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Morgan Sindall鈥檚 construction business has posted a full-year loss of 拢2m after a handful of problem jobs forced the firm to set aside 拢14.7m to cover costs related to the contracts.

Reporting its results for the year to 31 December 2013, Morgan Sindall said its construction and infrastructure business continued to be hit by costs associated with four problem contracts.

After making a 拢13m provision for costs attached to the jobs in its half-year results, the firm this had now risen 拢14.7m, which dragged the construction business into the red.

The construction division posted an adjusted operating profit of 拢12.7m, down 36% on last year.

But when taking into account the 拢14.7m in exceptional items, the division posted an operating loss of 拢2m.

Revenue in the construction and infrastructure business rose 6% to 拢1.2bn.

Meanwhile, revenue across the wider construction group remained relatively flat, up 2% on last year to 拢2.1bn.

However the group鈥檚 profit fell dramatically, with pre-tax profit down 59% to 拢13.9m, and operating profit falling 54% from 拢35.2m to 拢16.2m.

After stripping out the exceptional items of 拢14.7m and other finance costs, the firm鈥檚 adjusted operating profit stood at 拢33.6m, still down 30% on 拢48.1m last year. Adjusted pre-tax profit stood at 拢31.3m, down 34%.

The firm said it committed order book as was 拢2.4bn, an increase of 8% since the previous year end.

The firm said the 拢14.7m of costs were related to problems with 鈥渇our old construction contracts held on the balance sheet鈥�.

The figure is up from the 拢13m provision the firm made in its half-year results.

The firm said the half-year figure was 鈥渂ased on an assessment of progress made at that time towards recovering these amounts and the expected time, cost and associated risk of pursuing legal remedies to achieve recovery鈥�.

It added: 鈥淒uring the second half, there has been commercial resolution achieved on one of these contracts, whilst another has been impaired to reduce the carrying value to nil.

鈥淚n relation to the remaining two contracts, the Board believes it is appropriate to provide against these balances to an amount it considers is a balanced estimate of overall likely resolution based upon its current assessment of progress made towards recovering these amounts and the expected time, cost and associated risk of pursuing legal remedies to achieve recovery.鈥�

The firm said the construction and Infrastructure division had 鈥渆xperienced challenging market conditions through the year, which has significantly impacted on overall profitability鈥�.

The firm鈥檚 fit-out business posted revenue of 拢427m, down from 拢437m last year, with an adjusted operating profit of 拢10.9m, down 4% from 拢11.3m last year.

Revenue in the affordable housing business remained flat, down 1% to 拢381m, while adjusted operating profit fell 25% to 拢8.6m.

Chief executive John Morgan said: 鈥�2013 has seen challenging conditions predominate across most of our markets, with competitive pressures impacting on margins and profitability.

鈥淣otwithstanding this, the positive operating cash flow generated by the business has allowed us to make further investment in strategic assets, key skills and resources, which positions the Group well to benefit from future growth opportunities.

鈥淟ooking ahead to 2014, although there are signs of improving conditions in some of our markets, it is anticipated that upward pressure on supply chain costs and skills availability will provide additional management challenges.

鈥淎gainst this backdrop, we remain confident that our robust order book and on-going disciplined approach to contract selectivity will support the delivery of growth in this year and beyond.鈥