Shares in Morgan Sindall Group fell on Thursday morning after it said performance in the first quarter of the year was "slightly below expectations" as it continued to withstand difficult trading conditions.
Shares slipped 22p, or 4%, to 537p by 11am, approaching its 52-week low of 500p. The group's 52-week high was 697p in October 2012.
In an interim management statement for the period from 1 January to date, the board told the stock market: "Although group revenue levels held up, group margin was adversely impacted by margin contraction in its construction and infrastructure and affordable housing divisions. The group's forward order book as at the end of Q1 was £3.2bn, up 6% from the year end position, reflecting positive levels of selective bidding activity."
The directors 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."
The statement went on to describe performance in each of the group's divisions. Construction and infrastructure remain "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."
Tight margins were partly offset by the overhead cost savings found in a restructuring announced in November 2012.
The fit-out business, Overbury, "is focused on operational delivery and margin improvement through selective tendering and has seen no significant change in market conditions through Q1."
Lovell, the housing division, "has seen some recent improvement in market conditions in its open market housing activities, as evidenced by an increase in house reservations in Q1 compared to last year. However, the benefit of this has been more than off-set primarily by continuing significant pressure on construction revenue and margins."
Lovell enjoyed better returns from mixed-tenure schemes, with "business development activity in this strategic and increasingly important area…encouraging."
Muse Developments, Morgan Sindall's urban regeneration division, won planning consents for new projects in Lewisham, Chester and Doncaster and had a development pipeline at the end of Q1 level with the year-end at £2.1bn.
Investments continued with its strategy of recycling its invested capital, with the sale of its interest in the Access for Wigan scheme, a civic centre including library and swimming pool. Details of the sale were not disclosed.
Net debt on 30 April was £23m. Average daily net debt from the start of the year up to 30 April was £35m. During the period, the group entered into a £15m three-year bilateral loan issued under the UK Government's Funding for Lending Scheme arranged by Lloyds Bank Commercial Banking. Total committed banking facilities were increased to £125m, which includes £110m of committed banking facilities expiring in June 2015.