NM Investments has been set up to “utilise some of the free-flow cash” and “generate both a development profit, at a margin currently in excess of existing contracting margins, and also provide revenue and a return for the Construction Division.”

Work has started on site in Notingham on the first town-house development with another project in the pipeline at Sutton-in-Ashfield.

North Midland said: “Both of these schemes are a tentative ‘toe in the water’ on a moderate scale with low risk and should provide enhanced returns.”

The development plans will be confirmed at the firm’s AGM today where revenue of £74.5m for the first quarter will be revealed generating £640,000 of profit.

The Telecoms division was the main drag on margins which reduced to “an unsatisfactory return” of 0.86%.

Chairman Robert Moyle, talking about the Telecoms division said: “There is an urgent need to return this business to profitability and a thorough review of all operations and performance is currently being undertaken.”

The water sector was the main driver of growth returning a £731,000 profit on revenues of £49.8m.

Moyle said: “The construction market is currently quite buoyant and this year, on the back of its strong customer relationships and its ability to deliver larger and more complex projects, the group will deliver further growth in both revenue and profit. 

“Therefore, a very selective and thorough approach to contract selection and risk management is being taken.  All the concentration going forward will be on managing this growth and maximising the return upon it.”

North Midland currently employs nearly 1,700 staff but is struggling to fill vacancies with around 100 jobs permanently available.

John Homer Chief Executive said: “It is pleasing to report that we have had a strong start to this year.

“Our strategy of focusing on getting the basic principles of risk management right and delivering exceptional customer service is serving us well.

“The losses in the telecommunications sub segment are disappointing and full management attention is being focussed to rectify the situation.

“The forward order book and cash generation are positive indications of a successful year. It is expected that these will continue.”