A legal battle suppressed pre-tax profit at contractor Birse, which dropped by almost half for the six months to 31 October.

The figures for profit fell 49% to £917,000 after it lost a contract to build a datacentre for Citibank in south-east London in 2002.

The legal battle that followed the loss of contract continues and a final hearing is expected in the 2005/06 financial year.

The dispute went to adjudication in February. Birse was hit by £1.3m of legal costs in the six-month period.

Martin Budden, managing director of Birse, said: “While a professional dialogue continues between Citibank and ourselves, attempts to reach a resolution have so far failed.”

He said that the restructuring of the company was going “broadly according to plan, although uncertainties remain”. Birse is planning to focus on the local authority education sector.

Highlights in the six-month period included the civil engineering business, where operating profit rose £1.1m to £5.6m.