336 (32,303) (27,967) 11,671 (9,305) 2,366Non-controlling interests 35 389 (202) 187 48 (29) 19

4,725 (32,505) (27,780) 11,719 (9,334) 2,385Basic earnings per share1

Continuing operations 15 10.42p (33.20p) 30.55p 13.53pDiscontinued operations 15 - (33.79p) - (7.34p)

15 10.42p (66.99p) 30.55p 6.19pDiluted earnings per share1

Continuing operations 15 10.17p (33.20p) 29.53p 13.08pDiscontinued operations 15 - (33.79p) - (7.34p)

15 10.17p (66.99p) 29.53p 5.74p

1 Restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Notes 5 and 7)

Non-underlying items include those which the Group believes should be separately identified on the face of the income statement to assist in understanding the underlying financial performance achieved by the Group. Such items will affect the absolute amount of the results for the period and the trend of results. These include the trading results of businesses to be discontinued, gains and losses on the disposal of businesses and investments, costs of restructuring and reorganisation of existing businesses, acquisition costs, impairment and amortisation charges on intangible assets arising on business combinations (“amortisation of acquired intangible assets”) and impairment of goodwill as well as the tax effect of the items above, all of which are included in continuing operations. Non-underlying items also includes discontinued operations. Further information on these items is shown in Notes 5 and 13.

Consolidated incomestatementYear ended 30 June 2015

2015 2014Notes £’000 £’000

(Loss)/profit for the year (27,780) 2,385

Items that may be reclassified subsequently to profit or loss:Exchange differences on translation of foreign operations (3,053) (4,103)Total comprehensive loss for the year (30,833) (1,718)

Attributable to:Owners of the company (31,004) (1,747)Non-controlling interests 35 171 29

(30,833) (1,718)

Items in the statement above are disclosed net of tax. The tax relating to each component of other comprehensive income is disclosed in Note 12.

Consolidated statementof comprehensive incomeYear ended 30 June 2015


2015 2014Notes £’000 £’000

Non-current assetsGoodwill 16 85,068 82,797Other intangible assets 17 3,160 3,755Property, plant and equipment 18 9,220 7,248Investment in associates and joint ventures 19,20 23 1,884Deferred tax assets 29 6,249 4,577

103,720 100,261Current assetsInventories 21 554 1,010Trade and other receivables 22 202,824 179,889Due from customers for contract work 23 167,167 170,914Current tax assets 3,541 -Cash and cash equivalents 24 53,657 49,841

427,743 401,654Total assets 531,463 501,915

Current liabilitiesBorrowings 25 (896) (2,315)Trade and other payables 27 (465,954) (407,715)Due to customers for contract work 23 (19,425) (30,775)Provisions 28 (202) (202)Current tax liabilities (2,350) (1,818)

(488,827) (442,825)Non-current liabilitiesBorrowings 25 (94) (1,191)Deferred tax liabilities 29 (594) (741)Trade and other payables 27 (1,696) (65)Provisions 28 (183) (183)

(2,567) (2,180)Total liabilities (491,394) (445,005)TOTAL NET ASSETS 40,069 56,910

EquityCalled up share capital 30 492 391Share premium account 24,291 24,001Foreign currency translation reserve 238 2,210Investment in own shares 30 (1,312) (1,453)Other reserves 6,840 7,347Retained earnings 8,512 24,311Equity attributable to owners of the company 39,061 56,807Non-controlling interests 35 1,008 103TOTAL EQUITY 40,069 56,910

The consolidated financial statements of ISG plc (company number 2997684) were approved by the Board of directors and authorised for issue on 8 September 2015. They were signed on behalf of the Board of directors.

S D Lawther J C B Houlton Director Director

Consolidated balance sheetAt 30 June 2015

Share capital

Share premium

Foreign currency

translation reserve

Investment in own shares

Other reserves

Retained earnings Total

Non-controlling

interestsTotal

equity£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Balance at 1 July 2013 385 22,939 3,926 (2,488) 7,369 26,807 58,938 (61) 58,877

Profit for the year - - - - - 2,366 2,366 19 2,385Exchange differences arising on translation of foreign operations - - (1,716) - - (2,397) (4,113) 10 (4,103)Total comprehensive income - - (1,716) - - (31) (1,747) 29 (1,718)

Payment of dividends - 119 - - - (3,498) (3,379) - (3,379)Issue of shares 1 133 - - - - 134 - 134Costs incurred from issue of shares - - - - (22) - (22) - (22)Acquisition of subsidiary 4 630 - - - - 634 135 769Investment in associates and joint ventures 1 180 - - - - 181 - 181Recognition of investment in own shares - - - (395) - - (395) - (395)Tax credit on share-based payments - - - - - 877 877 - 877Recognition of share-based payments - - - 1,430 - 156 1,586 - 1,586Balance at 30 June 2014 391 24,001 2,210 (1,453) 7,347 24,311 56,807 103 56,910

(Loss)/profit for the year - - - - - (27,967) (27,967) 187 (27,780)Exchange differences arising on translation of foreign operations - - (1,972) - - (1,065) (3,037) (16) (3,053)Total comprehensive (loss)/ income - - (1,972) - - (29,032) (31,004) 171 (30,833)

Payment of dividends - 49 - - - (1,889) (1,840) - (1,840)Issue of shares 100 43 - - 16,826 - 16,969 - 16,969Costs incurred from issue of shares - - - - (496) - (496) - (496)Transfer to distributable reserves - - - - (16,330) 16,330 - - -Acquisition of subsidiary 1 198 - - (507) - (308) 734 426Investment in associates and joint ventures - - - - - - - - -Recognition of investment in own shares - - - (51) - - (51) - (51)Tax charge on share-based payments - - - - - (794) (794) - (794)Recognition of share-based payments - - - 192 - (414) (222) - (222)Balance at 30 June 2015 492 24,291 238 (1,312) 6,840 8,512 39,061 1,008 40,069

The foreign currency translation reserve is used to record cumulative translation differences on the goodwill and other intangible assets of foreign operations (Notes 16 and 17). The cumulative translation differences are recycled to the income statement on disposal of the foreign operation.

Consolidated statementof changes in equityYear ended 30 June 2015

ISG plc Annual report and accounts 2015 79Consolidated cash flowstatementYear ended 30 June 2015

2015 20141

Notes £’000 £’000

Cash flows from operating activitiesUnderlying operating profit for the year 5 8,497 15,945Non-underlying operating loss for the year 5,7 (19,514) (8,497)Share of profit of associates and joint ventures 8 (22) (59)Amortisation of intangible assets 17 2,002 1,988Depreciation on property, plant and equipment 18 3,018 2,634Loss on disposal of property, plant and equipment 95 93Share-based payment expense adjustment for share schemes (348) 550Movements in working capital:Decrease in inventories 21 302 106Increase in trade and other receivables (16,573) (36,231)Decrease in trade and other payables 27,597 61,085Cash generated from operations 5,054 37,614Corporate income taxes (2,470) (2,517)Net cash inflow from operating activities from continuing operations 2,584 35,097Net cash outflow from operating activities from discontinued operations 13 (3,180) (9,235)Net cash (outflow)/inflow from operating activities (596) 25,862

Cash flows from investing activitiesInterest received 10 74 122Interest paid 11 (1,549) (336)Dividends received from associates and joint ventures 19 25 85Investment in associates and joint ventures 19,20 - (1,627)Payments for other intangibles 17 - (3)Payments for property, plant and equipment 18 (5,174) (4,459)Proceeds from disposal of property, plant and equipment 2 29Acquisition of subsidiaries 7,36 (1,783) (3,200)Net cash acquired with subsidiaries 36 606 428Net cash outflow from operating activities from continuing operations (7,799) (8,961)Net cash outflow from investing activities from discontinued operations - -Net cash outflow from investing activities (7,799) (8,961)

Cash flows from financing activitiesDividends paid 14 (1,840) (3,379)Cash receipts from issuing shares 30 16,969 134Costs incurred from issuing shares (496) (22)Purchase of own shares (51) (395)Proceeds from borrowings 21,350 10,000Repayment of borrowings (23,700) (12,746)Net cash inflow/(outflow) from financing activities from continuing operations 12,232 (6,408)Net cash outflow from financing activities from discontinued operations - -Net cash inflow/(outflow) from financing activities 12,232 (6,408)

Net increase in cash and cash equivalents 3,837 10,493Cash and cash equivalents at the beginning of the year 49,841 42,214Effects of exchange rate changes on balances of cash held in foreign currencies (21) (2,866)

Cash and cash equivalents of continuing operations at the end of the year 67,278 60,282Cash and cash equivalents of discontinued operations at the end of the year 13 (13,621) (10,441)Cash and cash equivalents at the end of the year 24 53,657 49,841

1 Restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Notes 5 and 7)

Notes to the consolidatedfinancial statementsAt 30 June 2015

1. General information

ISG plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is given on page 52. The nature of the Group’s operations and its principal activities are set out in the Principal Activities section of the Directors’ Report on page 53.

These financial statements are presented in pounds Sterling (GBP) because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in Note 3.

2. Adoption of new and revised standards

During the financial year, there are no new IFRSs or IFRIC interpretations that are effective for the first time that would be expected to have a material impact on the Group.

The following pronouncements have been adopted in the year and either had no impact on the financial statements or resulted in changes to presentation and disclosure only:• IAS 32 (amendments) ‘Financial Instruments: Presentation - Offsetting financial assets and financial liabilities’; effective 1

January 2014• IAS 39 (amendments) ‘Continuing hedge accounting after derivative novations’; effective 1 January 2014• IAS 19 (amendments) ‘Defined benefit plans: Employee contributions’; effective 1 February 2015• IFRIC 21 ‘Levies’; effective 17 June 2014 • Annual improvements (2011–2013); effective 1 January 2015• Annual improvements (2010–2012); effective 1 February 2015

At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to the Group, which have not been applied in these financial statements, were in issue but not yet effective. In some cases these standards and guidance had not been endorsed by the European Union:• IAS 1 (amendments) ‘Disclosure Initiative’; effective 1 January 2016• IAS 27 (amendments) ‘Equity Method in Separate Financial Statements’; effective 1 January 2016• IAS 16 and IAS 38 (amendments) ‘Clarification of Acceptable Methods of Depreciation and Amortisation’; effective 1

January 2016• IFRS 10, IFRS 12 and IAS 28 (amendments) ‘Investment Entities: Applying the Consolidation Exception’; effective 1

January 2016• IFRS 10 and IAS 28 (amendments) ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’;

effective 1 January 2016• IFRS 11 (amendments) ‘Accounting for acquisitions of interests in joint operations’; effective 1 January 2016• IFRS 15 ‘Revenue from contracts with customers’; effective 1 January 2018• IFRS 9 ‘Financial instruments: Classification and measurement’; effective 1 January 2018• Annual improvements (2012–2014); effective 1 January 2016

Except for IFRS 15, the directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The potential impact of IFRS 15 is currently being evaluated.

3. Accounting policies

Basis of accountingThe annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union, International Financial Reporting Interpretations Committee (IFRIC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on a going concern basis. This is discussed in the Directors’ Report on page 53.

The financial information set out in this report has been prepared under the historical cost convention. The presentational currency of the Group and the functional and presentational currency of the Company is sterling. The principal accounting policies adopted, all of which have been consistently applied, are set out below. Areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.


The consolidated financial statements incorporate the financial statements of the company and all of its subsidiaries. Subsidiaries are all entities controlled by the company. Control exists when the company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

All intra-group transactions, balances, unrealised gains and losses, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders may be initially measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Associates and joint venturesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control and the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. The arrangements the Group has entered into involve the establishment of a separate entity in which each venturer has an interest.

Investments in associates and joint ventures are accounted for using the equity method of accounting; initially stated at cost and adjusted thereafter for subsequent changes in the Group’s share of net assets less any impairment in the value of individual investments. The Group’s share of associates’ and joint ventures’ post tax results are reported in the consolidated income statement and the net investments disclosed in the consolidated balance sheet. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate and joint venture recognised at the date of acquisition is recognised as goodwill.

The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Foreign currencies Transactions in foreign currencies are translated into the Group company’s functional currency (Sterling) at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the Group’s income statement in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of comprehensive income to the extent that they relate to a gain or loss on that non-monetary item.

