Peter Watson, chief executive of the Lincolnshire-based contractor, also attributed the loss to the company's restructuring and the poor performance of its process engineering division.
He said there were no significant problems in the pipeline, and added that Birse intended to minimise legal costs in the future by avoiding lowest-price tenders.
Group turnover rose from £181.1m in 1999 to £194.2m. Its plant hire and property divisions also reported increases in turnover.
Watson said: "A further small loss is expected in the second half of the year but, fundamentally, I think the bad news is behind us. We don't want to say Birse will never go legal again, but since mid-1997 and a massive rethink on our litigation procedures we have not fallen out with anyone.
"Before Rymney Valley, we had had eight cases in 10 years that had all gone in our favour." Birse was awarded only £500 000 in its long-running legal battle over the Rymney Valley Relief Road in Caerphilly. It had expected to win an £8m pay off.
Shares in the firm fell to an 18-month low of 7p in November after it was forced to write off £16m because of a dispute over a shopping centre in Hastings, East Sussex.
Watson said the cases had been a "massive disappointment" but insisted that they had not affected the day-to-day running of the firm.
Watson said: "We expected process engineering to have a tough first half. The management were not capable but we have changed it to include some actual process engineers.
"In the group, we have appointed a finance director, completed the reorganisation of the group and reduced overheads from £4m to £2m." Watson said a more focused customer approach had boosted Birse's order book from £293m in 1999 to £386m on 31 December 2000 .
He said: "We have a very good relationship with our customers. The emphasis now is to concentrate exclusively on what the company is good at."
