Interior Services buys Propencity for 12.5m

Interior Services Group (ISG) has bought Propencity for 12.5m (including 8.5m of the group's debt). The deal also provides for an add-on figure of up to 4m if the regional construction group turns in a sparkling profit in the current financial year.

Philip Brierley, chief operating officer at Propencity, joins the ISG board. ISG's acquisition will give it a turnover of 700m in a full 12-month period.

Propencity currently operates under three brand names:

Totty Construction - a regional construction player in the north of England with a turnover
of 90m.

Jackson Construction - a regional construction group working mainly in the east
of England. Turnover runs to 70m.

Dean & Bowes - a 45m-a-year fit-out and refurbishment provider, specialising in the retail market.

Brierley previously led a 23m management buy-out (MBO) of Propencity in January 2003 from the Peterhouse Group. David Jackson, chief executive of Peterhouse, explained at the time that the reason for parting company with Propencity was that "it's a cash user, rather than a cash generator".

Propencity produced a loss of 1.2m on a turnover of 210m in 2003. Propencity's accounts for 2004 have not been submitted to Companies House.

ISG finance director David Lawther declined to offer a pre-tax loss figure for Propencity for 2004. "Because of the MBO, a pre-tax figure is meaningless," he insisted.

He explained that the reason Propencity was cash-negative prior to the MBO from Peterhouse was because Brierley had been looking to make acquisitions.

When asked if ISG had been able to snap up Propencity for less than the MBO's 23m figure because it had been struggling, Lawther said that was not the case.

During 2004, Propencity suffered operating losses on higher risk contracts in the high-rise residential market place, which it will "no longer be exposed to". ISG also said that Propencity has net assets of 1.6m, including 17m-plus of goodwill.

Both Totty and Jackson Construction have special building services divisions, working on small projects up to 1.5m. Turnover in each case runs to between 15m to 20m. ISG has a similar division based in London. "This will take us out of our
traditional market in the capital," said Lawther.

Propencity also did larger projects. "They got into difficulty on their 10m-plus schemes, especially D&B," said Lawther. "Both Totty and Jackson came unstuck there. They will fit into ISG, however, as we have a track record of delivery on complicated new builds."