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Fri February 23 2024

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Laing O’Rourke posts £288m pre-tax loss

30 Nov 23 Group accounts published by Laing O’Rourke today show that it made a £288m loss before tax last year.

Chief executive Ray O'Rourke
Chief executive Ray O'Rourke

In the year to 31st March 2023, Laing O’Rourke achieved top line revenue growth of 13%  to £3.4bn but it made an operating loss of £276.6m and a pre-tax loss of £288.1m.

The results include £195m of exceptional items, mostly relating to an old contract in Australia that was terminated in 2017 but remains subject to arbitration.

Laing O’Rourke reports that inflation destroyed profit margins on some of its UK contracts, resulting in a pre-exceptional EBIT loss of £78.8m.

However it started the current financial year with a record order book of £10.0bn, up 16% from £8.6bn a year before.

Chief executive Ray O'Rourke said: “During FY23, geopolitical upheaval had profound inflationary effects, impacting the global economy, households, the wider sector, and our business. Official figures showed inflationary costs for the sector peaked at 26% during 2022, the biggest impact on construction in 40 years.

“The work we have done over a number of years has ensured Laing O’Rourke remains a resilient business and I thank all our colleagues for their hard work. With a record order book and a return to profitability in the first half of FY24, I remain very positive about the future.

“We continue to win work in our priority sectors, fuelling our strong order book growth and at the same time helping us to reduce our exposure to wider market conditions beyond our control. Our investment in the products, digital tools, and systems to unlock the productivity, quality, and safety benefits of advanced manufacturing underpins our strong sense of optimism about the outlook for the business. I am excited about our plans to deliver infrastructure projects of significant size and complexity in a new way.”

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Chief financial officer Rowan Baker said: “I am encouraged by the fact that in FY23 we delivered strong pre-exceptional group revenue growth of 13% (to £3.4bn) versus FY22, ended the period with gross cash of £428.1m, net cash of £286.3m, and added £1.4bn to our group order book. These are positive indicators for our future performance.

“Together with the whole UK construction sector, we were presented with extremely challenging market conditions during this trading period. Unprecedented inflation impacted margins on a small number of our fixed-price projects in the UK. And while it had no immediate cash impact, provision for an exceptional item on a legacy project in Australia added to our loss.

“We have seen strong performance across the business in the first half of the current financial year. Our revenue increased 22% versus the same period prior year and results are well ahead of management’s expectations at £31.4m EBIT.”

In the company's annual report, Ray O'Rourke also had a crack at clients and repeated his often-made call for industry change.

He said:  “During my long career, I cannot recall such a sharp surge in costs. We have sought to collaborate with clients to manage the impacts of this and keep projects on track, but our commitment to finding solutions in a difficult environment has not always been reciprocated. Inequitable risk-sharing adds to the ongoing turbulence across construction. It directly impacts our business and all our people, and it convinces me that the need for radical transformation is more pressing than ever.

“The sector must embrace a technology and innovation-enabled shift to manufacturing-led methods of construction. This future is encapsulated in our DfMA 70:60:30 operating model, which is being deployed on projects now and is a visible pathway for the industry to engage in advanced manufacturing.

“It is the only way to change the nature of the work we do. Making such a shift will enable us to attract a much more diverse range of people to the best industry there is and achieve a step change in productivity which will give clients certainty. It will also help create a more sustainable built environment and improve the health, safety, and overall wellbeing of our greatest asset – the people who pick up the tools every day to deliver.”

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