Morrison had lost a string of social housing repair deals prior to the acquisition and had been threatened with termination by a number of other local authorities.

But Mears is turning the business around despite the Morrison operation still making losses.

A trading update to the City today by Mears said: “Mears was aware in the period leading up to completion of the acquisition that a number of Morrison contracts were encountering significant service delivery failures and poor client relationships.

“Mears is committed to investing in these long term opportunities and the primary focus since completion has been to put structure and process in place to deliver excellent customer service.

“The response from Morrison clients since the acquisition has been positive and no contract losses of any materiality have been experienced, which is ahead of management’s acquisition plan.

“The Group is pleased with the early progress made since the acquisition and remains confident in the returns this business will generate following a period of restructuring which is already underway.”

The Morrison deal has helped boost Mears’ order book to £3.8bn as trading remains “solid” in its core social housing and care operations.

The “non-core” M&E business suffered difficult trading conditions and will post an operating loss for 2012 when annual results are announced on March 19.

David Miles, Chief Executive of Mears, said: “I believe that the opportunities currently available within the Social Housing sector are stronger today than at any time since I joined the Group seventeen years ago.”