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ISG was preparing to post after tax losses of more than 拢130m at the time it collapsed into administration with problem high-rise residential jobs costing it more than 拢100m, a new report by administrator EY has said.

The update, published on Companies House, reveals that by the time the firm collapsed into administration on 20 September, its debts had piled up to 拢1.1bn.

New details have also emerged about the sale process to would-be buyer Antipodean Holdings, fronted by South African entrepreneur Andre Redinger and former Multiplex staffer James Overton.

EY鈥檚 176-page report said Antipodean reduced its initial offer for the business, made in the spring, to just 拢1 in early September and that, amid claims that Antipodean was unable to 鈥渃onclude the transaction and meet the immediate funding requirements of the group,鈥� ISG鈥檚 US owner Cathexis 鈥� run by a billionaire called William Harrison 鈥� told the firm the deal would not be going ahead, three days before ISG eventually sank.

Worries over Antipodean鈥檚 funding had already prompted a so-called 鈥渁ccelerated marketing process鈥� in September centred on the sale of the fit out business.

This had been the subject of an offer from an unnamed private equity firm in March, only for that to flounder because, according to EY, 鈥渋t was highly conditional and was subject to due diligence being conducted as well as complex separation issues being required to be resolved鈥�.

The same unnamed buyer 鈥� one of 11 private equity firms to sign an NDA in the spring ahead of receiving information about the fit out business 鈥� was approached in September and again 鈥渆xpressed interest鈥� in buying the fit out arm.

But the deal hit the buffers again 鈥渋n a large part due to the uncertainty as to whether certain contracts would be successfully novated to the buying entity as well as the material working capital required to fund the fit out business鈥�.

EY said others were approached on an 鈥渦rgent basis thereafter but this process did not result in a buyer being identified who was willing and able to proceed with an acquisition on a going concern basis within the timeframes required鈥�.

It added: 鈥淐athexis confirmed to the group that there was no prospect of its own refinancing process providing further funding to the group in the near term and no further funds available as an alternative source of liquidity.鈥�

EY said that ISG鈥檚 draft 2023 accounts 鈥� which were never filed 鈥� showed a turnover of 拢2.2bn and a post-tax loss of 拢133m. It said they also included writedowns of 拢148m on contracts losses 鈥渨hich have been driven by legacy losses on a number of material construction contracts in prior years coupled with the group鈥檚 decision to exit the logistics and distribution business and crystallise contract losses on several large contracts in that division鈥�.

At the time it went down, ISG employed 2,380 people with an initial 216 kept on to help with the winddown of the business although that has now dropped to 22.

Construction employed the most staff with 879 while ISG Interior Services, the parent of its engineering arm 鈥� which worked on data centre and science schemes 鈥� and the fit out business, employed 729 people.

As well as the problem high-rise schemes, ISG鈥檚 finances were also hit by the move to pull the plug on the British Volt factory in Northumberland, which it had been due to build, and the decision by the client to put on ice a film studios job in Hertfordshire called Sunset Studios.

鈥淭he combined impact of these projects not proceeding as expected negatively impacted cashflow and profitability,鈥� EY said.

It said a winding up petition filed in October 2023 by a supplier against ISG Construction in relation to a missing 拢70,000 鈥� which resulted in an 鈥渋mmediate鈥� payment to settle the debt 鈥� and a credit insurer removing its cover 鈥渇or multiple suppliers as a result of the petition led to negative market speculation regarding the group鈥檚 financial stability, which in turn led to many suppliers and creditors narrowing their credit terms鈥�.

As a result, the firm asked for, and was given, a Time to Pay Arrangement (TTP) with HMRC relating to 拢60m of VAT that was due. A revised TTP agreement was struck with HMRC in February which would have seen ISG pay back 拢5m every month of 2024 with the final payment due on 31 December.

A fresh TTP request in January triggered a refinancing strategy which, EY said, would either see the sale of the fit out business or the refinancing of Cathexis 鈥渨hich was intended to result in the required funds being injected into the ISG group鈥�.

EY said its US business, EY Americas, was brought in after the October 2023 winding up petition with its initial brief, which included cashflow forecast review and refinancing support, later extended to include liquidity advice, cashflow monitoring and negotiating a TTP agreement.

It added it was brought in to help with the sale of the fit out business in March and added that 鈥減reliminary contingency planning, including discussions with UK government in respect of contracts in which they had an interest, was commenced.

鈥淚n early September 2024, when it became apparent that a successful sale of the group was going to be challenging, comprehensive contingency planning for an insolvency of the group was undertaken. This included making plans to ensure that ongoing project sites could be made safe and transferred to new contractor.鈥�

At the time it collapsed, ISG had 100 live construction sites and 500 live fit out and retail sites while EY鈥檚 report also said the eight collapsed companies had a 鈥渉ighly complex鈥� IT infrastructure 鈥渨ith over 150 unique suppliers and software providers which are either bespoke to the group or irretrievably integrated into various applications鈥�.

Trade creditors of the eight collapsed ISG firms 鈥� ISG Construction, ISG Interior Services Group, ISG Engineering, ISG Central Services, ISG Jackson, ISG Retail, ISG Fit Out and ISG UK Retail 鈥� are owed 拢308m, EY said.

Four companies 鈥� ISG Construction, ISG Retail, ISG Engineering and ISG Fit Out 鈥� account for the bulk of the losses trade creditors are facing. The largest amount is for 拢111.5m owed to trade creditors by ISG Fit Out.

EY warned that it expects to recoup just 拢35m from the administration and has told unsecured creditors, who include intercompany creditors, owed a cumulative total of 拢885m, not to expect a dividend to be paid.

HMRC, listed as a secondary preferential creditor, is owed 拢89.4m while primary preferential creditors, consisting of employees are owed 拢6.3m 鈥� with this group set to be paid a dividend.

Cathexis has been contacted for comment.