Contractor Mowlem has restructured its home repair and improvement operation after a £1.8m loss in the half year to 30 June.

Skillbase will continue to carry out local authority and housing association work but the insurance operation is to be farmed out to the facilities services division to cut overheads.

Chief executive John Gains said Skillbase had underperformed because consolidation in the insurance market had led many clients to hold off until the position was less confused.

He expected demand to remain quiet until this wave of mergers and takeovers ended, possibly in 18 months’ time, and insurers focused more clearly on market requirements.

Gains said: “The insurance market has yet to be clear about its service delivery strategy. We have to wait but we are very confident about the business.”

Gains said the restructure meant Skillbase would not give Mowlem a financial problem in 2001.Gains was upbeat about the contractor’s overall performance. Interim pre-tax profit rose 34% to £9.1m and turnover increased 1.7% to £664m.

Gains said prospects for infrastructure work were good in the wake of the government’s Comprehensive Spending Review.

He said: “Infrastructure is in a strong position and will continue to strengthen as time goes on.”

Mowlem also announced plans to buy back £50m of its shares in order to return to investors the value created by the disposal of its 51% stake in scaffolding firm SGB.