Laing O’Rourke disappoints in Europe

UK-based Laing O’Rourke has claimed that a profitable trading performance was maintained for its full year results ending 31 March, 2015, with strong figures in its Australian business offsetting a year of operational challenges in the UK construction market.

It said its managed revenue decreased 13% to £3.85 billion (€5.26 billion) compared to a 2013/14 figure of £4.41 billion (€6.03 billion), which the company said reflected “selective bidding and adverse foreign exchange movements”.

Laing O’Rourke reported pre-exceptional EBIT (earnings before interest and taxes) of £73.2 million (€100.03 million) for the 2014/15 year, up from £60.1 million (€82.13 million) a year earlier, saying that this was despite continuing market challenges.

It said its profit after tax of £20.1 million (€27.47 million) – £41.9 million (€57.28 million) in 2013/14 – was a result of a strong performance from the Australia hub and a disappointing performance from the European hub.

The Australian hub posted a “solid” managed revenue performance of £1.5 billion (€2.05 billion). Profit after tax was £76.5 million (€104.60 million), up £43.5 million (€59.48 million) on the previous year. Laing O’Rourke said the improved result could be attributed to operational focus and discipline translating to stronger delivery performances across all its regions.

It added that Europe had also posted a solid managed revenue performance, of £2.4 billion (€3.28 billion), including a share of joint ventures and associates, which was down slightly on the previous year when it was £2.6 billion (€3.56 billion), with a loss after tax of £53.1 million (€72.61 million), down £90 million (€123.04 million) on the previous year.

The group’s order book increased to £9.2 billion (€12.58 billion) compared to £7.4 billion (€10.11 billion) in 2013/14.

Laing O’Rourke said that the group was investing for the long term to respond to increased customer demands for greater certainty in time, cost, quality, safety and sustainability.

Skills shortage

Anna Stewart, group chief executive, said that, as she had indicated last year, the group had been expecting a challenging two years as it worked through the portfolio of projects secured during the recession, which she said were being delivered in a period of acute skills shortage and resource cost inflation.

She said, “Our financial results, although profitable, pay testimony to this and have also inevitably been impacted by our continuing programme of investments. Our private ownership is supportive of the long-term ambitions of the business and we are confident our strategy is both attractive and commercially prudent, through the cycles.

“Our profit after tax, at £20.1 million on reduced managed revenue of £3.85 billion, is however disappointing, albeit parts of the group, such as the Australia Hub, have enjoyed a record year.”

Stewart said, “We expect the 2015/16 period to be equally challenging, with margin improvements yielding enhanced financial performance in the 2016/17 year. Unfortunately, we are a three-year cycle business so will emerge from recession later than most other sectors.”

She said that it was, however, “difficult not to be excited by the increasingly attractive market opportunities”, as its economies recovered from the financial crisis.

“Although uncertainty remains, particularly within Europe, and the UK’s relationship with Europe, the election outcomes in most of our geographies would seem to create the environment for medium to long-term stability.”

Ray O’Rourke, group executive chairman, said, “Laing O’Rourke will be highly selective in pursuing opportunities that align with our value proposition. We will focus on our engineering and manufacturing capabilities. We will create certainty for our customers from the earliest engagement.

“Our investment programme supports the development of construction techniques to deliver quality, certainty and value for our customers.”

He added, “In May 2015, the board ratified the Final Investment Decision (FID) to build and operate a new Advanced Manufacturing Facility (AMF) alongside our existing factory at Explore Industrial Park in the East Midlands. The new facility will use intelligent design, precision engineering and fully automated processes to deliver modular solutions that will revolutionise house-building in the UK.”