Martin Laing, chairman, said: 'Strategically, the group is well positioned but that does not protect us from the impact of the UK recession, and in construction we expect any recovery in profits margins to take some time. Any rise in interest rates will damage confidence.'
Operating profits fell from pounds 6.1m to pounds 3.9m, although the underlying fall was not so marked at 18 per cent to pounds 5m - adjusted for a write-down on an office development in Peterborough and gains from the sale of its Castlecourt retail development.
Some pounds 8.8m of profits from asset disposals, principally Castlecourt, lifted the taxable result from pounds 5.1m to pounds 11.9m. Laing's caution, however, is reflected in an unchanged interim dividend of 3p.
James Armstrong, finance director, said profit margins built into tenders for construction projects 'remained extremely tight'. However, he said there was some upturn in volume, particularly in the South-east.
In London, Laing recently won a pounds 65m contract to refurbish the bomb-damaged NatWest Tower. Public sector work is under pressure due to the Government's tight squeeze on spending.
Sales of houses to the private sector rose 10 per cent, but fewer deals with housing associations reduced the total number of Laing homes sold from 1,093 to 1,027.
Despite the squeeze on public sector spending, Mr Laing expected a further improvement in private house sales.
The shares dropped 21p to 269p.