An Interim Management Statement to the Stock Exchange said: “Against the backdrop of continued difficult trading conditions in most of its markets, group performance in the first quarter was slightly below the Board’s expectations.

“Although Group revenue levels held up, group margin was adversely impacted by margin contraction in its Construction and Infrastructure and Affordable Housing divisions.

“In Construction and Infrastructure, the markets continue to be highly competitive, with the operational focus being on careful contract selection, cost and overhead management, and management of cash in a challenging working capital environment.

“Margins continue under pressure across all sectors, however the full impact of this has been mitigated in part by the overhead cost savings derived from the restructuring announced in November 2012.”

The company launched a major shake-up last year which saw a number of regional offices closed in a bid to make annual savings of up to £15m.

The affordable housing performance will be a particular disappointment to the board which was expecting an early turn around in the division.

Average company daily net debt during the period was £35m and Morgan Sindall also boosted its banking facilities to £125m with a £15m deal with Lloyds issued under the UK Government’s Funding for Lending Scheme.

Company debts are being driven drown with net debt as at April 30 standing at £23m.

The company added: “General market conditions are expected to remain difficult throughout 2013 and no significant short-term improvement is envisaged.

“With positive momentum in the business evidenced by order book levels and the operational focus on deliverable margin, the Board is confident that the business is well-positioned to benefit from profitable opportunities as they arise, with a strong bias towards the second half of the year.”

Morgan Sindall’s share price dropped 4% in early trading this morning.