Laing O’Rourke has failed to file accounts on time because of slow progress with its UK refinancing, the group has said.
More from: Ray O’Rourke targets payment improvement
The contractor completed the refinance of its Australian businesses earlier this year, but said the current environment in the wake of a number of contractors collapsing was holding up its UK accounts being filed.
Laing O’Rourke will fail to file its accounts on time for a third successive year, which the group blamed on banks, auditors and regulators tightening their grip.
Speaking to Construction News, chief executive Ray O’Rourke said: “Our auditors will not sign off until we have the refinancing done. I’m afraid that part of the market [financing] moves slowly.”
The contractor said it has “an outline agreement with its primary banking partners for UK refinancing” and expected the deal to be finalised in the next few weeks.
Traditional lenders have been pulling back from the construction industry, according to recent data from the Bank of England, but Mr O’Rourke refused to attribute the change to Carillion’s collapse.
The slow progress was a symptom of wider economic uncertainty, he said, but added that attitudes towards the sector would have to change.
“We’re not seen as an attractive sector, which is interesting because we represent 8-10 per cent of GDP,” he said.
“I don’t think it’s tenable that banking institutions can say they don’t want to be involved [with construction].”
Several UK construction leaders have flagged to CN in recent weeks that banks are trying to reduce their exposure to the sector, particularly in light of Carillion’s collapse.
According to Companies House, Laing O’Rourke’s accounts for the year to 31 March 2018 were due to be filed by 30 September. The contractor said its annual report would not be filed until Christmas “at the earliest”.
Mr O’Rourke confirmed its accounts would show the firm had been profitable in the year and not just on an underlying basis, as it had reported in its previous financial year.
In a statement, the company said its turnaround was “complete” but warned of the dangers presented by the collapse of contractors this year.
“In 2018, the construction industry has experienced the collapse of a number of companies, large and small.
“This has impacted the approach of banks, insurers, regulators and auditors – and ultimately will prevent Laing O’Rourke closing out its formal statements in the coming weeks.”
The contractor said its cost reduction plan was “exceeding targets” and that it had 100 per cent of revenue for 2019 and a further 70 per cent for 2020 under contract. Its “anticipated and secured” order book stands at £8.6bn globally.
Unaudited EBITDA stood at £29m for its half-year to the end of September and the group said it was forecast to hit £70m for the full year.
Mr O’Rourke said: “Our industry has witnessed the demise of a number of companies and the withdrawal of significant funding this year.
“This has put enormous pressure on parties across the sector, and slowed down all regulatory, financial and administrative processes.
“Three million jobs in the UK rely on construction, and we have nation-building infrastructure to deliver. It is a tragedy to see the industry starved of oxygen like this.
“We have built a pipeline of high-quality projects. Laing O’Rourke is committed to play its part, to drive enhanced confidence and investment in the sector.”
Spotlight on fair payment
Ray O’Rourke has called on government to “play its part” on fair payment as he committed to improving payments to Laing O’Rourke’s supply chain.
The contractor takes an average of 53 days to pay invoices, it revealed today.
It said 41 per cent of invoices were paid in more than 61 days, with 35 per cent between 31 and 60 days and 24 per cent within 30 days.
Fewer than two-thirds (58 per cent) of invoices were being paid within agreed terms.
“We will focus on improving payments to our supply chain during the next financial year,” Mr O’Rourke said.
He called on government to “settle its own accounts promptly”, to improve “costly and inefficient procurement policies”, and to “remove outdated adversarial contracts and security instruments”.
Laing O’Rourke completed the refinance of its Australian businesses in mid-2018, and now has an outline agreement with its primary banking partners for UK refinancing.
“As a private company, we have continued to brief all our stakeholders – clients and the supply chain – regularly, keeping them fully appraised at all times. We appreciate the loyal support we’ve had over recent years.”
Laing O’Rourke UK refinancing delays 2018 results