Laing O’Rourke’s CFO has said “no more skeletons […] in the closet” after a legacy job in Australia cost the contractor £193m last year.
The UK’s biggest private contractor this week reported a pre-tax loss of £288m, driven by provisions, legal costs and a cancellation related to a contract it held between 2010 and 2016, although it also blamed an operating loss of £78.8m on inflation. and delays in starting the project.
The company’s chief financial officer, Rowan Baker, said Construction news: “We have significantly improved our governance and significantly adjusted our exposure to the types of contracts and the types of clients we engage with.
“This is something that is constantly evolving for the better. [The loss related to the Australia contract] it’s treated as an outlier because it’s not reflective of the business we see today.”
Baker said the company now focuses on six sectors: nuclear and green energy; defense; data centers; railway; health care; and science and research.
“You will see us less in the residential space. And in commercial and mixed use [markets] we only tend to work with those clients with whom we have a long-standing relationship, who understand us and understand the model and the value we bring”.
Baker also acknowledged that the company had suffered from “contracts that were signed that did not contemplate the level of inflationary challenge”, and added that “there have been many learnings from the inflationary environment.
“Through the government processes we have, we ensure that we are not in the same position again. No more skeletons […] in the locker room, we’re constantly trying to improve and it’s something that’s very important for us to do well.”
Baker said that while Laing O’Rourke’s 2022/23 financial period had been “a challenging year”, there were “essentially two reasons for that” – inflation and exceptional costs in Australia. He suggested these issues were behind the company, which has “a lot to be positive about going forward”.
Baker added that Laing O’Rourke returned to profit in the first six months of its 2023/24 financial year and expanded its loan facility with HSBC. It also ended the last financial year with net cash of £286.3m.
“We’ve gone through quite a process of reducing our debt levels over the last few years,” he said. “That adds to our resilience and has put us in good stead given the rise in interest rates as well.”
