Laing O’Rourke’s profits dropped by 20 per cent last year following a review of its assets, the collapse of a client and losses from its German stone products business.
The contractor revealed its annual results for the year ended 31 March 2012 this afternoon, with pre-tax profits – before exceptional items – up from £40.7 million to £43m, as total revenue rose from £3.3 billion to £3.54bn.
After taking into account exceptional items, pre-tax profit dropped by 21.7 per cent from £29.9m to £23.4m. This followed a 50 per cent fall the year before.
The company also saw its European workforce fall further in the year, from 11,526 to 10,937. The number had fallen from 16,788 the year before.
The exceptional costs before tax rose to £24.6m in 2011/12, from £13.8m in 2010/11. The group lost £2.6m when an outstanding debt was “only partially recovered” after a client went into administration.
Directors also reviewed the value of the group’s residential and mixed-use development assets, in accordance with current accounting standards, and recognised exceptional impairments of £21.2m (2011: £7.2m).
The board also incurred costs on the closure of its loss-making German finished stone products business and the expected sale of the assets, planned for 2012/13.
The company did however make a £4.2m gain on the completed acquisition of Bison. CN revealed last week that 125 jobs are at risk across two Bison factories after the “continued depressed state of the construction and manufacturing markets” led to a decline in demand for core products.
Laing O’Rourke chairman and chief executive Ray O’Rourke said: “The group continues to sustain its resilience, competitiveness and capability. In addition to its well-established position in its core UK and Australian markets, we are consolidating strong competitive positions in new markets.
“Our capability is generating a unique portfolio of building and infrastructure projects. Through our success in developing talent and diversifying our capability, we will attract clients through radical solutions that only Laing O’Rourke can deliver.”
Mr O’Rourke highlighted his firm’s use of its preassembly approach to building, using Design for Manufacture and Assembly (DfMA) in its building sectors through its facility at the Explore Industrial Park, Steetley, Nottinghamshire.
He also pointed out a “growing application on [its] heavy infrastructure projects”, with benefits in onsite recycling, shorter programmes, reduced carbon emissions and investment in cleaner-fuel vehicles.
He said the contractor invested £7m in R&D and DfMA during the financial period.
Laing O’Rourke improved its payment terms for suppliers outstanding at 31 March from 25 days to 21 days
The company said it has maintained a strong gross cash position of £601m, down from £619m last year. Its net cash position was £321m. It also paid back £57m of debt.
In its financial and business review, the group stated: “Clients around the world are continuing to challenge the construction industry to provide more cost-effective answers to their needs, as they seek to generate greater value from restricted investment budgets.
“This increased level of expectation has not been fully recognised by the industry, with limited innovation to deliver a higher-quality built environment at a lower cost.”
It also expected the main civils contract at Hinkley Point C – for which it was appointed preferred bidder with partner Bouygues - to reach more than £2bn, with a final investment decision due at the end of the year from EDF Energy and Centrica on whether to go ahead with the scheme.
O’Rourke had given a snapshot of group results two weeks ago.
Laing O’Rourke said health and education business has suffered from spending cuts, but pointed to Crossrail where it has won a hat-trick of projects in recent months, and new nuclear as significant markets.
It added: “The UK chancellor’s autumn statement did bring some positive signs that public sector capital investment programmes will recommence, with the commitment to High Speed 2 the most notable expression of this intent.
“The £2bn Private Finance Initiative-backed schools programme, albeit in a different PFI format to previous models, and the previously announced National Infrastructure Plan, with over 500 potential projects with an estimated value in excess of £250bn over five years, represent a significant pipeline of opportunity for the group over the medium term.”
At the end of the 2011/12 performance period the group order book stood at £8.2bn, marginally above the prior year’s level.
The 7.6 per cent like-for-like increase in group managed revenue this year was primarily driven by 18.6 per cent growth in the Australia Hub.
During the year, the group repaid £57m of its borrowings using cash from its profitable and highly cash-generative businesses
Its global Accident Frequency Rate was 0.24, up 0.01 on the previous year.