New Wates chief executive Andrew Davies said the firm was concerned about labour and material price inflation as the construction economy improved.
His warning came as the construction group posted pre-tax profit down 13% to £22.3m last year, on turnover down by more than a fifth to £931m.
Davies said: “While volumes indicate improvement in 2014, it may be 2015 before we see significant market recovery.
“A strong forward order book for 2014 reflects more activity in the sectors in which we operate, but the impact of this is likely to be progressive and will take some time to come through in financial performance.
“We are not immune to some of the issues associated with an upturn in the market, such as material price inflation and labour shortages, but we are in a robust financial position allowing us to enter only into contracts which we believe will deliver commercial value.”
The group order book, however, was strongly ahead from £1.6bn to 2.4bn at the end of the year and operating margins rose from 2.2% in 2012 to 2.5% in 2013.
This was primarily driven by a 4% reduction in administrative expenses and non-recurring costs of £4.9m incurred the year before.
Wates said it had overhauled it pre-construction team to improve its win strike rate by 20% and reduce abortive bid costs by 25%.
It also launched Wates Building Sevices towards the end of last year to improve its in-house management capability and work more effectively with M&E subcontractors.
Like most other main contractors cash in the bank dropped from £121m in 2012 to just over £100m at year end.
Davies said the group would be investing further in responsive maintenance to see Wates Living Space take a bigger share of the market.
He added the group would also work with customers to find innovative ways to finance much-needed affordable new homes and invest through its development arm in more private residential schemes.