The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill and intangibles are translated into Sterling at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate of the transactions or average rates for the year. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to the “foreign currency translation reserve” in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal.

Notes to the consolidated financial statementsAt 30 June 2015 (continued)

3. Accounting policies (continued)Business combinationsBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value in exchange for control of the acquiree. Acquisition-related costs are expensed to the Income Statement as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 ‘Business Combinations’ are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 ‘Non-Current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

The cost of business combinations includes, where applicable, deferred consideration discounted at an appropriate rate of interest to its fair value at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration is classified as an asset or liability that is a financial instrument and within the scope of IAS 39 ‘Financial instruments: Recognition and Measurement’, with any subsequent changes in the estimated value being recognised within non-underlying administrative expenses in the Consolidated Income Statement.

When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest less direct costs of the transaction and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary.

Any acquisition or disposal which does not result in a change in control is accounted for as a transaction between equity holders. The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in the relative interests in the subsidiary.

GoodwillGoodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Any impairment is recognised immediately in the Income Statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated:• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and• is not larger than a segment based on the Group’s reporting format determined in accordance with IFRS 8

‘Operating segments’.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating unit or group of cash-generating units, to which the goodwill relates. Where an impairment test is performed a discounted cash flow analysis is carried out based on the cash flows of the cash-generating unit compared with the carrying value of that goodwill. Management estimate the discount rates as the risk effected cost of capital for the particular cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.


Intangible assetsThe cost of intangible assets acquired in a business combination is recognised separately from goodwill if the asset is separable or arises from contractual or other legal rights and is based on its fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost and amortised over the estimated useful lives on a straight line basis. Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The categories of intangible assets (all of which were acquired on acquisition of subsidiaries) and their estimated useful lives are as follows:

Customer relationships 1-10 yearsCustomer contracts 1-2 years

The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed at least at the end of each reporting period. The amortisation expense of intangible assets with finite lives is recognised in the income statement.

Impairment of non-financial assetsThe carrying amounts of the Group’s non-financial assets are reviewed at each reporting period date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount.

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. The value in use is determined as the net present value of the future cash flows expected to be derived from the asset, discounted using a pre-tax discount rate with the individual CGU cash flow forecasts risk adjusted.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount after the reversal does not exceed the amount that would have been determined, net of applicable depreciation, if no impairment loss has been recognised.

Property, plant and equipmentProperty, plant and equipment are stated at historical cost net of accumulated depreciation and any recognised impairment loss. Cost includes expenditure associated with bringing the asset into use.

Depreciation is provided to write off the cost of assets to their residual value in equal annual instalments over the estimated useful economic lives of its assets. The estimated useful lives are as follows:

Short-leasehold property Life of the leaseMotor vehicles 4 yearsIT and office equipment 2-5 years

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

The residual values and useful lives of all property, plant and equipment are reviewed and adjusted if appropriate at least each financial year.

InventoriesInventories comprise stocks and property developments, which are valued at the lower of cost and net realisable value. Cost, where appropriate, is determined using the first-in first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion. Provision is made for foreseeable losses.

Financial instrumentsFinancial assets and liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash flows from the assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. A financial liability is derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.


3. Accounting policies (continued)Financial instruments (continued)The principal financial assets and liabilities of the Group are as follows:

Trade and other receivablesTrade and other receivables are measured on initial recognition at fair value, and are subsequently measured at amortised cost, less any impairment.

In relation to trade receivables, a provision for impairment is made when there is objective evidence that the Group will not be able to collect all of the amounts due in accordance with the original terms of those receivables. The carrying amount of the receivables is reduced through use of an allowance provision account. Impaired debts are derecognised when they are assessed as uncollectible.

If collection is expected in more than one year, receivables are classified as non-current assets and are adjusted for the time value of money.

Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand and short-term highly-liquid investments that are readily convertible (with a maturity of three months or less) to a known amount of cash and are subject to an insignificant risk of changes in value.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

Trade payablesTrade payables are not interest bearing and are stated at their nominal value.

BorrowingsAll loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Where existing borrowings are exchanged for new borrowings and the terms of the existing and new borrowings are not substantially different (as defined by IAS 39), the new borrowings are recognised initially at the carrying amount of the existing borrowings. The difference between the amount initially recognised and the redemption value of the new borrowings is recognised in the income statement over the period of the new borrowings using the effective interest method.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For financial assets objective evidence of impairment could include:• significant financial difficulty of the issuer or counterparty; or• default or delinquency in interest or principal payments; or• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of a provision account.

Revenue recognitionRevenue represents the fair value of consideration received or receivable for goods and services provided to external customers, net of trade discounts and excluding value added tax and similar sales based taxes. The Group recognises revenue on an accruals basis, where the amount of revenue can be reliably measured and it is probable that the future economic benefits will flow to the Group.


• Revenue from construction contracts includes the amount initially agreed in the contract plus any variations in contract work to the extent that it is probable that the variation will result in revenue that can be reliably measured (usually when instructions have been received from the client) plus any claims recoveries to the extent that negotiations have reached an advanced stage such that it is probable that the customer will accept the claim and the amount can be reliably measured. The revenue recognised reflects the value of the contract at the reporting date, with reference to a survey of work performed. The value of work carried out during the year includes amounts which have not been invoiced;

• Revenue from construction related service contracts is recognised in the income statement in the same proportion as the stage of completion of the contract at the reporting date, the stage of completion having been assessed with reference to a survey of the work performed;

• Dividend income is recognised when the right to receive payment is established.

Construction and service contractsMargin on long-term contracts is recognised by reference to the stage of completion and the final estimated margin, provided that the final outcome can be assessed with reasonable certainty. The stage of completion is measured with reference to the proportion of the value of the contract at the reporting date against the total estimated value of the contract, as measured by a survey of the work performed.

Where the outcome of the construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. Contract costs include costs that relate directly to the specific contracts and costs that are attributable to contract activity in general and can be allocated to the contract.

Full provision is made for all known or expected losses on individual contracts immediately, once such losses are foreseen.

The gross amount due from customers for contract work is shown as a receivable. The gross amount due comprises costs incurred plus recognised profits less the sum of recognised losses and progress billings. Where the sum of recognised losses and progress billings exceeds costs incurred plus recognised profits, the amount is shown as a liability.

Non-underlying itemsNon-underlying items are items of financial performance which the Group believes should be separately identified on the face of the income statement to assist in understanding the underlying financial performance achieved by the Group. Such items will affect the absolute amount of the results for the period and the trend of results. Non-underlying items include gains and losses on the disposal of businesses and investments, costs of restructuring and reorganisation of existing businesses, acquisition costs, impairment and amortisation charges on intangible assets arising on business combinations (“amortisation of acquired intangible assets”), impairment of goodwill and operations to be discontinued as well as the tax effect of the items above. These are all included in continuing operations. Non-underlying items also includes discontinued operations. These are examples, however from time to time it may be appropriate to disclose further items as non-underlying items in order to highlight the underlying performance of the Group. Where this is the case, the Group presents both current year and prior year balances consistently.

PensionsThe company operates a defined contribution pension scheme. The assets of the scheme are invested and managed independently of the finances of the company. Contributions to the defined contribution pension schemes are charged to the income statement as they become payable in accordance with the rules of the schemes.

Share-based paymentsThe cost of granting share options and other share-based remuneration to employees and directors is recognised through the income statement.

Options granted under the Group’s employee share schemes are equity settled and measured at fair value at the date of grant. Where the share awards have non-market related performance criteria the group has used the Black Scholes Option valuation model to establish the relevant fair values. Where the share awards have a TSR market related performance criteria, the Group has used the Monte-Carlo simulation valuation model to establish the relevant fair values. The amounts recognised are expensed over the vesting period and are based on the Group’s estimate of shares that will eventually vest and are adjusted for the effect of non-market based vesting conditions. Vesting conditions are service and performance conditions.


3. Accounting policies (continued)Operating leasesRentals under operating leases are recognised as an expense on a straight-line basis over the lease term.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term.

Finance income and costsFinance income comprises interest income on the Group’s cash and cash equivalents and other interest earned. Interest income is recognised as it accrues in the income statement using the effective interest rate method.

Finance costs comprise interest on bank overdrafts, the unwinding of discounts on contingent deferred consideration and the amortisation of prepaid bank facility arrangement fees, commitment fees charged by lenders on the undrawn portion of available bank facilities which have been amortised over the length of the associated facilities.

TaxationThe Group’s tax charge is the sum of the total current and deferred tax charges. Current tax is the tax payable on the taxable profits for the year and any adjustment in respect of prior years.

The Group has made an irrevocable election to claim tax relief for qualifying research and development expenditure under the Finance Act 2013 (“RDEC”), albeit that the RDEC regime becomes mandatory from the financial year ending 30 June 2016. The credit is calculated as a percentage of the qualifying R&D expenditure at a rate of 10% for the period to 31 March 2015 and then at a rate of 11% from 1 April 2015. The credit is recorded as income within profit before tax (as part of cost of sales), netted against the relevant research and development expenditure.

Deferred tax liabilities are recognised in full using the balance sheet liability method on temporary differences between the carrying amounts of assets and liabilities for financial and reporting purposes and the amounts used for taxation purposes.

The recognition of deferred tax assets is based upon whether it is probable that there will be sufficient and suitable taxable profits in the relevant legal entity or tax group against which to utilise the tax assets in the future. Judgement is required when determining the probable future taxable profits but a rigorous process of reviewing latest available profit forecasts is undertaken.

Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled.

Current tax and deferred tax are charged or credited to the income statement, except when they relate to items charged or credited directly to equity, in which case the relevant tax is also accounted for within equity.

DividendsInterim dividends are recorded in the Group’s consolidated financial statements when paid. Final dividends are recorded in the Group’s consolidated financial statements in the period in which they receive shareholder approval. Dividends paid are recognised as a deduction from equity.

Investment in own sharesOwn shares deducted in arriving at shareholders’ funds represent the cost of the company’s ordinary shares acquired by Interior Services Group Employee Trust in connection with the Group’s employee share schemes. No gain or loss is recognised on the purchase, sale, issue or cancellation of the company’s own shares.

Share capitalThe ordinary share capital of the company is recorded at the proceeds received, net of directly attributable incremental issue costs.

ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.


When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous property contractsProvision for onerous lease commitments on property contracts is based on an estimate of the net unavoidable lease and other payments in respect of these properties. These comprise rental and other property costs payable, plus any termination costs, less any income expected to be derived from the properties being sublet. The provisions are discounted at an appropriate rate to take into account the time value of money.

4. Critical accounting judgements and key sources of estimation uncertainty

The preparation of consolidated financial statements under IFRS requires management to make judgements, estimates and assumptions about the carrying amount of assets and liabilities, the amount of income and expenditure recognised in the period and the disclosure of contingent liabilities. Actual results may differ from these estimates. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Revenue and profit/margin recognitionThe Group’s revenue recognition and long-term construction and service contracts policies are set out in Note 3 above. These policies are central to the way in which the Group values the work it has carried out at each reporting date and the estimation of the percentage completion of the contract. These policies require forecasts to be made of the outcome of long-term construction and service contracts and require assessments and judgements to be made on the recovery and agreement of pre-contract costs, variations in work scopes, claim recoveries, expected contract costs to complete and the progress on contract programmes. The Group has appropriate control procedures in place to ensure estimates are calculated on a consistent basis.

Impairment of goodwill and other intangible assetsDetermining whether goodwill or other intangible assets are impaired generally requires an estimation of the value in use of the intangible assets or the cash-generating units to which goodwill has been allocated. Judgement is also required in determining the cash-generating units to which goodwill is allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Note 16 details the assumptions that have been applied in assessing impairment of goodwill, including the sensitivities in respect of UK Construction.

TaxationThe Group is subject to tax in a number of jurisdictions and judgement is required in determining the worldwide provision for income taxes. The Group provides for future liabilities in respect of uncertain tax positions where additional tax may become payable in future periods, and such provisions are based upon management’s assessment of exposures.

As set out in Note 3 above, deferred tax is accounted for on temporary differences using the balance sheet liability method, with deferred tax liabilities being provided for in full and deferred tax assets being recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Note 29 details the unused tax losses for which deferred tax assets have not been recognised.


