Problem Ministry of Defence contracts at the Faslane Naval Base have resulted in a pre-tax loss of £27.2 million during the first half of this year for Morgan Sindall.

Announced by the contractor today, the figure is double the £13.0m pre-tax loss for the same period last year though chief executive John Morgan said the firm remains confident it will reach its full year targets.

Morgan Sindall said in May that it expects to take a further £35 million hit over two problem Ministry of Defence contracts at the Faslane Naval Base in West Scotland.

It is now understood this will cost the firm nearly £40m.

Its Construction & Infrastructure business adjusted operating profit down to £0.3m (HY 2014: £5.9m), impacted by continued challenges from older construction contracts in London and the South. The firm said completion is taking longer than previously expected.

Operating profit before amortisation and exceptional operating items was £15.5m (2014: £15.2m) on revenue of £1,152m, a 15 per cent increase over the same period last year (2014: £998m).

The Group reports an order book of £2.6 billion, down slightly (3 per cent) on the previous year (2014: £2.7bn), supported by a £3.2bn pipeline of regeneration schemes (2014: £3.2bn). Adjusted earnings per share for the period was 24.5p (2014: 28.6p). The interim dividend has been maintained at 12p per share (2014: 12.0p).

Highlights include a strong performance from its Fit Out operation, with operating profit up 89 per cent to £10.4m (HY 2014: £5.5m) and good growth expected to continue through the second half. While Urban Regeneration operating profit rose to £5.0m (HY 2014: £3.5m) as a consequence of the ongoing and focused, long-term investment in the development portfolio and an improved performance from response maintenance in Affordable Housing, with loss reduced to £0.8m (HY 2014: loss £1.7m) and further progress expected in the second half towards its target break-even position by 2016.

“We’ve seen a strong performance from Fit Out in the first half and Urban Regeneration continues to deliver good growth as a result of our focused and long-term investment in the development portfolio,” chief executive John Morgan.

“Construction & Infrastructure continues to be impacted by the poor performance of its older and lower margin construction contracts in London and the South and, whilst these are working through to completion, this is happening at a slower rate than previously anticipated which will hold back the divisional performance in the second half of the year. However, it is expected that Fit Out will produce a further strong performance in the second half, with Urban Regeneration and Affordable Housing both making good progress.

“Consequently, the Group remains on track to deliver results for the full year in line with the board’s expectations and the outlook for 2016 and beyond remains unchanged.”

Affordable housing, regeneration and maintenance firm Lovell has contributed to the half year results thanks to a number of contracts with housing associations and local authorities on new affordable housing developments, major housing refurbishment schemes and regeneration programmes across the UK. The company’s order book now stands at £732m.

Key housing projects for Lovell in Scotland include: