UPDATE 2-Interior Services sees recovery in private sector

* Sees business from food retailers up 10 pct in 2011 - CEO

* Sees 5-10 pct fall in regional construction business

* FY adj pretax profit 12 mln stg vs 13.3 mln stg yr ago

* Raises final dividend by 5 pct to 10.14p

* Shares up 9.3 pct (Recasts; adds CEO, analyst comments; updates share movement)

By Juhi Arora

BANGALORE, Sept 8 (Reuters) - British construction management firm Interior Services Group (ISG.L) said it was seeing a recovery in spending by its private sector customers, who account for about 70 percent of its revenue, sending its shares up 9.3 percent.

Interior Services, which provides refurbishment, new-build and fit-out services, also said it was seeing signs of recovery in most of its markets.

In July, British construction firm Kier (KIE.L) had said it was witnessing a rebound in the private sector with private funding becoming available, offsetting the impact of public spending cuts. [ID:nLDE66B079]

Retailers Tesco (TSCO.L), Sainsbury (SBRY.L) and Wm Morrison (MRW.L) have again committed to bringing more new space on to the marketplace and refurbishing the space they have got, Interior Services Chief Executive David Lawther told Reuters.

"The bank retailers have got the same story. we've seen the likes of Barclays (BARC.L) and Lloyds (LLOY.L) commit again to new programmes for roll-outs of their bank branches and refurbishment of existing bank branches," he said.

The CEO expects business from food retailers to rise more than 10 percent in fiscal 2011.

However, Lawther expects the UK construction sector, which led to a 10 percent drop in its full-year adjusted pretax profit, to remain weak due to its large exposure to the public sector.

"We are flagging a small decline in the order of 5-10 percent for the year as a whole on the regional construction business," Lawther said.

Numis Securities analyst Howard Seymour said, "ISG has the lowest UK public sector exposure in the (construction) sector and its UK private sector and international exposure point to rising profits in 2011/12."

The company, whose key clients include HSBC (HSBA.L), Google Inc (GOOG.O) and Exxon Mobil (XOM.N), raised its final dividend by 5 percent, taking the total dividend to 14.34 pence.

For the full year, the company reported an adjusted pretax profit of 12 million pounds ($18.42 million), compared with 13.3 million pounds last year.

Exceptional items included losses on closure of the company's office in Japan and legal costs.

Revenue fell 7 percent at 972 million pounds.

Interior Services' shares, which have shed 27 percent in the last one year, were up 9.3 percent at 153 pence at 1333 GMT on Wednesday on the London Stock Exchange. ($1=.6513 Pound) (Reporting by Juhi Arora in Bangalore; Editing by Vinu Pilakkott) ((juhi.arora@thomsonreuters.com; within UK +44 207 542 7717; outside UK +91 80 4135 5800; Reuters Messaging: juhi.arora.reuters.com@reuters.net))