CONSTRUCTION group Morgan Sindall yesterday boosted optimism in the sector after announcing “encouraging signs of improvement”, despite unveiling a 28 per cent fall in profits.<br /><br />The group reported pre-tax profits of £20.8m for the six months to 30 June, down from £28.6m the year before. The group’s revenues also slipped eight per cent to £1.1bn. <br /><br />The group’s “urban regeneration” division, which is mainly commercial property, fell into the red by £1.1m, compared to a profit of £5.6m the year before after revenues in that business collapsed to £5m from £45m for the same period last year.<br /><br />Last year the group announced it would be taking on more social housing developments due to the downturn in commercial property markets. <br /><br />The recent strong public sector spending has helped the group to weather the storm, with the group’s construction arm delivering a record operating profit of £5.7m, up from £4.1m a year ago.<br /><br />Despite “challenging” short term conditions the group said it was confident of expanding its current £3.64bn order book.<br /><br />Executive chairman John Morgan yesterday said that part of the group’s strength was the diversity of the business’ divisions. <br /><br />But Morgan urged caution on getting carried away: “Recovery depends on the extend the commercial market will increase as government spending on construction development decreases.” Currently 60 per cent of the company’s orders come from the government – leaving it slightly vulnerable if Whitehall tries to curb spending in construction during the downturn.