Results for the year to December 31 show operating margins at the Construction and Infrastructure Services divisions improved to 2.2% from the previous year’s 2% as revenue dipped to £1.3bn from £1.5bn.
Group turnover was also down 5% to £2.1bn as pre-tax profits also dipped 9% to £40.7m.
The fit-out division enjoyed a strong year with the London commercial market powering growth in revenue of 43% to £415m.
But the company warned: “Very challenging conditions persist in the commercial fit out and refurbishment markets where intense competition is creating downward pressure on tender prices.
“Consequently the operating margin reduced to 3.6% (2009: 4.7%).”
Turnover in the affordable housing division rose to £387m from £374m following the £6.7m acquisition of Powerminster and a number of social housing contracts from Connaught for £28m.
Cost cutting measures across the Group resulted in £21m of savings last year giving a total of £59m during the last three years.
Morgan Sindall is also looking to make its supply chain more efficient.
The company said: “Advances in the management of our supply chain through procurement initiatives will further improve operating efficiency, helping to protect our margins and maintain our competitiveness in the market in the short-term, and improving operating margins in the medium-term when markets recover.”
John Morgan, Executive Chairman, said: “2010 was a year of important strategic and operational progress for the Group.
“The restructuring we conducted to create Construction & Infrastructure leaves us better placed than ever to meet our clients’ needs, while Lovell’s expansion in response and planned maintenance opens up exciting new market opportunities.
“Trading remains challenging, but we continue to secure profitable projects. We are well placed to exploit opportunities presented in the short-term, whilst carefully monitoring market trends to maximise long-term growth potential. The Group remains financially strong with an exciting future.”