Henry Boot acquired a majority stake in Starfish Commercial last August.
But the business has now been placed into creditors’ voluntary liquidation after not performing in line with expectations.
Henry Boot said: “Whilst we have been encouraged by recent increases in activity within our construction division, which is now at over 90% of pre-Covid-19 levels, unfortunately, we have not seen the same level of recovery in Starfish.
“Furthermore, there is no visibility as to when it might reach a sustainable level.
“These factors have led us to make the difficult decision of placing Starfish into creditors’ voluntary liquidation.
“This decision has a minimal impact on Henry Boot’s strong financial position and management’s expectations for FY20. A £0.2m goodwill impairment will occur in H2, which is additional to the £1.8m impairment already accounted for in H1.
“Affordable Housing is still a market of interest and we will continue to pursue our interest in this sector, but this will now be part of the overall services offered by our construction business.
“The Group’s overall performance remains in line with management’s expectation, and we continue to be encouraged by the growing momentum within our operations.
“This enables us to remain focused on selectively investing in our three long-term markets: residential, industrial and logistics, and urban development.”