5. Segmental information

For management purposes, the Group is organised into operating segments on both a geographic and product perspective. The performances of these segments are considered by the Board when making strategic decisions. These segments include the UK, Continental Europe, Middle East and Asia, whilst the UK is further segregated by product into UK Fit Out and Engineering Services, UK Retail and UK Construction.

Although the Middle East geographical segment does not meet the quantitative thresholds required by IFRS 8 ‘Operating Segments’, management has concluded that this segment should be reported. This segment is closely monitored by the Board as a potential growth region and is expected to materially contribute to Group revenue in the future.

The principal activities of each of these divisions are as follows:

UK Fit Out and Engineering Services provision of office fit out and refurbishment services in the UK and engineering services including data centers in the UK and Continental Europe

UK Retail provision of fit out, refurbishment and ancillary new build services to retail and hospitality customers in the UK

UK Construction provision of new build, refurbishment and ancillary fit out services in the UK

Continental Europe provision of office and retail fit out and refurbishment services in continental Europe

Middle East provision of fit out, refurbishment and project management services in the Middle East and Africa

Asia provision of fit out, refurbishment, design, project management and commissioning management services in Asia

Group activities central overheads and provisions and our operations in Brazil

The segmental information provided to the Board for the reportable segments for the year ended 30 June 2015 is as follows:

a. Revenue and profit analysisIncluded in revenue from predominantly UK Fit Out and Engineering Services as well as Continental Europe is revenue of £346.2m (2014: £228.6m) which arose from sales to the Group’s largest customer. No other single customer contributed 10% or more to the Group’s income in either 2014 or 2015.

The revenue disclosed is from external customers and is reported to the Board in a manner consistent with that in the income statement.


RevenueOperating

profitOperating

profit marginFinance

income/(costs)Profit

before tax2015 £’000 £’000 % £’000 £’000

UK Fit Out and Engineering Services 630,276 15,995 2.5 67 16,062UK Retail 319,751 9,048 2.8 (43) 9,005UK Construction 446,089 (18,129) (4.1) (338) (18,467)Continental Europe 80,500 1,058 1.3 (82) 976Middle East 50,749 1,167 2.3 (96) 1,071Asia 101,987 3,494 3.4 74 3,568Underlying Group trading 1,629,352 12,633 0.8 (418) 12,215Unallocated:

Group activities - (4,136) - (1,070) (5,206)Cost of acquisition finance - - - - -

Underlying items from continuing operations 1,629,352 8,497 0.5 (1,488) 7,009Non-underlying items from continuing operations 19,288 (19,514) - (397) (19,911)Consolidated continuing operations 1,648,640 (11,017) (0.7) (1,885) (12,902)

RevenueOperating

profitOperating

profit marginFinance

income/(costs)Profit

before tax20141 £’000 £’000 % £’000 £’000

UK Fit Out and Engineering Services 519,509 9,882 1.9 141 10,023UK Retail 283,157 6,060 2.1 (39) 6,021UK Construction 435,720 2,487 0.6 (9) 2,478Continental Europe 102,832 1,264 1.2 (33) 1,231Middle East 34,606 508 1.5 (60) 448Asia 79,401 2,722 3.4 11 2,733Underlying Group trading 1,455,225 22,923 1.6 11 22,934Unallocated:

Group activities - (6,978) - (102) (7,080)Cost of acquisition finance - - - (603) (603)

Underlying items from continuing operations 1,455,225 15,945 1.1 (694) 15,251Non-underlying items from continuing operations 27,664 (8,497) - - (8,497)Consolidated continuing operations 1,482,889 7,448 0.5 (694) 6,754

1 Restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Note 7)


5. Segmental information (continued)b. Capital expenditure and depreciation and amortisation analysis

2015 2014

Capital expenditure

Depreciationand

amortisationCapital

expenditure

Depreciationand

amortisation£’000 £’000 £’000 £’000

UK Fit Out and Engineering Services 13 (313) 65 (277)UK Retail 1,478 (852) 316 (901)UK Construction 1,157 (381) 835 (208)Continental Europe 1,745 (1,154) 1,369 (1,061)Middle East 170 (172) 118 (97)Asia 300 (665) 248 (752)Group activities 1,775 (1,483) 2,514 (1,326)Consolidated 6,638 (5,020) 5,465 (4,622)

Capital expenditure includes property, plant and equipment and intangible assets (excluding goodwill).

c. Balance sheet analysis

Goodwill Other assets Liabilities Net assets2015 £’000 £’000 £’000 £’000

UK Fit Out and Engineering Services - 160,531 (155,420) 5,111UK Retail 39,898 57,010 (38,553) 58,355UK Construction 24,111 111,948 (136,807) (748)Continental Europe 13,829 41,827 (40,690) 14,966Middle East 665 31,034 (28,850) 2,849Asia 4,911 43,959 (31,687) 17,183Group activities 1,654 86 (59,387) (57,647)Consolidated 85,068 446,395 (491,394) 40,069

Goodwill Other assets Liabilities Net assets2014 £’000 £’000 £’000 £’000

UK Fit Out and Engineering Services - 128,689 (120,863) 7,826UK Retail 39,899 68,052 (53,556) 54,395UK Construction 24,111 124,531 (128,688) 19,954Continental Europe 13,319 42,965 (39,935) 16,349Middle East 614 21,561 (20,565) 1,610Asia 4,854 34,732 (25,893) 13,693Group activities - (1,412) (55,505) (56,917)Consolidated 82,797 419,118 (445,005) 56,910

Group activities include consolidation adjustments (excluding goodwill) and net assets attributable to Group holding companies.


6. Operating profit

2015 2014£’000 £’000

Amortisation of intangible assets1 2,002 1,988Depreciation 3,018 2,634Foreign exchange (gain)/loss2 (1,575) (90)Acquisition related expenses1 1,025 408Research and development expenditure credit3 3,971 -Rentals under operating leases:

- Land and buildings 3,455 3,141- Hire of plant and machinery 5,703 7,194- Other operating leases 780 1,063

1 Presented within non-underlying items (Note 7)2 Generated from a number of foreign exchange hedges entered into during the year3 During the year, the Group moved from submitting research and development related tax claims under the previous large company super deduction scheme to the R&D expenditure

credit (RDEC) scheme. This resulted in total net income of £4.0m in the year of which £2.0m related to prior years.

2015 2014£’000 £’000

Auditor’s remunerationFees payable to the company’s auditor for the audit of the company’s annual accounts 101 94Fees payable to the company’s auditor and their associates for other services to the Group:

- Audit of the company’s subsidiaries pursuant to legislation 543 503- Services relating to tax 45 21- All other services 18 11

Total fees payable to Group’s auditor 707 629


7. Non-underlying items

Amortisationof intangible

assetsAccordion

costs

Acquisitionrelated

expensesDiscontinuation

of businessRestructuring

costs Total2015 £’000 £’000 £’000 £’000 £’000 £’000

Revenue - - - 19,288 - 19,288

Gross loss - - - (14,030) - (14,030)Administrative expenses (2,002) (947) (1,025) (1,510) - (5,484)Operating loss (2,002) (947) (1,025) (15,540) - (19,514)Finance costs - (210) (187) - - (397)Loss before tax from continuing operations (2,002) (1,157) (1,212) (15,540) - (19,911)

Amortisationof intangible

assetsAccordion

costs

Acquisitionrelated

expensesDiscontinuation

of businessRestructuring

costs Total20141 £’000 £’000 £’000 £’000 £’000 £’000

Revenue - - - 27,664 - 27,664

Gross profit - - (2,492) - (2,492)Administrative expenses (1,988) - (408) (1,230) (2,379) (6,005)Operating loss (1,988) - (408) (3,722) (2,379) (8,497)Finance costs - - - - - -Loss before tax from continuing operations (1,988) - (408) (3,722) (2,379) (8,497)

1 Restated for the classification of the London Exclusive Residential operations as a business to be discontinued within non-underlying items (Note 5)

In January 2015, the Group announced that it had discontinued its London Exclusive Residential activities following a review which concluded that the rewards of this market do not meet the division’s new bid and risk management policies. As a small number of the related projects have not completed as at 30 June 2015, the operations do not meet the definition of “discontinued operations” as stipulated by IFRS 5. Accordingly, the results of this operation for the current and prior year have been included within non-underlying items, and therefore differ from the presentation for applicable discontinued operations. The loss in the year of £15.5m (2014: £3.7m) reflects the losses incurred in the year as well as the Board’s assessment of the losses to close out the remaining contracts.

In February 2015, the Group secured a further short term credit facility of £10m from HSBC and the Royal Bank of Scotland plc in association with the share placing. Total professional costs and banking charges (“Accordion costs”) of £1.2m were incurred.

On 16 July 2014 the Group acquired 50.1% of the shares in Interior ISG Espana SA, whilst on 8 June 2015, the Group acquired a further 49% interest in ACE in Brazil (see Note 36) and £1.2m of associated acquisition related expenses were incurred during the period. This included £0.6m in respect of the foreign exchange loss recycled to the income statement on the deemed disposal of the original 20% associate interest in ACE on completing the further acquisition in June 2015.

In the prior year, the Group incurred restructuring costs of £2.4m following the completion of the exercise in respect of the UK Construction operations with the reorganisation of the business from seven regions to four.


8. Share of profit from associates and joint ventures

2015 2014£’000 £’000

AssociatesACE-Engenharia e Construções Ltda 21 66DRAW Serviços de Engenharia Ltda - (9)Share of profit in associates 21 57

Joint venturesCMI Babtie 1 2Share of profit in joint venture 1 2

Share of profit in associates and joint ventures 22 59

Following the acquisition of a further 49% interest in ACE on 8 June 2015, these companies have been consolidated within the Group’s consolidated financial statements from that date (see Notes 7 and 36).

9. Staff costs including directors’ remuneration

2015 2014£’000 £’000

Salaries and wages 137,602 106,923Social security costs 17,590 14,972Pension costs 3,463 3,046Fair value adjustment to stock options (211) 227

158,444 125,168

Included in salaries above is a bonus accrual payable in respect of the financial year ended 30 June 2015.

Directors’ remuneration included in the aggregate remuneration above comprised:

2015 2014£’000 £’000

Emoluments for qualifying services 1,406 2,084

Directors’ emoluments (excluding social security costs) disclosed above include £0.5m paid to the highest paid director (2014: £0.8m). There is no bonus accrual for the directors of the company.

Certain subsidiary undertakings of the Group operated defined contribution pension schemes. The assets of the schemes were held separately from those of the Group by an independently administered fund. The only other pension contributions made by the Group are to employees’ personal pension schemes under a salary waiver arrangement.

Further information about the remuneration of individual directors is provided in the audited part of the Directors’ Remuneration Report on pages 58 to 65.


9. Staff costs including directors’ remuneration (continued)

2015 2014Employees Number Number

Average number of persons (including directors) employed by Group in the year:UK Fit Out and Engineering Services 529 449UK Retail 430 396UK Construction 898 838Continental Europe 278 207Middle East 128 107Asia 404 376Group activities 86 86

2,753 2,459

The Corporate segment in the table above includes three directors (2014: three).

Remuneration of key management personnelThe remuneration of the directors who are the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the remuneration of the company directors is provided in the audited part of the Directors’ Remuneration Report on pages 58 to 65. Key management personnel are specific directors of the key Group subsidiaries; their names are available in the statutory accounts of those subsidiaries, which are listed in Note 37.

