Chairman Robert Moyle said that two areas of its Carillion Telent framework contract for British Telecom are partly responsible for losses which have dogged the firm for two years.

The contracts have also dragged the firm into another loss of £125,000 during the first quarter of this year on revenues which increased by 21.3% to £53.96m.

The problem areas are now being closed down and Moyle is confident about future prospects despite the prospect of litigation.

The building division returned to profit during the first quarter after being divorced from civil engineering and operating with a new standalone management team.

But utilities suffered a “very poor” start to the year delivering a Q1 loss of £588,000 on reduced revenues of £4.9m due to the ongoing problems with Carillion Telent work in Lincolnshire and Shropshire where work was terminated in February.

The firm added: “A thorough review of the contractual rates and terms of the CT contract in the remaining two areas of the East Midlands and Yorkshire, where the division continues to work is being discussed with the client over future viability.”

Highways operations returned to profit during the period  while NMC Nomenca saw a dip in revenue due to the AMP water spending changeover period.

Moyle said: “As a result of the problems experienced on these legacy contracts, the whole issue of governance and approach to risk have been re-evaluated and a far more risk-averse approach to potential projects has been adopted.

“The resolution of the few remaining legacy contracts still remains outstanding, but the Board remains cautiously optimistic for the year. The restoration of the dividend, as soon as possible, remains the prime objective.”