Interserve’s profit margin from UK construction work fell to just over 1% in the first half of this year, as cost inflation bit.
The firm posted a margin for that part of the business of 1.1%, down from 1.9% in the same period last year.
Interserve said the fall was due to a squeeze between challenging tender prices and supplier cost inflation.
UK construction revenue grew by 16% to £500.7M, while operating profit from the division dropped 34% to £5.3M.
Group revenue was up 16%, to £1.6bn, and group pre-tax profit was up 19% to £33.7M.
Interserve chief executive Adrian Ringrose said: “We have made good progress in the first half of the year in markets that offer both opportunities and challenges.
“We have delivered volume growth across the board, and strong profit performances in our support services, equipment services and international construction businesses.
“Market conditions in UK Construction have remained challenging although demand continues to strengthen and the expanded future workload is encouraging.”