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Construction cost inflation in London and the South put a brake on Morgan Sindall profit in the year to December 2014, the contractor has said.

In mixed full-year results published this morning, Morgan Sindall confirmed problems on 鈥渁 small number鈥� of construction contracts 鈥渁dversely impacted鈥� its results for the period, .

The firm posted a 19% drop in adjusted pre-tax profit for 2014 to 拢25.2m, down from 拢31.3m the previous year, which the firm attributed to 鈥渁n escalation of costs鈥� and 鈥渄elivery pressures鈥� on some contracts in its London and the South construction business.

Revenue rose 6% to 拢2.2bn, up from 拢2.1bn, while the order book grew 11% to 拢2.7bn, up from 拢2.4bn.

The adjusted profit figures stripped out the impact of exceptional costs, which in 2013 included a 拢14.7m provision made for costs related to four problem jobs that year.

With exceptional costs included, Morgan Sindall reported a 64% rise in pre-tax profit to 拢22.8m, up from 拢13.9m the previous year.

Nonetheless, Morgan Sindall chief executive John Morgan described the results as 鈥渄isappointing鈥�.

Morgan said he expected 鈥渓ower returns鈥� in the firm鈥檚 construction and infrastructure division 鈥渢o remain for at least the first half [of 2015] as lower margin construction contracts tendered in 2012-2013 are worked through to completion.鈥�

The firm鈥檚 construction division posted a 72% drop in adjusted operating profit to 拢3.5m, down from 拢12.7m, while its revenue contracted 5% to 拢1.17bn, down from 拢1.23bn. The firm鈥檚 operating margin dropped to 0.3% from 1%, while its order book edged up 3% to 拢1.54bn, up from 拢1.5bn.

The firm confirmed it had shaken up its construction management teams in an effort to improve performance. Three construction directors exited this month, , following the firm鈥檚 London boss.

Elsewhere, the firm鈥檚 fit-out and urban regeneration businesses performed strongly.

The firm鈥檚 fit-out division 鈥� which includes subsidiary Overbury 鈥� posted a 38% jump in adjusted operating profit to 拢15m, up from 拢10.9m, with revenue up 19% to 拢507m, up from 拢427m.

Morgan Sindall said the division was 鈥減ositioned well for further growth鈥�, with the order book up 70% to 拢241m.

Adjusted operating profit at the firm鈥檚 urban regeneration division jumped nine-fold to 拢10m, up from 拢1m, while revenue grew to 拢113m, up from 拢82m.

The firm鈥檚 affordable housing division posted a 30% decline in adjusted operating profit to 拢6m, down 30% from 拢8.6m, while revenue grew 11% to 拢423m, up from 拢381m.

Morgan added: 鈥淭he continued positive momentum expected within fit-out, affordable housing and urban regeneration, together with further investment programmes in regeneration opportunities, and supported by the improvement in the quality of our order book, provides confidence that the group is well positioned to deliver overall growth in 2015 and beyond.鈥