2015 2014£’000 £’000

Short-term employee benefits 11,355 9,847Post-employment benefits 709 723Other long term benefits 11 -

12,075 10,570

10. Finance income

2015 2014£’000 £’000

Interest on bank deposits 74 122Total finance income 74 122

11. Finance costs

2015 2014£’000 £’000

Interest on bank overdrafts and loans 1,411 336Unwinding of discount on deferred consideration 187 82Loan arrangement fee 138 103Amortisation of fees 223 295Total finance costs 1,959 816


12. Tax on profit on ordinary activities

a. Taxation charge2015 2014£’000 £’000

UK current taxUnited Kingdom corporation tax on profits for the year 2,561 1,060Double tax relief (968) -Adjustment in respect of prior years 408 (365)

2,001 695Overseas current tax

Overseas taxation on profits for the year 2,253 2,409Adjustment in respect of prior years (284) (166)

Total current tax 3,970 2,938

Deferred taxOrigination and reversal of temporary differences arising in the year (2,578) (2,009)Adjustment in respect of prior years (653) 371Effect of change in tax rates 37 266

Total deferred tax (Note 29) (3,194) 1,372

Total tax expense from continuing operations 776 1,566Total tax credit from discontinued operations (Note 13) (1,737) (814)Total tax (credit)/expense (961) 752

UK Corporation tax is calculated at 20.75% (2014: 22.50%) of the estimated taxable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

b. Taxation reconciliation for continuing operationsThe charge for the year can be reconciled to the profit per the income statement as follows:

2015 2015 2014 2014

£’000 % £’000 %

(Loss)/profit before tax from operations (12,902) 6,754

Tax (receivable)/due if paid at the applicable UK corporation tax rate (20.75%) (2,677) 20.8 1,520 22.5

Adjusting itemsAdjustment relating to release of prior year corporation tax provisions (528) 4.1 (531) (7.9)Tax effect of utilisation of tax losses not previously recognised (192) 1.5 (505) (7.5)Effect of different tax rates of operations in other jurisdictions (256) 2.0 1,122 16.6Tax effect of expenses that are not deductible in determining taxable profit 706 (5.5) 223 3.3Effect of movements in deferred tax 4,226 (32.8) (33) (0.5)Effect of deduction in relation to research and development expenditure - - (788) (11.7)Tax effect of income that is not taxable in determining taxable profit and Other (503) 3.9 558 8.3Income tax expense recognised in the income statement 776 (6.0) 1,566 23.2


13. Discontinued operations

In June 2014, the Group’s UK Construction business discontinued its operations from its Tonbridge office in line with the restructuring of our UK Construction business to four regions. The office has been formally closed and we have ceased operations in this regional market. It was classified as a discontinued operation from the year ended 30 June 2014.

Further provisions for increased losses in closing out the contracts in the year have been incurred and consequently, the results for the year include a post tax charge to the income statement in respect of the discontinued operations of £14.1m (2014: £2.8m).

The results of the Group’s discontinued operations in 2015 are presented below together with the comparative information for 2014 and arise solely from the Tonbridge operations.

2015 2014£’000 £’000

Loss for the year from discontinued operations:Revenue 3,216 27,928Expenses (19,055) (31,545)Loss before taxation and costs of closure (15,839) (3,617)Tax credit 1,737 814Loss after tax for the year from discontinued operations (14,102) (2,803)

Cash flows from discontinued operations:Net cash outflows from operating activities (3,180) (9,235)Net cash outflows (3,180) (9,235)

14. Dividends

2015 2014£’000 £’000

Interim dividend paid for the period to 31 December 2014 of nil per ordinary share (2014: 4.54p) - 1,739Final dividend paid for the period to 30 June 2014 of 4.91p per ordinary share (2014: 4.91p) 1,889 1,759Ordinary dividends on equity shares 1,889 3,498

Proposed final dividend for the period to 30 June 2015 of 5.00p per ordinary share (2014: 4.91p) 2,426 1,883

In the year to 30 June 2015 £1.9m (2014: £3.5m) of dividends were paid. Of these, £0.1m (2014: £0.1m) were taken as scrip dividends.

There are no significant tax consequences attaching to the payment of dividends by the Group to its shareholders.


15. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to owners of the company by the weighted average number of ordinary shares during the year, determined in accordance with the provisions of IAS 33 ‘Earnings per Share’.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. The Group has two categories of dilutive potential ordinary shares, being share options granted where the exercise price is less than the average price of the company’s ordinary shares during the year and conditional shares not vested where contingent consideration conditions are yet to be met.

Underlying basic earnings per share is calculated by dividing the earnings from underlying items attributed to owners of the company by the weighted average number of ordinary shares during the year. The Group believes that this measure of earnings from underlying items is more reflective of the ongoing trading of the Group.

A total of 55,361 share options that could potentially dilute earnings per share in the future were excluded from the calculations below because they were not dilutive as at 30 June 2015 (2014: 5,168).

2015 2014£’000 £’000

Basic and diluted (loss)/earnings being (loss)/profit for the year attributable to owners of the company (27,967) 2,366Post tax loss from discontinued operations 14,102 2,803Basic and diluted (loss)/earnings from continuing operations attributable to owners of the company (13,865) 5,169

Post tax loss from non-underlying items:Amortisation of intangible assets 1,246 1,458Discontinuation of business 14,927 2,885Other administrative expenses 2,028 2,159

Basic and diluted earnings attributable to owners of the company from underlying items 4,336 11,671

2015 2014Number Number

Weighted average number of ordinary shares for the purpose of basic earnings per share 41,729,093 38,199,749Effect of dilutive potential ordinary shares:

Share options 910,769 1,240,437Conditional shares not vested 137,993 84,246

Diluted weighted average number of ordinary shares for the purpose of diluted earnings per share 42,777,855 39,524,432


15. Earnings per share (continued)

2015 2014

From continuing and discontinued operationsBasic earnings per ordinary share1 (66.99p) 6.19pDiluted earnings per ordinary share1 (66.99p) 5.74p

From continuing operationsBasic earnings per ordinary share1 (33.20p) 13.53pDiluted earnings per ordinary share1 (33.20p) 13.08pUnderlying basic earnings per ordinary share 10.42p 30.55pUnderlying diluted earnings per ordinary share 10.17p 29:53p

From discontinued operations Basic earnings per ordinary share1 (33.79p) (7.34p)Diluted earnings per ordinary share1 (33.79p) (7.34p)

1 The basic and diluted loss per share in 2015 were equal as IAS 33 stipulates that a basic loss per share cannot be diluted by the impact of potential ordinary shares

16. Goodwill

£’000

CostBalance at 1 July 2013 83,232Recognised on acquisition of subsidiary 1,063Net foreign currency exchange differences (1,498)Balance at 30 June 2014 82,797Recognised on acquisition of subsidiary 4,059Net foreign currency exchange differences (1,788)Balance at 30 June 2015 85,068

Carrying amountAs at 30 June 2015 85,068As at 30 June 2014 82,797

Goodwill has been allocated for impairment testing purposes to six groups of cash-generating units (CGUs) identified according to operating segments, being UK Fit Out and Engineering Services, UK Retail, UK Construction, Continental Europe, Middle East and Asia. The allocation of goodwill is dependent on the CGU that is expected to benefit from the business combination.

The additional goodwill in the current year relates to the acquisition of 50.1% of the issued share capital in Interior ISG Espana SA and a further 49% interest in ACE as described in Note 36.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and margins. The Board estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money, giving a pre-tax discount rate of 11.50% (2014: 11.2%). The Group discount rate is applied to all CGUs, on a pre-tax basis with the individual CGU cash flow forecasts risk adjusted. The long-term growth rate of 2.25% is based on the estimated industry growth forecasts and long-term growth in gross domestic product.

The Group prepares cash flow forecasts derived from the most recent financial forecasts approved by the Board for the next two years and extrapolates cash flows for the following three years based on the estimated growth rate of 2.25% and thereafter applied into perpetuity.


At 30 June 2015 and 30 June 2014, the carrying amounts of goodwill for CGUs were tested for impairment and deemed not to be impaired.

However, in light of the losses incurred within UK Construction in the current year, further consideration was given to the impairment testing for this CGU. The stabilisation and recovery of UK Construction’s performance to more normal levels of performance is a key assumption underpinning the cash flow forecasts used to assess the recoverable amount of the related goodwill and the associated forecast is based upon a detailed recovery plan. The Board believes that the assumptions within this recovery plan and the annual budget are reasonable and appropriate. It is anticipated that the UK construction market will grow modestly over the forecast two year period, with improvements in both tender margins and contract terms and conditions. The forecast further assumes limited revenue growth over the period alongside controlled overhead inflation resulting in the business returning to profitability. The Group’s impairment review is sensitive to changes in the key assumptions used, with the major assumptions that result in significant sensitivities being the annual growth rate, the discount rate and the forecast year two trading profits. Except as noted below, a reasonable possible change in a single assumption will not give rise to impairment in any of the Group’s CGUs. The UK Construction goodwill is £24m and the key assumption is the forecast cashflows which require a significant recovery performance as noted above. The Board recognises that it is possible that an impairment to the UK Construction goodwill could be identified if the performance of the business does not improve as expected in line with the recovery plan.

The Group has performed some sensitivity analysis in respect of the UK Construction CGU and at the Group’s pre-tax discount rate of 11.5%, the value in use of the CGU exceeds the carrying value of the goodwill by £17m or 70%. The value in use of the CGU is equal to the carrying value of the goodwill following an increase in the pre-tax discount rate of 5.5% or a £2.5m reduction in EBITDA by year two compared to the recovery plan.

17. Other intangible assets

TrademarkCustomer

relationshipsCustomercontracts Total

£’000 £’000 £’000 £’000

CostBalance at 1 July 2013 - 16,083 1,704 17,787Additions 3 - - 3Recognised on acquisition of subsidiary - 786 220 1,006Net foreign currency exchange differences - (822) (19) (841)Balance at 30 June 2014 3 16,047 1,905 17,955Additions 127 - - 127Recognised on acquisition of subsidiary - 1,379 85 1,464Net foreign currency exchange differences - (608) (9) (617)Balance at 30 June 2015 130 16,818 1,981 18,929

Accumulated amortisationBalance at 1 July 2013 - 11,131 1,704 12,835Charge for the year - 1,797 191 1,988Net foreign currency exchange differences - (612) (11) (623)Balance at 30 June 2014 - 12,316 1,884 14,200Charge for the year - 1,899 103 2,002Net foreign currency exchange differences - (427) (6) (433)Balance at 30 June 2015 - 13,788 1,981 15,769

Carrying amountAs at 30 June 2015 130 3,030 - 3,160As at 30 June 2014 3 3,731 21 3,755


18. Property, plant and equipment

Leaseholdproperty

Motor vehicles

IT & officeequipment Total

£’000 £’000 £’000 £’000

CostBalance at 1 July 2013 5,166 122 12,002 17,290Additions 252 21 4,186 4,459Disposals (180) - (69) (249)Recognised on acquisition of subsidiary - 45 25 70Net foreign currency exchange differences (11) (21) (216) (248)Balance at 30 June 2014 5,227 167 15,928 21,322Additions 1,496 - 3,551 5,047Disposals - (5) (454) (459)Recognised on acquisition of subsidiary - - 125 125Net foreign currency exchange differences (22) (84) 86 (20)Balance at 30 June 2015 6,701 78 19,236 26,015

Accumulated depreciationBalance at 1 July 2013 3,395 56 8,266 11,717Disposals (87) - (40) (127)Depreciation charge for the year 581 21 2,032 2,634Net foreign currency exchange differences (1) (8) (141) (150)Balance at 30 June 2014 3,888 69 10,117 14,074Disposals - (4) (358) (362)Depreciation charge for the year 512 23 2,483 3,018Recognised on acquisition of subsidiary - - - -Net foreign currency exchange differences (3) (57) 125 65Balance at 30 June 2015 4,397 31 12,367 16,795

Carrying amountAs at 30 June 2015 2,304 47 6,869 9,220As at 30 June 2014 1,339 98 5,811 7,248

The Group does not have any of its property and equipment pledged as security over bank loans.


19. Investment in associates

Following the acquisition of a further 49% interest in ACE-Engenharia e Construções Ltda and DRAW Serviços de Engenharia Ltda on 8 June 2015, these two entities are now treated as subsidiaries (see Notes 36 and 37).

ACE-Engenharia e Construções

Ltda

DRAW Serviços de Engenharia

Ltda Total2015 £’000 £’000 £’000

Goodwill - - -Non-current assets - - -Current assets - - -Current liabilities - - -Non-current liabilities - - -

- - -

Income 2,374 - 2,374Expenses (2,353) - (2,353)


Ltda


Ltda Total2014 £’000 £’000 £’000

Goodwill 1,907 - 1,907Non-current assets 48 - 48Current assets 435 18 453Current liabilities (348) (6) (354)Non-current liabilities (190) - (190)

1,852 12 1,864

Income 2,721 - 2,721Expenses (2,661) (3) (2,664)

Further information on the associates is given in Note 8.

