The full-year pre-tax profit at Morgan Sindall could hit £25m, the contractor claimed after it posted improved interim results.

It posted a 31% rise in first-half profit on Monday as demand for low-cost housing grew and confidence returned to the office refurbishment market.

Pre-tax profit rose to £11.6m in the six months to the end of June from £8.9m the previous year.

Executive chairman John Morgan was optimistic about more progress in the full-year results. He said: “Analysts have been talking in terms of £24m or £25m. These record results represent excellent progress for the group and in particular reflect strong performances from affordable housing and fit-out.”

Lovell, the group’s affordable housing division, more than doubled its pre-tax profit to £5.7m. About two-thirds of this came from building and refurbishing low-cost homes for local councils and housing associations, which can reduce financial risks caused by interest rate rises. The rest of the revenue came from selling homes direct to the public.

The firm said it was now well placed to exploit Lovell’s position as a market leader and take advantage of government funds for affordable housing.

Morgan Sindall’s order book stands at £1.55bn across its four business divisions – housing, office fit-out, building schools and hospitals, and engineering. The last includes work on infrastructure on Terminal 5 at Heathrow airport in west London and the Channel Tunnel Rail Link.

Returning confidence in the finance, IT and recruitment sectors had increased demand at its office fit-out business, where profit was up 17%.

Following the results, Morgan Sindall’s share price had increased to 464.4p as Building went to press.