Morgan Sindall has reported a pre-tax profit of £43.9 million after clearing legacy projects which resulted in a £15m loss in 2015.

Last year the firm settled the second of two problem Ministry of Defence contracts at the Faslane naval base after writing off over £40m on the deals.

Chief executive John Morgan said all divisions were now performing well with strong cash generation and the group expected to outperform expectations this year.

Group revenue rose 7% to £2.5 billion in 2016 with the outlook looking better in the year ahead as the order book jumped nearly a third to £3.6bn.

Even adjusted for exceptionals and intangibles, there was clear improvement with underlying pre-tax profit up 32% from £34.3m to £45.3m for the year endings 31st December 2016.

Mr Morgan said: “These results demonstrate the considerable strategic and operational progress made in the group over the last few years and the underlying quality of the business.

“The UK is struggling to cope with the increasing demand for affordable housing and there is a clear need for government to deliver urban regeneration and infrastructure investment to support future economic growth. Morgan Sindall Group has strong established positions in these markets, and the balance sheet and cash position to fund further investment and growth.

“From this strong base, we are confident in the outlook and expect the positive momentum across the group to continue through 2017 and beyond. With significant opportunities in Partnership Housing, the continued improvement in operational delivery in Construction & Infrastructure, and the size and quality of our secured order book in Fit Out and elsewhere across the group, we are well-placed to deliver a result for the year which is slightly above our previous expectations.”

Morgan Sindall’s construction and infrastructure business posted a 0.7% margin last year but Morgan said he has set construction a 2% target over the medium-term and infrastructure a target of 2.5%.

Partnership Housing operating profit rose 40% to £13.4m. Morgan said the business had seen a sizeable increase in its dialogue with local authorities and housing associations on opportunities for future land and development partnerships.

The firm, which also announced that former head of the British Property federation Liz Peace is stepping down as a non-executive director this May, said its fit-out arm, which operates under the Overbury brand, ended the year with a record order book of £446m. It made a profit of £27.5m on turnover of £634m.