The following amounts are included in the Group financial statements as a result of the equity accounting for associates:


Ltda


Ltda Total£’000 £’000 £’000

Balance at 1 July 2014 1,852 12 1,864Retained profit for the year 21 - 21Dividends paid (25) - (25)Exchange rate differences (571) - (571)Control obtained over associate (1,277) (12) (1,289)Balance at 30 June 2015 - - -


20. Investment in joint ventures

The Group has the following significant interests in joint ventures:

Country of incorporation / registration and operation Activity

Proportion of ordinary shares

held by the Group%

Total issued share capital

CMI Babtie Hong Kong Fit out 50.0 Unincorporated

Tulloch ISG Limited Scotland Construction 51.0 100 £1.00 ordinary

CMI Babtie Tulloch ISG

Limited Total2015 £’000 £’000 £’000

Non-current assets - 1 1Current assets 32 - 32Current liabilities (10) - (10)Non-current liabilities - - -

22 1 23

Income 47 - 47Expenses (46) - (46)


Limited Total2014 £’000 £’000 £’000

Non-current assets - 1 1Current assets 33 - 33Current liabilities (14) - (14)Non-current liabilities - - -

19 1 20

Income 192 - 192Expenses (190) - (190)

Further information on the joint ventures is given in Note 8.

The following amounts are included in the Group financial statements as a result of the equity accounting for joint ventures:


Limited Total£’000 £’000 £’000

Balance at 1 July 2014 19 1 20Retained profit for the year 1 - 1Dividends paid - - -Exchange rate differences 2 - 2Balance at 30 June 2015 22 1 23


21. Inventories

2015 2014£’000 £’000

Consumables and raw materials 554 1,010554 1,010

The Board considers that the carrying amount of inventories approximates their fair value.

22. Trade and other receivables

2015 2014£’000 £’000

CurrentTrade receivables 170,256 146,047Less: provision for impairment (1,272) (1,106)Trade receivables net 168,984 144,941Other receivables 28,720 31,362Prepayments 5,120 3,586Total current 202,824 179,889Total 202,824 179,889

The Board considers that the carrying amount of trade and other receivables approximates their fair value due to their short-term to maturity.

The Group has different provision methods for its various divisions which have been determined by references to past default experience and specific provisions are raised after taking an individual view to debts recoverability.

Due to the nature of the Group’s operations, it is normal practice for customers to hold retentions in respect of contracts completed. Retentions held by customers as at 30 June 2015 were £21.9m (2014: £27.1m).

The Group’s exposure to credit risk and impairment losses related to trade and other receivables is disclosed in Note 26.

Under the normal course of business, the Group does not charge interest on its overdue receivables.

23. Construction contracts

Contracts in progress at the balance sheet date:

2015 2014£’000 £’000

Amounts due from construction contract customers 167,167 170,914Amounts due to construction contract customers (19,425) (30,775)Carrying amount at the end of the year 147,742 140,139

Contract costs incurred plus recognised profits less recognised losses to date 4,016,613 3,598,630Less: progress billings (3,868,871) (3,458,491)Net work in progress 147,742 140,139


23. Construction contracts (continued)Amounts recoverable on construction contracts are stated at cost plus the profit attributable to that contract, less any impairment losses. Progress payments for construction contracts are deducted from amounts recoverable. Payments in advance on construction contracts represent amounts received in excess of revenue recognised on construction contracts.

24. Analysis of net cash position

2014 Cash flowOther non-cash

charges 2015£’000 £’000 £’000 £’000

Cash and cash equivalents 49,841 3,816 - 53,65749,841 3,816 - 53,657

Loans due after one year (1,191) 922 175 (94)Loans due within one year (2,315) 1,428 (9) (896)Net cash 46,335 6,166 166 52,667

The Group’s exposure to interest rate risks and a sensitivity analysis for financial assets and liabilities is disclosed in Note 26.

25. Borrowings

2015 2014£’000 £’000

Non-currentBank loans 298 1,220Unamortised cost of debt (204) (29)Total non-current 94 1,191

CurrentBank loans 1,063 2,491Unamortised cost of debt (167) (176)Total current 896 2,315

Total 990 3,506

The Group has no term loan outstanding (2014: £3.6m).

There is no variance between the carrying amount and the fair value of the borrowings.

The Group has borrowings of £0.5m (2014: £0.1m) in Asia for working capital purposes. Repayments on the facility commenced in October 2010 and were completed in August 2015. The loan carried a variable interest rate of 1.88% as at 30 June 2015.

The Group also has total borrowings of £0.8m (consisting of a number of smaller facilities) acquired with Interior ISG Espana SA, for working capital purposes. These loans carry variable rates of interest varying from 1.75% to 3.01%.

During the year, the Group has negotiated new banking facilities with HSBC and the Royal Bank of Scotland plc. These facilities include a revolving credit facility of £20m until 30 September 2017, bearing a variable interest rate with reference to LIBOR. The facility was drawn and repaid during the year.

Bank covenants include total interest cover, net debt to earnings before interest, tax, depreciation and amortisation, cash flow cover and a minimum annual earnings before interest, tax, depreciation and amortisation. There have been no breaches of bank covenants during all periods. The facility is a revolving credit guaranteed by material subsidiaries of the Group by way of a debenture. The Group does not have any of its property and equipment pledged as security over bank loans.


The Group had the following committed undrawn borrowing facilities at 30 June 2015:

2015 2014£’000 £’000

Expiry dateIn more than one year 20,000 10,000

20,000 10,000

Further information on the principal features of the Group’s borrowings are set out in Note 26.

26. Financial instruments

Capital risk management The Board is responsible for overall Group strategy, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. The Board manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders as well as sustaining the future development of the business.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 25, cash and cash equivalents and equity attributable to equity holders of ISG plc, comprising issued capital, reserves and retained earnings. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares (see Note 30) or sell assets to reduce debt.

The Group’s overall capital risk management strategy remains unchanged from 2014.

Categories of financial instruments

2015 2014£’000 £’000

Financial assetsTrade and other receivables 197,704 176,303Cash and cash equivalents 53,657 49,841Total financial assets 251,361 226,144

Financial liabilitiesAmortised cost

Bank loans 990 3,506Trade payables 182,302 188,470Other payables 71,150 56,339Deferred contingent consideration 2,408 233

Total financial liabilities 256,850 248,548

Fair value of financial instrumentsThe Board considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate to their fair values due to the short maturity of the instruments or because they bear interest at rates approximate to the market.


26. Financial instruments (continued)Financial risk managementThe Group’s activities expose it to a variety of risks, the key risks identified being:• Market risk• Credit risk• Foreign currency risk • Liquidity risk• Interest rate risk

This note presents information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and procedures for measuring and managing risk. Please refer also to the principal business risks on pages 42 to 45 and also the Corporate Governance statement on pages 66 to 69.

Market riskMarket risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group’s activities expose it mainly to the financial risks of changes in foreign currency exchange rates and changes in interest rates. The Board reviewed and agreed the policy for managing interest rate risk and foreign currency risk and the potential impact of any significant economic changes are discussed at monthly Board meetings. Refer to both foreign currency risk and interest rate risk headings below.

The Group does not use derivative contracts for speculative purposes.

Credit riskCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.

The Group’s principal financial assets are cash and cash equivalents, trade and other receivables, prepayments and accrued income, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies such as Standard and Poor’s, Moody’s and Fitch. No material credit exposure is permitted to a financial institution with a rating lower then A- or equivalent. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved financial institutions.

Trade receivables: Trade receivables consist of a large number of customers, spread across diverse geographical areas and the Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including default risk of the industry and country in which the customers operate, has less of an influence on credit risk.

The Group does not have any significant net credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments when there is objective evidence that the asset is impaired. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined by references to past default experience and historical data of payment statistics for similar financial assets.

Before accepting any new customer, the Group runs credit checks to assess the potential customer’s credit quality. The Group monitors exposure to individual clients and all customers are subject to standard terms of payment for each division.


Ageing of trade receivables:

Gross

2015 Impairment

provision Gross

2014 Impairment

provision£’000 £’000 £’000 £’000

Not past due 137,681 - 116,003 -Past due 0 – 30 days 16,234 - 16,004 -Past due 30 – 60 days 7,069 - 5,002 -Past due 60 – 90 days 1,980 - 1,562 -Past due 90 – 120 days 1,407 - 603 -Past due greater than 120 days 5,885 (1,272) 6,873 (1,106)

170,256 (1,272) 146,047 (1,106)

Trade receivables that are less than four months past due for payments are generally not considered impaired. Included in the Group’s trade receivables are debtors with a carrying amount of £4.6m (2014: £5.8m) which are four months past due at the reporting date for which the Group has not made provision as there has not been a significant change in the credit quality and the amounts are considered recoverable. The Group does not hold any collateral over these balances.

Movement in the provision for impairment:

2015 2014£’000 £’000

Balance at the beginning of the year 1,106 664Increase in impairment provision recognised 354 649Receivables written off as uncollectible (28) (4)Amounts recovered during the year (160) (203)Balance at the end of the year 1,272 1,106

Foreign currency riskThe Group has international operations and is exposed primarily to the Euro (EUR), Singapore dollar (SGD), Hong Kong dollar (HKD) and United Arab Emirates dirham (AED), hence exposures to exchange rate fluctuations arise. The main risk is from net investments in foreign operations, recognised assets and liabilities and future trading transactions.

The current level of foreign business is approximately 93% (2014: 51%) of the Group’s underlying operating profit before Group activities as presented in Note 5. A 10% increase/decrease in sterling (GBP) against the EUR would have had a circa £0.5m (2014: £0.6m) impact on trading operating profits, a 10% increase/decrease in the GBP against the SGD would have had a circa nil (2014: £0.1m) impact on trading operating profits, a 10% increase/decrease in the GBP against the HKD would have had a circa £0.3m (2014: £0.2m) impact on trading operating profits and a 10% increase/decrease in the GBP against the AED would have had a circa £0.1m (2014: £0.1m) impact on trading operating profits. This analysis assumes all other variables, in particular interest rates, remain constant.

The Group monitors the net balance sheet exposure to foreign currency movements and would consider hedging against any material exposure arising. The tax impact of foreign exchange movement on certain intercompany balances is hedged.

During the year the Group made a decision not to hedge any exposure to fluctuations in the value of the SGD, HKD and AED against the GBP since it believed that it would not be in the interests of the business as the cost outweighs the benefit. However, the Group protected itself from any adverse fluctuations in the value of the EUR via appropriate foreign exchange hedges, protecting its profits denominated in that currency.

Foreign exchange risk is reviewed on a regular basis by the Finance Department and the Board and if considered necessary a strategy to minimise any potential risk will be discussed and implemented. Significant foreign exchange movements are also reviewed by the Board and the process of reviewing different options is undertaken on a quarterly basis.


26. Financial instruments (continued)Foreign currency risk (continued)The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities, relating to operations carried out in local functional currencies, at the reporting date are as follows:

Assets2015

Liabilities Assets2014

Liabilities£’000 £’000 £’000 £’000

AED 23,811 (20,968) 11,178 (10,566)EUR 64,778 (68,282) 35,116 (36,844)HKD 7,932 (13,989) 4,082 (6,622)MYR 5,605 (2,397) 5,647 (3,023)RUB 1,051 (1,246) 918 (2,031)SGD 11,847 (7,918) 13,509 (6,869)

115,024 (114,800) 70,450 (65,955)

Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Responsibility for liquidity risk management rests with the Board of directors. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring bank covenant compliance, forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in Note 25 is a description of the additional undrawn facility that the Group has at its disposal to further reduce liquidity risk.

Further details relevant to the Group’s liquidity position and its status as a going concern are included within the Directors’ Report on page 53.

The Group reviews its treasury position daily, placing surplus cash on short-term deposits. A daily cash flow forecast for the next four weeks is prepared on a weekly basis and a twelve week forecast is produced monthly and these are reviewed at company and Group level. Additionally, there is a detailed review of the assumptions underpinning these forecasts by Group Finance. At each month end a twelve month cash flow is prepared by each subsidiary company and submitted to Group. Minimum cleared cash levels have been imposed on each subsidiary company and actual balances are monitored against the minimum levels on a daily basis. In addition the top and bottom ten cash contracts by company are reviewed at company and Group level on a monthly basis.

