The turnaround was helped by the completion of several large projects and a year of shrewd investments.

The latest accounts for the year to February reveal that former chief executive Mark Andrews, who left the firm last year, received a pay-out of £574,000. He was replaced by David Hurcomb, a former Carillion director, this year.

The building services contractor this year is planning to invest heavily in raising competitveness and targeting new markets.

But chairman Nimble Thompson warned the slowdown in Government spending would make it hard to deliver a strong repeat performance in the near future.

He said: “Although the results are extremely pleasing, this level of profit is unlikely to be repeated in the near future and indeed we approach the market with caution, as the recession continues to bite.

“There are two very clear-cut reasons to explain the profit figure. Firstly, some of our most successful longer-term projects came to a financial close, resulting in us being able to take profit.

“Secondly, we saw a welcome revaluation in our investment portfolio, which returned to a £6.7m profit compared to a £6.7m loss the previous year – a swing we weren’t expecting quite so soon.”

Bailey completed the BBC’s Media City at Salford Quays, a flagship PFI hospital project in Merseyside and several commercial developments in central London.

But challenging market conditions saw turnover fall 23% to £464m.

Thompson added: “We expect that our sales volume will remain at a similar level for at least the next couple of years and for that reason we have unfortunately had to take the necessary steps to reduce our workforce by 7%.

“The board has set aside substantial investment for 2010/11 which will help us improve our market penetration, capitalise on our technical expertise and target new emerging sectors.”

The core businesses have secured more than 80% of  turnover for 2010-11.

This week NG Bailey picked up a £26.5m contract from Robertson Construction Group to deliver M&E and ICT services for NHS Grampian’s new Emergency Care Centre at Aberdeen Royal Infirmary.