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Morgan Sindall鈥檚 construction business has posted a dip in revenue and operating profit as the firm said it was still hit by tight margins and 鈥渄ifficult鈥� trading conditions, which are expected to continue through to next year.

In its half-year results, announced today, Morgan Sindall鈥檚 construction and infrastructure business posted revenue of 拢567m, down 4% on 拢593m over the same period last year.

Adjusted operating profit fell 8% to 拢5.9m, giving an adjusted operating margin of 1% - broadly the similar to the 1.1% the firm posted over the same period last year.

The firm said trading conditions for the construction and infrastructure business 鈥渞emained difficult throughout the period鈥�, with a 鈥渃ombination of lower margins from work tendered in 2012-2013 and cost inflation鈥�.

The firm added: 鈥淎t a time of improving general market activity, [this] has provided some significant on-going challenges particularly in the construction activities.鈥�

The firm said trading conditions were particularly difficult in London and the south of England, with 鈥渋nflationary and delivery pressures [鈥�] providing significant management challenges鈥�.

The firm added: 鈥淟ooking ahead, no significant improvement in performance and margin is expected in the second half and the on-going challenges are expected to remain.

鈥淗owever, the growing proportion of contract procurement through negotiated, framework and two-stage tendering in the market provides confidence of a higher quality of future work in the medium and longer term.鈥�

Overall, Morgan Sindall Group posted revenue of 拢998.5m in the six months to 30 June 2014, down 2% on 拢1.019bn over the same period the previous year.

The firm posted pre-tax profit of 拢13m - up from 拢1m over the same period last year, when its performance was hit by a 拢13m write-down on a clutch of problem contracts in its construction business.

Operating profit stood at 拢14m over the period - broadly similar to the 拢14.8m the firm posted over the same period last year, prior to the 拢13m write-down.

The firm鈥檚 order book was up 14% on the same period last year to 拢2.7bn.

The firm pointed to the continued growth of its urban regeneration business, which posted 拢3.5m in adjusted operating profit - up from 拢400,000 for the same period last year - with revenue rising 24% to 拢42m.

Morgan Sindall chief executive John Morgan said: 鈥淭he first half has seen an important shift in the balance of our profits, with an increase in the contribution from the urban regeneration business.

鈥淭his trend is expected to continue into the second half and beyond and reinforces our long-term strategy of focusing on both construction and regeneration activities.

鈥淔or the remainder of 2014, the operating environment for general construction is expected to remain challenging with no easing of pressure on margins.

鈥淗owever, with continued positive momentum anticipated within both fit out and urban regeneration, the group remains on track to deliver results for the full year in line with the board鈥檚 expectations.鈥