Liquidity and interest risk tables: The following tables detail the Group’s remaining contractual maturity for its financial assets and liabilities.

The tables below have been drawn up based on the earliest date on which the Group can settle the debt. The tables include both interest and principal cash flows.

Carrying amount

Contractual cash flows

Less than 1 year

1-2 years

2-5years

2015 £’000 £’0001 £’000 £’000 £’000

Non-derivative financial assetsTrade and other receivables 197,704 197,704 197,704 - -Cash and cash equivalents 53,657 53,657 53,657 - -

251,361 251,361 251,361 - -

Non-derivative financial liabilitiesVariable interest rate instruments 990 1,361 1,063 189 109Trade and other payables 253,452 253,452 253,452 - -Deferred contingent consideration 2,408 2,408 712 461 1,235

256,850 257,221 255,227 650 1,344


Carrying amount

Contractual cash flows

Less than 1 year

1-2 years

2-5years

2014 £’000 £’0001 £’000 £’000 £’000

Non-derivative financial assetsTrade and other receivables 176,303 176,303 176,303 - -Cash and cash equivalents 49,841 49,841 49,841 - -

226,144 226,144 226,144 - -

Non-derivative financial liabilitiesVariable interest rate instruments 3,506 3,7112 2,491 1,220 -Trade and other payables 244,809 244,809 244,809 - -Deferred contingent consideration 233 233 168 65 -

248,548 248,753 247,468 1,285 -

1 Under IFRS 7 contractual cash flows are undiscounted and include any related future interest payments and therefore may not agree with the carrying amounts in the balance sheet.2 Assumed no further issue of debt and interest rates based on conditions existing at reporting date.

Interest rate riskInterest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument, will fluctuate due to changes in market interest rates. The Group’s only interest-bearing asset is cash, which is invested in short-term deposits.

The Group is exposed to interest rate risk primarily through borrowing funds at floating interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group manages interest rate risk on borrowings by ensuring access to diverse funding and through monitoring interest rate movements with weekly reports.

Interest rate risk is reviewed on a regular basis and if considered necessary a strategy to minimise any potential risk through interest rate swaps is discussed and implemented. Currently the effect of interest rate changes on net interest income and expense is immaterial to the Group. Risk arises on the variance between the Bank of England Base Rate and the LIBOR rate. The Group’s exposure to interest rates on financial assets and financial liabilities are detailed below.

Interest rate sensitivity analysisIf interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group’s profit for the year would increase or decrease by £0.1m (2014: £0.1m) in respect to exposure to the Group’s borrowings. However this exposure is largely mitigated by cash balances held by the Group throughout the year.

27. Trade and other payables

2015 2014£’000 £’000

Non-currentDeferred contingent consideration 1,696 65Total non-current 1,696 65

CurrentTrade payables 182,302 188,470Other taxation and social security 21,727 18,118Other payables 35,778 38,221Deferred contingent consideration 712 168Accruals 225,435 162,738Total current 465,954 407,715Total 467,650 407,780


27. Trade and other payables (continued)An analysis of the maturity of debt is given in Note 26.

The Group’s policy is to fix payment terms when agreeing the terms of each transaction. It is the Group’s general policy to pay suppliers according to the agreed terms and conditions, provided that the supplier has complied with those terms. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. Therefore, under the normal course of business, the Group is not charged interest on overdue payables.

There are no suppliers who represent more than 10% of the total balance of trade payables in either 2015 or 2014.

There is no variance between the carrying amount and the fair value.

28. Provisions

£’000

Balance at 1 July 2014 385Provision created in the year 201Utilisation of provision (201)Balance at 30 June 2015 385

Analysis of provision 2015 2014£’000 £’000

Non-current 183 183Current 202 202

385 385

Provisions comprise of the net present value of the estimated future costs of vacant properties. The provision is expected to be utilised in the next two years.

29. Deferred tax

Deferred tax liabilities represent sums that might become payable in tax in future years as a result of transactions that have occurred in the current year.

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting periods.

Accelerated tax depreciation

Intangible assets

Employee benefits

Share-based payment Other Tax losses Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Balance at 1 July 2013 586 (902) 50 529 584 1,079 1,926(Charge)/credit to income 508 500 3 (120) 337 144 1,372Credit to equity - - - 877 - - 877Acquisition of subsidiary - (339) - - - - (339)Balance at 30 June 2014 1,094 (741) 53 1,286 921 1,223 3,836(Charge)/credit to income 64 728 2 (108) 931 1,577 3,194Credit to equity - - - (794) - - (794)Acquisition of subsidiary - (581) - - - - (581)Balance at 30 June 2015 1,158 (594) 55 384 1,852 2,800 5,655

Other deferred tax assets comprise movements on provisions and other short-term timing differences.


At the balance sheet date there were unused tax attributes of approximately £53.6m (2014: £10.4m) which are available for offset against future profits. A deferred tax asset of £6.0m (2014: £1.2m) has been recognised in relation to £29.0m (2014: £5.1m) of these attributes.

The Finance Act 2013, which provides for a reduction in the main rate of corporation tax from 21% to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the balance sheet date.

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

2015 2014£’000 £’000

Deferred tax assets 6,249 4,577Deferred tax liabilities (594) (741)

5,655 3,836

There is an unrecognised deferred tax asset of £4.9m (2014: £1.2m).

30. Share capital

Group andCompany

2015 Group andCompany

Group andCompany

2014 Group andCompany

Number £’000 Number £’000

Authorised:Ordinary shares of 1p each (2014: 1p each) 100,000,000 1,000 100,000,000 1,000

Allotted, called up and fully paid:Ordinary shares of 1p each (2014: 1p each) 49,179,325 492 39,122,139 391

Nominal value£

Number of shares

Consideration£

Ordinary shares of 1p each allotted as at 1 July 2014 391,222 39,122,139Ordinary shares issued during the year ended 30 June 2015 fully paid:

Payment of dividends 162 16,173 -Share placing 99,561 9,956,084 16,925,343Crystallisation of options 849 84,929 43,657

Total ordinary shares of 1p each allotted and fully paid during the year ended 30 June 2015 100,572 10,057,186 16,969,000Ordinary shares of 1p each allotted as at 30 June 2015 491,794 49,179,325

The total authorised number of ordinary shares is 100m shares (2014: 100m) with a par value of 1p per share (2014: 1p per share). All issued shares are fully paid. The company has one class of ordinary shares which carry no right to fixed income.

On 3 March 2015 and 10 March 2015, approximately ten million ordinary shares were issued. Total net consideration of £16.4m was received after deducting transaction costs of £0.5m. Of the net consideration received, £16.3m comprising the premium on the share placing, was recorded within retained earnings. No share premium was recorded due to the operation of the merger relief provisions of the Companies Act 2006.


30. Share capital (continued)As at 30 June 2015, the Interior Services Group Employee Share Trust held 662,743 (2014: 766,000) ordinary 1p shares in the company at a cost of £1.3m (2014: £1.5m) and a market value of £1.1m (2014: £2.3m). These shares have not yet been allocated to individuals and accordingly, dividends on these shares have been waived.

At 30 June 2015, the Group owns 1.35% (2014: 1.96%) of its own called up share capital within the investment in own shares reserve.

31. Capital and other commitments

At 30 June 2015, the Group and the company had no capital commitments (2014: nil).

Operating leasesThe Group’s minimum commitments under non-cancellable operating leases at 30 June are as follows:

2015 2014Land and buildings Other

Land and buildings Other

£’000 £’000 £’000 £’000

Operating leases which expire:Within one year 1,535 80 1,326 318Within two to five years 6,665 652 5,657 1,227After five years 10,999 - 10,902 -

19,199 732 17,885 1,545

32. Employee shares schemes

The company has adopted the following share incentive arrangement plans:

ISG plc Company Share Option Plan (the “Approved Plan”)The Approved Plan was adopted by the company on 26 September 1997, approved by the Inland Revenue on 26 November 1997, amended by the company in General Meeting on 4 December 2000 and amended pursuant to a Board Resolution dated 31 October 2003, approved by the Inland Revenue on 23 January 2004.

Under this scheme, the following options have been approved by the Board:

Date of Board approval and grant

Number of share options Option price

(pence)

Period during which options

may be exercised1 July2014 Awarded Exercised Lapsed Cancelled

30 June 2015

18 September 2006 11,472 - (11,472) - - - 261½On or after

18 September 2009

As the Approved Plan expired in 2007, the company adopted a new plan (the “Approved CSOP”) on 26 January 2007. The Approved CSOP was approved for adoption by the shareholders on 18 December 2006 and approved by HM Revenue and Customs on 26 February 2007.


Under the Approved CSOP, the following options have been approved by the Board:



(pence)



30 June 2015

16 October 2009 15,454 - - - - 15,454 185On or after

16 October 2012


10 October 2015

27 September 2013 88,046 - - (12,578) - 75,468 238½On or after

27 September 2016

9 October 2014 - 99,000 - - - 99,000 303On or after

9 October 2017

The estimated weighted average fair value of options granted in 2015 was 50.290p (2014: 36.985p)

At 30 June 2015, the number of option-holders participating in the Approved Plan and the Approved CSOP was 21 (2014: 13).

ISG plc Unapproved Company Share Option Plan (the “Unapproved Plan”)The Unapproved Plan was adopted by the company on 8 June 1998, amended by the company in General Meeting on 4 December 2000, amended pursuant to a Board Resolution on 31 October 2003 and amended by the company in General Meeting on 17 December 2007. There have been no variations to the conditions of the share options.

Under the Unapproved Plan, the following options have been approved by the Board:



(pence)



30 June 2015

29 September 2005 200,000 - - - - 200,000 223On or after

29 September 2008

18 September 2006 123,528 - - - - 123,528 261½On or after

18 September 2009

As the Unapproved Plan expired in 2008, the company adopted a new plan (the “Unapproved CSOP”) on 26 January 2007. The Unapproved CSOP had been approved for adoption by the shareholders on 18 December 2006. The Unapproved CSOP was amended by the company in General Meeting on 17 December 2007. Under the Unapproved CSOP, the following options have been approved by the Board:



(pence)



30 June 2015

14 April 2009 667,100 - - - - 667,100 97On or after

14 April 2012


16 October 2012

14 October 2011 457,000 - - (370,580) - 86,420 184On or after

14 October 2014

10 October 2012 1,308,184 - - - - 1,308,184 141On or after

10 October 2015

27 September 2013 1,054,683 - - (69,602) - 985,081 238½On or after

27 September 2016

9 October 2014 - 1,108,944 - - - 1,108,944 303On or after

9 October 2017


32. Employee shares schemes (continued)The estimated weighted average fair value of the options granted in 2015 was 50.290p (2014: 36.985p).

At 30 June 2015, the number of option-holders participating in the Unapproved Plan and the Unapproved CSOP was 23 (2014: 15).

Interior Services Group Deferred Bonus Scheme 2011The Deferred Bonus Scheme 2011 was adopted by the Board on 28 January 2011. Under this scheme the following awards have been made by the Remuneration Committee:

Date of award

Number of shares

Date of vesting1 July 2014 Awarded Vested Lapsed Cancelled

30 June 2015

10 October 2012 232,621 - - - - 232,621 10 October 2015

27 September 2013 101,950 - - - - 101,950 27 September 2016

9 October 2014 - 165,319 - - - 165,319 9 October 2017

At 30 June 2015, the number of awardees participating in the Deferred Bonus Scheme 2011 was 20 (2014: 7).

Interior Services Group Performance Share Plan 2010 (the “PSP”)The PSP was approved by the company on 3 December 2010 and adopted by the Board on 3 December 2010. Under this scheme the following awards have been made by the Remuneration Committee:

Date of award

Number of shares

Date of vesting1 July 2014 Awarded Vested Lapsed Cancelled

30 June 2015

14 October 2011 236,818 - (44,783) (192,035) - - 14 October 2014

10 October 2012 276,594 - - - - 276,594 10 October 2015

27 September 2013 185,240 - - - - 185,240 27 September 2016

9 October 2014 - 152,061 - - - 152,061 9 October 2017

At 30 June 2015, the number of awardees participating in the PSP was 3 (2014: 3).

ISG plc Savings-Related Share Option Scheme (the “Sharesave Scheme” or “SAYE” scheme)The SAYE Scheme was adopted by the company on 26 January 2007 and approved by the Inland Revenue on 20 March 2007.

Under the Sharesave Scheme the following options have been approved by the Board:



(pence)


may be exercised1 July2014 Awarded Vested Lapsed Cancelled

30 June 2015

9 November 2010 7,908 - (6,090) - (1,818) - 198On or after

1 February 2014

4 November 2011 109,478 - (65,465) (5,282) (15,061) 23,670 184On or after

1 February 2015

5 November 2012 273,087 - (10,071) (22,068) (3,728) 237,220 140On or after

1 February 2016

7 November 2013 90,302 - - (5,424) (8,599) 76,279 272On or after

1 February 2017

8 May 2014 107,959 - - (4,158) (4,455) 99,346 303On or after

1 August 2017

4 November 2014 - 144,537 - (5,382) (1,794) 137,361 301On or after

1 February 2018


The estimated fair value of the options granted on 4 November 2014 was 58.228p (7 November 2013: 34.957p, 8 May 2014: 31.832p).

At 30 June 2015 the number of option-holders participating in the Sharesave Scheme was 199 (2014: 200).

The credit recognised for the share-based payments in respect of employee services received during the year to 30 June 2015 is £0.3m (2014: Debit of £0.6m).

The Black-Scholes model has been used to estimate the fair value of the options within the individual plans with the assumptions set out below. None of these options or awards are subject to a share price related performance condition.

SAYE9 November

20104 November

20115 November

20127 November

20138 May 2014

4 November 2014

Number of options granted 171,974 298,358 362,891 98,902 110,335 144,537Share price at grant date 192.5p 178.5p 140.0p 261.5p 302.5p 317.5pExercise price 198.0p 184.0p 140.5p 272.0p 303.0p 301.0pExpected volatility 28% 22% 27% 29% 21% 30%Option life 3 years 3 years 3 years 3 years 3 years 3 yearsExpected dividend yield 7.82% 5.04% 6.59% 3.73% 3.73% 3.13%Risk free interest rate 1.16% 0.92% 0.33% 0.84% 1.35% 1.11%

Approved Plan18 September

200616 October

200910 October

201227 September

20139 October

2014

Number of options granted 22,944 16,216 70,920 66,038 74,250Share price at grant date 261.5p 186.5p 136.5p 241.0p 302.0pExercise price 261.5p 185.0p 141.0p 238.5p 303.0pExpected volatility 9% 7% 27% 29% 30%Option life 3 years 3 years 3 years 3 years 3 yearsExpected dividend yield 3.82% 7.69% 6.59% 3.73% 3.13%Risk free interest rate 4.89% 1.83% 0.33% 0.84% 1.11%

Unapproved Plan29 September

200518 September

200614 April

200916 October

200914 October

201110 October

2012

Number of options granted 200,000 247,056 700,000 350,451 342,750 964,794Share price at grant date 223.5p 261.5p 107.0p 186.5p 183.5p 136.5pExercise price 223.0p 261.5p 97.0p 185.0p 184.0p 141.0pExpected volatility 15% 9% 50% 7% 27% 27%Option life 3 years 3 years 3 years 3 years 3 years 3 yearsExpected dividend yield 3.44% 3.82% 12.34% 7.69% 8.21% 6.59%Risk free interest rate 4.26% 4.89% 2.21% 1.83% 0.93% 0.33%


32. Employee shares schemes (continued)

Unapproved Plan (continued)27 September

20139 October

2014

Number of options granted 791,009 831,708Share price at grant date 241.0p 302.0pExercise price 238.5p 303.0pExpected volatility 29% 30%Option life 3 years 3 yearsExpected dividend yield 3.73% 3.13%Risk free interest rate 0.84% 1.11%

The expected volatility was assumed to be equal to historic volatility of the company’s share price over the period prior to grant.

The Monte Carlo model has been used to estimate the fair value of the option plan with the assumptions set out below. This option and awards are subject to a share price related performance condition.

Approved Plan10 October

201227 September

2013 9 October

2014

Number of options granted 35,460 22,008 24,750Share price at grant date 136.5p 241.0p 302.0pExercise price 141.0p 238.5p 303.0pExpected volatility 27% 29% 30%Option life 3 years 3 years 3 yearsExpected dividend yield 6.59% 3.73% 3.13%Risk free interest rate 0.33% 0.84% 1.11%

Unapproved Plan14 October

201110 October

201227 September

20139 October

2014

Number of options granted 114,250 482,397 263,674 277,236Share price at grant date 183.5p 136.5p 241.0p 302.0pExercise price 184.0p 141.0p 238.5p 303.0pExpected volatility 27% 27% 29% 30%Option life 3 years 3 years 3 years 3 yearsExpected dividend yield 8.21% 6.59% 3.73% 3.13%Risk free interest rate 0.93% 0.33% 0.84% 1.11%

Performance Share Plan14 October

201110 October

201227 September

20139 October

2014

Number of options granted 59,204 92,198 46,310 38,015Share price at grant date 183.5p 136.5p 241.0p 302.0pExercise price 184.0p 141.0p 238.5p 303.0pExpected volatility 27% 27% 29% 30%Option life 3 years 3 years 3 years 3 yearsExpected dividend yield 8.21% 6.59% 3.73% 3.13%Risk free interest rate 0.93% 0.33% 0.84% 1.11%


Deferred Bonus Scheme12 October

201227 September

20139 October

2014

Number of options granted 103,308 22,008 41,330Share price at grant date 136.5p 241.0p 302.0pExercise price 141.0p 238.5p 303.0pExpected volatility 27% 29% 30%Option life 3 years 3 years 3 yearsExpected dividend yield 6.59% 3.73% 3.13%Risk free interest rate 0.33% 0.84% 1.11%

33. Contingent liabilities

There are Group cross guarantees from the company with certain subsidiaries for all monies due to certain of the Group’s banks and surety lenders. No monies were outstanding as at 30 June 2015 (2014: £nil). In the normal course of business there are contingent liabilities including the provision of bonds in respect of completed and uncompleted contracts. Bonds are treated as contingent liabilities until such time as it becomes probable payment will be required under the terms of the bond agreement.

34. Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There have been no related party transactions between the Group and its associates or joint ventures during the year other than dividend payments.

35. Non-controlling interests

£’000

Balance at 1 July 2013 (61)Adjustment arising from change in non-controlling interests 135Share profit for the year 19Exchange differences arising on translation of foreign operations 10Balance at 30 June 2014 103Recognised on acquisition (Note 36) 734Share of profit for the year 187Exchange differences arising on translation of foreign operations (16)Balance at 30 June 2015 1,008

Adjustment arising from change in non-controlling interests in the prior year represents the acquisition of the remaining 15% shareholding in Realys.


36. Acquisition of subsidiaries

On 16 July 2014 the Group acquired 50.1% of the shares in Interior ISG Espana SA (Interior Espana), a newly formed company that owns 100% of each of Diadec, a Spanish based office and retail fit out company and Emerald, a Spanish based data center and engineering services company, for an initial consideration of £1.7m satisfied by £1.3m in cash, £0.4m in ISG plc ordinary shares. £0.2m was invested as new capital into Interior Espana. A maximum deferred consideration of £2.0m is payable in three potential instalments over three calendar years ending 31 December 2017 conditional on the business meeting certain profit before tax targets. The first £0.4m of deferred contingent consideration will be settled 75% in cash and the balance in ISG plc ordinary shares and the remaining consideration will be settled 50% in cash and the balance in ISG plc ordinary shares. All shares issued to the vendors will be subject to phased lock-in periods over two years from the date of issue and orderly market undertakings.

The goodwill of £2.4m arising from the acquisition is attributable to the expansion of the Group’s client base and geographical spread. None of the goodwill is expected to be deductible for income tax purposes.

The deferred contingent consideration arrangements require the achievement of certain profit targets. The potential undiscounted amount of all future payments that the Group could be required to make under the deferred contingent consideration arrangement is up to £2.0m. The fair value of the deferred contingent consideration arrangement of £2.0m was estimated by applying the likelihood of meeting the profit targets as assessed by current management.

Interior Espana contributed £11.8m revenue and £0.9m to the Group’s profit before tax for the period between the date the Group had effective control of the business and the balance sheet date. If the acquisition of Interior Espana had been completed on the first day of the financial year, Group revenue for the year would have been £1,649m and the Group’s loss for the year would have been £13.7m.

Fair valueInterior ISG Espana SA £’000

Recognised amounts of identifiable assets acquired and liabilities assumed:Financial assets 3,213Property, plant and equipment 55Identifiable intangible assets 1,464Financial liabilities (3,189)Total identifiable net assets 1,543Non-controlling interest (771)Goodwill 2,356Total consideration 3,128

Satisfied by:Cash 1,349Shares 198Accrued consideration 198Deferred contingent consideration 1,383Total consideration transferred 3,128

Net cash outflow arising on acquisition:Cash consideration 1,349Less: cash and cash equivalent balances acquired (344)

1,005


On 8 June 2015 the Group acquired a further 49% of the shares in ACE-Engenharia e Construções Ltda and DRAW Serviços de Engenharia Ltda (together “ACE”), its Brazilian fit out partner. The Group had previously acquired 20% of ACE in June 2013 with an option to buy the remaining 80% and now owns a total of 69%. The consideration was £0.3m, fully settled in cash. The Group has also agreed to buy the remaining 31% of ACE from the remaining shareholder over a period of three calendar years ending 31 December 2018, with consideration conditional on the business meeting certain profit before tax targets. The maximum consideration payable is £5.0m. The goodwill of £1.7m arising from the acquisition is attributable to the expansion of the Group’s client base and geographical spread. None of the goodwill is expected to be deductible for income tax purposes.

The fair value of the consideration for the remaining 31% was estimated at £0.5m by applying the likelihood of meeting the relevant profit targets as assessed by management and in accordance with IAS 39, the debit relating to the liability has been recognised within Other Reserves in the Statement of Changes in Equity.

ACE contributed £nil revenue and £nil to the Group’s profit before tax for the period between the date the Group had effective control of the business and the balance sheet date. If the acquisition of ACE had been completed on the first day of the financial year, Group revenue for the year would have been £1,660m and the Group’s loss for the year would have been £13.6m.

Fair valueACE £’000

Recognised amounts of identifiable assets acquired and liabilities assumed:Financial assets 2,908Property, plant and equipment 70Financial liabilities (3,095)Total identifiable net assets/(liabilities) (117)Non-controlling interest 37Goodwill 1,703Total consideration 1,623

Satisfied by:Cash 303Accrued consideration 31Existing investment in associate 1,289Total consideration transferred 1,623

Net cash outflow arising on acquisition:Cash consideration 303Less: cash and cash equivalent balances acquired (262)

41


37. Additional information on subsidiaries

The directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length.

