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Morgan Sindall has seen its profit slump to 拢1m over the first half of the year after problems on a number of construction jobs left the contractor 拢13m out of pocket.

Reporting its results for the six months to 30 June 2013, Morgan Sindall posted pre-tax profit of 拢1m, down from 拢18.8m for the same period the previous year, after making provisions of 拢13m against amounts on a small number of construction contracts.

The firm said it had received legal advice on the contracts and believed that the amounts were recoverable.

鈥淗owever, based upon an assessment of current progress made towards recovering these amounts and the expected time, cost and associated risk of pursuing legal remedies to achieve recovery, the Board believes it is now appropriate to provide against these balances to an amount it considers is a prudent estimate of overall likely resolution,鈥� the firm added.

Overall revenue across the group rose 2% to 拢1,019m, with operating profit, before the deduction of the 拢13m in exceptional items, of 拢16.2m, down 22% on 拢20.8m the previous year.

The firm鈥檚 construction and infrastructure business reported revenue of 拢593m for the period, up slightly on 拢583m for the same period last year, with operating profit of 拢6.4m - before the exceptional items - down 25% from 拢8.5m. The construction division鈥檚 operating margin fell from 1.5% to 1.1%.

The firm鈥檚 fit out business posted revenue of 拢203m, up from 拢191m, with an adjusted operating profit of 拢5m, down 9% from 拢5.5m the previous year. The operating margin tightened from 2.9% to 2.5%.

The affordable housing business posted a fall in revenue of 8%, down from 拢202m last year to 拢185m, with operating profit down 64% from 拢7.5m to 拢2.7m. The operating margin in the affordable housing business fell sharply from 3.7% to 1.5%.

The firm said it had 鈥渟uffered a significant decline in both revenue and margin as a result of general competitive pressures in the contract new build social housing market鈥�.

Meanwhile, the firm鈥檚 regeneration business posted revenue of 拢34m, up 48% from 拢23m the previous year, with operating profit of 拢400k, down from 拢1.5m the previous year.

Net cash at the end of the period was 拢39.7m, a reduction of 拢10.7m from 1 January 2013.

Morgan Sindall chief executive John Morgan said the firm did not expect to see a major pick up in the overall market in the second half of the year: 鈥� 鈥淟ooking ahead to the second half, overall market conditions are not expected to significantly improve. 

鈥淭he business will continue to focus on cash management and will look to improve the order book selectively, such that it is well-positioned to take advantage of the growth and investment opportunities in its markets as they arise.鈥