Laing O’Rourke has posted a £288.1m loss following problems with inflation, project delays and a legacy contract in Australia.
The UK’s biggest privately owned contractor has now made a combined pre-tax loss of £636.5m over the last 10 reported years, even as its revenue gradually rises to £3.3bn million pounds in its latest results, which cover the year 31. March 2023.
The latest loss was based on issues with a landmark Australian contract – signed in 2010 and terminated in 2016 – which led to a write-down of £33.3m, an associated provision of £143.7m and legal costs of 15.7 million pounds.
However, the company also made pre-exceptional earnings before interest and tax of -£78.8m, reflecting operating losses made over the years. Laing O’Rourke said it has since returned to profit in the first half of its 2023/24 financial year.
The company had turnover of £2.03bn through its UK business and £1.16bn through its Australian business and has a record order book of £10bn, although its accounts also reveal a reduction in customer satisfaction, from 78.3 per cent in 2021/22 to 74.6 per cent. hundred in the 2022/23 academic year.
A foreword by Laing O’Rourke chairman John Parker said: “High inflation […] significantly affected the profits of certain fixed-price contracts”, as did “new clients, with high-value projects, who request major post-contract design changes”.
Parker added: “Unfortunately, early starts on major infrastructure contracts, which we had been working on for some time to deliver engineering solutions and cost reductions, including the sections of HS2 that are still underway, have been postponed. Similar delays were experienced in relation to the procurement of urgently needed energy and health projects.”
He went on to lament that “the UK government has yet to provide the industry with the pipeline visibility it needs to plan ahead, allocate people and supply chain resources and improve delivery efficiency.”
He added: “As a result of these profitability impacts, Laing O’Rourke will adjust its future exposure to certain clients and sectors in the UK.”
Meanwhile, Laing O’Rourke chief executive Ray O’Rourke called for construction procurement reform and suggested the government should lead the way.
In the report accompanying the accounts, he said: “The uneven sharing of risk adds to the ongoing turbulence in construction. It directly affects our business and all our people, and I am convinced that the need for a radical transformation is more urgent than ever.
“Governments, meanwhile, need to provide clarity on the infrastructure pipeline they want to deliver. Procurement is labyrinthine and pedestrian and there is too little design collaboration to drive delivery efficiency and value for money – price
“Automotive, aviation and shipbuilding have all addressed their business models, and it’s time for construction to do the same. A ‘delivery partner’ approach between client and contractor would do much to foster a better long-term decision-making, with a focus on people, sustainability, digital and modern construction methods.”
