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Wed November 13 2019

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Laing O’Rourke moves back into profit

17 Oct Laing O’Rourke has reported annual net profit before tax of £32.8m, compared to last year’s pre-tax loss of £43.6m.

CEO Ray O’Rourke
CEO Ray O’Rourke

Its global earnings before interest and tax (Ebit) for the year to 31st March 2019 were £47.2m – an improvement of £74.7m. The revenue of schemes it managed for the period was £3.3bn - and the order book stood at £7.6bn at year-end.

The results to 2018 had been published in February.

However, the company’s chairman Sir John Parker said that UK construction remains in a troubled state.

CEO Ray O’Rourke said: “Knowing how hard our people have worked in the past year, I am pleased to present a review that acknowledges the value of their dedication and business acumen. As promised, Laing O’Rourke continues to address the challenges of ongoing market uncertainty and resulting hesitancy in both the public and private sectors. We remain committed to the core conditions that will help us lead a very different construction industry.”

The Europe Hub businesses – UK, Middle East, Canada - closed the 2019 trading year with a £76.1m Ebit result. This was an improvement of £65.8m on the prior year. The Australia Hub contributed £1.9m Ebit. Losses from the Canadian hospital PFI have ceased.

At the year-end, the group had an order book of £7.6bn. In Australia, this includes several of the nation’s largest defence and urban transport projects, as well as new works in the mining sector. It said that in the UK, there has been considerable success in securing complex projects in a range of sectors, including a new cultural space in Manchester, further data centre works the Soho Place mixed-use scheme in London and further early engagement works to bring a series of residential schemes to market, particularly in Manchester.

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The company said that it has insulated its operations against Brexit via detailed scenario and contingency planning, with mitigation plans for talent and skills retention, labour availability, and plant and equipment imports – all of which have been independently audited. The annual report notes no adverse Brexit impact on current, live projects. 

Group chairman Sir John Parker praised the management team and employees for consistent delivery, closing off legacy contracts, pursuing its transformation agenda and delivering credible profits. However, he added: “UK construction remains in a troubled state. A number of key lending banks have signalled their exit from the sector; thankfully a few remain committed.

“The livelihood of some three million UK employees and the well-being of those who support and depend upon them must be secured. The country’s sustainable economic recovery and the vital need to renew our infrastructure requires the driving force of a modern and successful construction sector.

“There is now a crucial opportunity for the public sector to reform procurement processes and modernise commercial models. This can reset the ‘tone from the top’ within the industry and its broader customer base.

At the same time, construction can no longer be driven by old standards and outmoded thinking. That is why we as a Board enthusiastically support the ongoing innovative and transformational agenda of Laing O’Rourke.”

The company said that, on entering the latter half of the FY20 trading year, its UK businesses are all performing to plan and delivering forecast margins. The half-year Ebit to 30th September 2019 for the UK businesses is forecast at £39.6m a gross margin of 7.6% is being achieved across the portfolio.

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