The details of all of the subsidiary companies as at 30 June 2015 were:

Subsidiary undertakings

Country of incorporation/registration and operation Activity


held by the group %

Direct/indirect holding

ACE-Engenharia e Construções Ltda 2 Brazil Fit out and refurbishment services

69 Indirect

CMI Commtech Ltd Hong Kong Commissioning and testing management

100 Indirect

Commtech (Asia) Ltd Hong Kong Commissioning and testing management

100 Indirect

Commtech (Asia-Philippines) Branch, Inc. Philippines Commissioning and testing management

100 Indirect

Commtech Asia (Australia) Pty Ltd Australia Commissioning and testing management

100 Indirect

Commtech Asia (Japan) Ltd Cayman Islands/Japan

Commissioning and testing management

100 Indirect

Commtech Asia (Singapore) Pte Ltd Singapore Commissioning and testing management

100 Indirect

Commtech Middle East Technology Services LLC 1

UAE Commissioning and testing management

49 Indirect

Commtech Testing Technology (Shanghai) Co. Ltd

China Commissioning and testing management

100 Indirect

Diseños y Adecuaciones SLU 2 Spain Fit out and project management

100 Indirect

Draw Serviços de Engenharia Ltda 2 Brazil Fit out and refurbishment services

69 Indirect

Emerald Telecom and Data Center SAU 2 Spain Data Center and engineering services

100 Indirect

Interior ISG Espana SL 2 Spain Holding company 50.1 Indirect

Interior Service Group Netherlands BV Netherlands Fit out and project management

100 Indirect

Interior Services Group (UK Holdings) Ltd England Holding company 100 Direct

Interior Services Group Africa (Pty) Ltd Africa Holding company 80 Indirect

Interior Services Group South Africa (Pty) Ltd Africa Fit out and project management

80 Indirect

Interior Services Group Spain SL Spain Fit out and project management

100 Indirect

ISG (Schweiz) AG Switzerland Fit out and project management

100 Indirect

ISG (Thailand) Ltd 1, 2 Thailand Fit out and project management

49 Indirect

ISG Asia (China) Limited 2 China Fit out and project management

100 Indirect





held by the group %


ISG Asia (Hong Kong) Ltd Hong Kong Fit out and project management

100 Indirect

ISG Asia (Japan) Ltd Cayman Islands/Japan

Non-trading 100 Indirect

ISG Asia (Korea) Ltd Korea Fit out and project management

100 Indirect

ISG Asia (Macau) Ltd Macau Fit out and project management

100 Indirect

ISG Asia (Malaysia) Sdn Bhd Malaysia Fit out and project management

100 Indirect

ISG Asia (Shanghai) Ltd China Fit out and project management

100 Indirect

ISG Asia (Singapore) Pte Ltd Singapore Fit out and project management

100 Indirect

ISG Asia Group Services Pte Ltd Singapore Group services 100 Indirect

ISG Asia Investment (Hong Kong) Ltd Hong Kong Holding company 100 Indirect

ISG Construction Ltd England Construction services 100 Indirect

ISG Construction Services SPRL Belgium Fit out and project management

100 Indirect

ISG Deutschland GmbH Germany Fit out and project management

100 Indirect

ISG Europe SAS France Fit out and project management

100 Indirect

ISG Fit Out Ltd England Fit out 100 Indirect

ISG Interior Services Group Ireland Ltd Ireland Fit out and project management

100 Indirect

ISG Interior Services Group UK plc England Fit out and project construction services

100 Indirect

ISG Italia Srl Italy Fit out and project management

100 Indirect

ISG Jackson Ltd England Construction services 100 Indirect

ISG Middle East LLC 1 UAE Fit out and project management

49 Indirect

ISG Middle East LLC (Qatar) 1 UAE Fit out and project management

49 Indirect

ISG Olson CJSC 2 Russia Fit out 100 Indirect

ISG Pearce Ltd England Construction services 100 Indirect

ISG Retail Ltd England Fit out and refurbishment

100 Indirect

ISG South Ltd England Construction services 100 Indirect

Realys France SAS France Design-led project management

100 Indirect


37. Additional information on subsidiaries (continued)




held by the group %


Realys GmbH Germany Design-led project management

100 Indirect

Realys Group Africa (Pty) Limited South Africa/Africa

Design-led project management

80 Indirect

Realys Group Construction and Design Consulting (Shanghai) Company Limited 2

China Design-led project management

100 Indirect

Realys Group Ltd 2 Hong Kong Design-led project management

100 Indirect

Realys Hong Kong Ltd Hong Kong Design-led project management

100 Indirect

Realys Limited England Design-led project management

100 Indirect

Realys Pte Ltd Singapore Design-led project management

100 Indirect

Realys Sdn Bhd Malaysia Design-led project management

100 Indirect

Tecton Engineering GmbH Germany Fit out and project management

90 Indirect

1 The Group has control over these subsidiaries as the other shareholder has no voting rights or rights to dividends.2 Financial year ended 31 December. All other subsidiaries have financial year ended 30 June.

The following subsidiaries are exempt from the requirements under the Companies Act 2006 relating to the audit of individual financial statements by virtue of section 479A of the Act.

Subsidiary undertakings (English company registration number)



held by the group %


Exterior International Ltd (3454602) England Fit out and building 100 Indirect

ISG Developments (Southern) Ltd (1801647) England Property development 100 Indirect

ISG Developments Ltd (1098081) England Property development 100 Indirect

ISG Northern Ltd (315305) England Construction services 100 Indirect

ISG Overseas Investments Ltd (3791978) England Holding company 100 Indirect

ISG Retail and Leisure Ltd (1346138) England Non-trading 100 Indirect

ISG UK Fit Out Ltd (7267349) England Holding company 100 Indirect

ISG UK Retail Limited (4491779) England Holding company 100 Indirect

Propencity Group Ltd (4545988) England Holding company 100 Indirect

Realys Holdings Limited (9059862) England Holding company 100 Indirect


The details of dormant companies as at 30 June 2015 were:

Subsidiary undertakings(English company registration number)



held by the group %


Commtech (UK) Limited (3006483) England Dormant 100 Indirect

Interior Ltd (4596704) England Dormant 100 Indirect

Interior Services (Group) Ltd (2341003) England Dormant 100 Indirect

Interior Services Group AESOP Trustee Limited (3776889) England Dormant 100 Indirect

Interior Services Group Trustee Ltd (4165632) England Dormant 100 Indirect

InteriorExterior Ltd (3008773) England Dormant 100 Indirect

ISG Asia Ltd (7395385) England Dormant 100 Indirect

ISG Cathedral Ltd (3151349) England Dormant 100 Indirect

ISG Construction Holdings Limited (7272660) England Dormant 100 Indirect

ISG Construction South Ltd (8082511) England Dormant 100 Indirect

ISG Egypt Ltd Egypt Dormant 100 Indirect

ISG Europe Ltd (7662920) England Dormant 100 Indirect

ISG Harry Neal Ltd (5144647) England Dormant 100 Indirect

ISG Holdings Limited (2094054) England Dormant 100 Indirect

ISG Interior Ltd (2510874) England Dormant 100 Indirect

ISG Interior Services Group Ireland Limited Ireland Dormant 100 Indirect

ISG International Ltd (8142960) England Dormant 100 Indirect

ISG Jackson Special Projects Limited (541763) England Dormant 100 Indirect

ISG Middle East Ltd (7395542) England Dormant 100 Indirect

ISG Polska Sp.zo.o. Poland Dormant 100 Indirect

ISG Regions Ltd (7686934) England Dormant 100 Indirect

ISG Retail and Leisure Holdings Limited (3011317) England Dormant 100 Indirect

ISG Scotland Limited Scotland Dormant 100 Indirect

ISG UK Ltd (8093121) England Dormant 100 Indirect

ISG Western Ltd (9069850) England Dormant 100 Indirect

Jackson Construction Ltd (2094054) England Dormant 100 Indirect

Pearce Ltd (2152862) England Dormant 100 Indirect

Propencity Limited (2517333) England Dormant 100 Indirect

Realys Europe Limited (9227207) England Dormant 100 Indirect

Totty Construction Limited (5086130) England Dormant 100 Indirect

Totty Developments Limited (3119754) England Dormant 100 Indirect

38. Events after balance sheet date

There have been no significant events since the balance sheet date.

We have audited the parent company financial statements of ISG plc for the year ended 30 June 2015 which comprise the Parent Company Balance Sheet, and the related notes 39 to 47. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the parent company financial statements:• give a true and fair view of the state of the company’s affairs as at 30 June 2015;• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or• the parent company financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

Other mattersWe have reported separately on the group financial statements of ISG plc for the year ended 30 June 2015.

Claire Faulkner (Senior statutory auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory AuditorLondon United Kingdom8 September 2015

Independent auditor’s report to the members of ISG plc


2015 2014Notes £’000 £’000

Fixed assetsIntangible assets 41 19 3Investments 42 15,050 15,050Total fixed assets 15,069 15,053

Current assetsAmounts owed by Group undertakings 43 40,617 50,148Other debtors: amounts falling due within one year 2,104 525Cash at bank and in hand 43 13,046 1,890

55,767 52,563Creditors: amounts falling due within one yearAmounts owed to Group undertakings 45 - (4,892)Bank loans 44 167 (2,224)Trade creditors 45 (254) (48)Other creditors 45 (92) (162)Accruals 45 (507) (1,236)Net current assets 55,081 44,001

Total assets less current liabilities 70,150 59,054

Creditors: amounts falling due after one year 44 204 (1,168)TOTAL NET ASSETS 70,354 57,886

Capital and reservesCalled up share capital 46 492 391Share premium account 47 24,291 24,001Own shares 47 (1,312) (1,453)Other reserves 47 8,195 30,979Profit and loss account 47 38,688 3,968TOTAL SHAREHOLDERS’ FUNDS 70,354 57,886

The financial statements of the company (company number 2997684) were approved by the Board of directors and authorised for issue on 8 September 2015. They were signed on behalf of the Board of directors.

S D Lawther J C B Houlton Director Director

Company balance sheet At 30 June 2015

39. Significant accounting policies

The separate financial statements of the company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with United Kingdom accounting standards.

The financial statements have been prepared under the historical cost basis and in accordance with UK GAAP. Whilst the consolidated financial statements are prepared in accordance with International Financial Reporting Standards, the principal accounting policies adopted are the same as those set out in Note 3 to the consolidated financial statements insofar as they are material to the parent company financial statements and have been consistently applied in both the current and prior year.

Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. The company is included within the consolidated financial statements of ISG plc, which are publicly available. Consequently, the company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1 (revised 1996) ‘Cash Flow Statements’.

40. Parent company profit and loss account

The company has taken advantage of section 408(3) of the Companies Act 2006 and has not presented its own profit and loss account. The loss for the year included within the financial statements of the parent company is £2.2m (2014: loss of £0.9m).

41. Intangible assets

The intangible asset is in respect of the company trademarks.

42. Investments

2015 2014£’000 £’000

CostBalance at beginning of the year 15,050 15,050Balance at end of the year 15,050 15,050

43. Current assets

Amounts owed by Group undertakingsAt the balance sheet date amounts receivable from fellow Group companies were £40.6m (2014: £50.1m). The carrying amount of these assets approximates their fair value.

Cash at bank and in handThese comprise cash held by the company and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. The cash balance at the balance sheet date was £13.0m (2014: £1.9m).

44. Borrowings

2015 2014£’000 £’000

CurrentBank loans (167) 2,224

Non-currentBank loans (204) 1,168Total (371) 3,392

Notes to the company financial statements At 30 June 2015


Details of the bank loans are given in Note 25 to the consolidated financial statements.

Only the borrowings in Asia and Spain do not relate to the company.

45. Creditors: amounts falling due within one year

2015 2014£’000 £’000

Amounts owed to Group undertakings - 4,892Trade creditors 254 48Other creditors 92 162Accruals 507 1,236

853 6,338

The carrying amount of trade payables approximates to their fair value.

46. Share capital

See Note 30.

47. Company reserves

Share premium Own shares Other reservesProfit and loss

account£’000 £’000 £’000 £’000

At 1 July 2014 24,001 (1,453) 30,979 3,968Profit for the year - - - (2,229)Dividends paid 49 - - (1,889)Issue of shares 43 - 16,826 -Costs arising on issue of shares - - (496) -Transfer to distributable reserves - - (38,830) 38,830Acquisition of subsidiary 198 - - -Recognition of investment in own shares - (51) - -Recognition of share-based payments - 192 (284) 8At 30 June 2015 24,291 (1,312) 8,195 38,688

As at 30 June 2015, the parent company held 662,743 (2014: 766,000) ordinary 1p shares in the company at a cost of £1.3m (2014: £1.5m) and a market value of £1.1m (2014: £2.3m) following transfers from other subsidiary companies. These shares have not been allocated to individuals and accordingly, dividends on these shares have been waived.

Of the opening balance of other reserves, £22.5m arose from the sale of ISG Interior Services Group UK plc to Interior Services Group (UK Holdings) Limited in 2008. This was transferred to distributable reserves during the year following the settlement of the associated intercompany loan from Interior Services Group (UK Holdings) Limited to ISG plc. Other reserves are unrealised.

Within other reserves, £7.4m was due to the issue of shares in prior years.

All amounts within the profit and loss account are distributable reserves.

Designed and produced in-house by ISG.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.

Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

ISG1571 (10/2015)

ISG plcAldgate House, 33 Aldgate High Street, London EC3N 1AGT +44 (0)20 7247 1717 F +44 (0)20 7392 4999E [email protected]

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