Laing O Rourke has posted a significant increase in its group order book taking it to a record £9.2 billion (£7.4 billion: 2013/14), despite “a year of operational challenges in the UK construction market” which contributed to a £50 million loss in Europe, according to its full year results to 31st March 2015.

The group, a key player in the UK water sector which is involved in a number of Tier 1 AMP6 alliances, said it had maintained a profitable trading performance, with strong results in its Australian business offsetting a year of operational challenges in the UK construction market.

Despite a marginal decline in infrastructure output of 1 per cent in 2014, the group said it is continuing to build its presence in sectors such as power, rail and water, describing the UK water and utilities markets as “strategically important” to Laing O’Rourke.

Key water sector projects secured during the year include work on the Thames Tideway Tunnel scheme - in February 2015, Laing O’Rourke, in joint venture with Ferrovial Agroman, was selected as preferred bidder to construct the largest works package on the Thames Tideway Tunnel project – the central section.

Severn Trent Water extended the firm’s place on the AMP6 framework for the next investment period to 2020 and United Utilities announced LiMA, a partnership of Laing O’Rourke, Imtech and Atkins, as one of four construction delivery partners for the same period.

United Utilities also appointed the Laing O’Rourke/Imtech joint venture to undertake the £140 million modernisation of its Davyhulme Waste Water Treatment Works in Manchester.

Group revenues decreased 13 per cent to £3.85 billion (£4.41 billion: 2013/14), reflecting selective bidding and adverse foreign exchange movements. Profit after tax of £20.1 million (£41.9 million: 2013/14) was delivered through a strong performance from the Australia Hub and a disappointing performance from the Europe Hub. 

The Australia Hub posted a solid managed revenue performance £1.5 billion. Profit after tax was £76.5 million, up £43.5 million on the previous year. In contrast, Europe’s managed revenue performance fell to £2.4 billion from £2.6 billion in 2013/14 (including share of joint ventures and associates), with a loss after tax of £53.1 million, down £90 million on the previous year.

Laing O’Rourke said the Europe Hub results were particularly affected by three first-generation DfMA UK construction contracts, adversely impacted by input cost inflation and delays in delivery using new construction methods.

The firm added that “significant lessons have been learned” from the projects, all of which were secured during the recession.

The group order book has increased significantly to £9.2 billion (£7.4 billion: 2013/14) with the depth and quality of pipeline at an all time high.

Commenting on the results, Anna Stewart, Group Chief Executive said:

‘As I said last year, we expected a challenging two years as we worked through the portfolio of projects secured in recessionary times, which are being delivered in a period of acute skills shortage and resource cost inflation. 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.”

‘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.”

Stewart McIntyre, Group Finance Director added:

‘Laing O’Rourke continues to focus on its established objective to deepen its capability as an enduring engineering enterprise. Our focused investment in innovation through our excellence in engineering capabilities, digital engineering, design for manufacture and assembly (DfMA) approach and our specialist direct delivery businesses is having a significantly positive impact on the way we generate value and benefit to our clients.’

In May 2015, the Board ratified the Final Investment Decision (FID) to build and operate a new Advanced Manufacturing Facility (AMF) alongside its 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 which it said “will revolutionise house-building in the UK. “

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