Construction recession still taking a toll as Sindall profits slump 10%

Executive chairman John Morgan said increasing demand for office buildings was helping to offset the impact of government spending cuts on its business.

But he cautioned: "The commercial side is growing, but let's not over exaggerate - it's growing a bit but not as quickly as governments are spending less.

"It's been challenging for a couple of years and the recession in construction is not over yet."

Morgan, who co-founded Morgan Lovell in 1977 before it combined with William Sindall in 1994, said public sector work now accounts for about 50 per cent of the group's work, down from 60 per cent.

The group added: "Uncertainty remains over the precise levels of future public sector demand and we await the outcome of the comprehensive spending review to gain a clear understanding of specific departmental plans for future public spending."

But the company - which is involved in a range of projects from house building and infrastructure through to social housing and regeneration work - said its order book had grown to 3.7 billion from 3.2bn at the start of the year, although the outlook remained tough.

Turnover in the six months to 30 June fell 14 per cent to 980 million, while pre-tax profit dropped 10 per cent to 18.4m.

The company maintained its interim dividend at 12p and increased its net cash balance by 55 per cent to 128m.

Andy Brown, an analyst at Panmure Gordon, said: "If you look back at statements from Morgan Sindall or anyone else in the sector, you'll see a challenging outlook, but the numbers are in line with expectations."

Morgan Sindall said that Lovell, its housing business, could benefit from the woes of social housing repairs specialist Connaught, which is in crunch talks over funding after warning on profit.

It added that the outlook remained robust for new build social housing and refurbishment.

About 270 of the group's 4,800 staff are based in Scotland.

The firm's Scottish base is at Glasgow Airport business park, where Lovell, construction and infrastructure division Morgan Sindall - which includes the former Morgan EST business - Morgan Sindall Professional Services and Muse Developments all have offices.

Harry Thorburn, Morgan Sindall managing director for Scotland, said: "While we expect the market to remain competitive this year, we are continuing to win new work and our project pipeline remains healthy.

"There are still good projects out there to be won and we'll be doing our best to win them."

The Scottish team has won contracts worth a total of 124.5m since February, including the 95.4m Tayside Acute Adult Mental Health Developments scheme, under which mental health facilities will be built in Brechin and Perth.

Other recent deals secured include a 6.6m project to build industrial units at Eurocentral, the construction of a community health centre in Airdrie and designing and building St Mary's Primary School in Hamilton.

Morgan Sindall Professional Services has landed two contracts with Glasgow University as part of the refurbishment of the Rankine Building and the construction of a lecture theatre for the West Medical Building.

John Jenkins, managing director of the professional services division, said: "Despite challenging market conditions, the business is winning work, particularly in highly-specialised and complex design sectors such as pharmaceuticals, science and technology, energy and transport - where we are seeing continued investment in facilities and infrastructure."