Four old contracts continued to cause problems with two still outstanding as the deals forced Morgan Sindall to set aside £14.7m to cover them.

Turnover ticked-up 2% to £2,095m for the year to December 31 2013 from £2,047 last time while pre-tax profit dropped to £13.9m from £34.2m

Operating margins at Morgan Sindall’s construction and infrastructure division dropped from 1.7% to just 1% as it made a pre-exceptional operating profit of £12.7m on a turnover of £1,234m.

After the £14.7m exceptional charge for the problem contracts the construction and infrastructure division made a nett loss of £2m.

The firm said the division had faced “challenging market conditions through the year” and was now being hit by cost inflation as the market picked-up.

Chief Executive, John Morgan said: “Looking ahead to 2014, although there are signs of improving conditions in some of our markets, it is anticipated that upward pressure on supply chain costs and skills availability will provide additional management challenges.

“Against this backdrop, we remain confident that our robust order book and on-going disciplined approach to contract selectivity will support the delivery of growth in this year and beyond.”