Challenging outlook for building firm

The company – whose clients range from Network Rail to Yorkshire Water –has increased its order book by 500m to 3.7bn so far this year.

However, the company warned that the outlook was "challenging" as it prepares for public sector spending cuts.

In a statement, the company said: "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."

Many businesses expect to face a tougher trading environment after Chancellor George Osborne announces his spending plans in October.

Morgan Sindall said it expects Government funding cuts to social housing schemes in the medium term, with no "significant improvement" in the private housing market due to constrained mortgage supply.

Pre-tax profits fell from 20.5m to 18.4m for the opening six months of 2010 on revenues 14 per cent down to 980m.

All of Morgan Sindall's businesses showed falling profits or operating losses except its urban regeneration arm – Muse – which is about to start work on two major schemes in Doncaster and Wakefield. This arm delivered an 800,000 operating profit due to greater interest in the residential element of its schemes.

In June, Muse secured planning permission to develop an office scheme for Doncaster Council as part of a new civic and cultural quarter. Working as part of the English Cities Fund – a joint venture partnership with Legal & General and the Homes and Communities Agency – the company is about to finish the first phase of a residential and commercial development at Merchant Gate in Wakefield.

Matt Crompton, joint managing director for Muse Developments, said: "Although market conditions have remained tough in the first half of 2010, our presence in a number of long-term development partnerships, coupled with improved levels of residential sales across the UK, has enabled us to perform well.

"We've made excellent progress on a number of our major regeneration schemes already this year and, looking ahead, our forward development programme remains strong."

The group's office fit-out division is also benefiting from signs of recovery in the commercial office property market, landing several major deals from financial services firms in London.

Revenues for the second half of the year are expected to exceed the 179m seen in the first six months, although the firm is cautious about prospects for 2011.

Public sector clients have also cut back on refurbishments to account for less than 10 per cent of turnover, down from 20 to 30 per cent historically.

The company also reported "strong" sales at Granary Wharf in Leeds where Muse is developing 282 waterside apartments as part of Isis Waterside Regeneration.

Morgan Sindall also includes housing and regeneration specialist Lovell, which has a regional office in Leeds. Lovell's schemes include the 981,000 Windrush Court development in Chapeltown Road, Leeds,

which is being built for Unity Housing.

Lovell also began work this year on a 5.6m development of energy-efficient housing in Longfield Drive, Bradford and it has unveiled plans for a major shopping and residential development in Skipton.

Stewart Davenport, Lovell's managing director, said: "With a record 4.5 million people on the housing waiting list – a figure expected to rise to 5 million by the end of the year – the demand for new affordable housing is as strong as ever."

Numis analyst Howard Seymour said: "The group's relatively limited exposure to facility services and 100 per cent focus in the UK construction sector are likely to prevent the shares outperforming ahead of greater clarity about the magnitude and impact of UK public sector cutbacks."

'Solid set of half year results'

Morgan Sindall, which has offices in Garforth, near Leeds, has contributed to a "solid" set of half-year results released by parent construction and regeneration group Morgan Sindall Group.

Since February 2010, the Leeds office has been awarded contracts worth 39.8m in turnover. These include a 14.1m project to design and build a five-storey commercial building for Wakefield Council. The existing buildings at Burton Street, Wakefield, will be demolished to make way for the new civic offices.

Chris Brown, Morgan Sindall area director, said: "While we expect the market to remain competitive this year, we are continuing to win new work and our project pipeline remains healthy."