* Full-year pretax profit 34.2 mln stg vs 40 mln stg last yr
* Full-year revenue falls 8 pct to 2.05 bln stg
* Order book declines 9 pct to 3.1 bln stg
* Shares fall as much as 11 pct (Rewrites throughout; adds CEO quote, background, analyst comment; updates share movement)
Feb 15 (Reuters) - British construction company Morgan Sindall Group Plc halved its final dividend and said it expected the market to remain challenging in the short term, sending its shares down as much as 11 percent.
The company, which gets roughly half its revenue from government contracts, also reported a 15 percent fall in full-year profit, hurt by government spending cuts.
With the UK on the verge of a triple-dip recession, the government has so far shied away from increasing public infrastructure spending outright as it tries to keep the fiscal deficit in check.
The dividend cut was disappointing, but not a major surprise following the management changes and the profit warning Morgan Sindall issued in November (Xetra: A0Z24E - news) , Panmure Gordon analyst Andy Brown said, downgrading the stock to "sell" from "hold."
"The key here is not (a) worsening market outlook or a weaker balance sheet but a resetting of dividend policy based on the view that 2013 is the trough from which the company can resume growth," Numis Securities analyst Howard Seymour wrote in a note.
Morgan Sindall, which builds houses, refurbishes offices and undertakes redevelopment projects, cut its final dividend to 15 pence per share from 30 pence a year earlier.
Profit before tax fell to 34.2 million pounds in the year ended Dec. 31 from 40 million pounds in 2011.
Revenue declined 8 percent to 2.05 billion pounds for 2012. Revenue from the company's core construction and infrastructure unit, which designs and builds roads, rails, and utilities, also fell about 8 percent to 1.17 billion pounds.
The company, which got 70 percent of its work in the construction business from the public sector about four years ago, has been reducing its exposure to the public sector as it copes with government budget cuts.
Margins at the construction business will remain under pressure in 2013, Chief Executive John Morgan told Reuters.
"We expect a broadly flat performance from the other business units," the CEO added.
Morgan Sindall's order book slipped about 9 percent to 3.1 billion pounds.
Margins at its affordable housing business, which brings in about a fifth of the company's revenue and has been relatively more profitable, shrunk a percentage point to 3 percent.
Shares in the company were trading down 9.2 percent at 523 pence on the London Stock Exchange (LSE: LSE.L - news) at 1125 GMT, after touching a low of 512.27 pence. ($1 = 0.6460 British pounds) (Reporting By Abhirup Roy, Writing by Brenton Cordeiro, Editing by Joyjeet Das)