Laing O’Rourke will aim to improve its payment terms as part of efforts to be “the best” at working with its suppliers, according to chief executive Ray O’Rourke.
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Mr O’Rourke was speaking to Construction News after the company revealed its average days to pay suppliers was 53.
He said the company had “a very long-term and a very strategic relationship” with its suppliers, adding that improving its average payment terms was now a target for the firm in the next financial year.
“It is not our style, it has never been our style, to stretch our creditors, so we will be working with our supply chain to improve that [average payment],” Mr O’Rourke said.
“We have an ambition to be the best at anything we do, including working with our supply chain.”
The company said that, with its turnaround “complete”, it was committed to returning to “top-quartile” payment performance.
CN’s analysis of the other 19 largest contractors in the UK found the average time to pay suppliers was 47 days.
Laing O’Rourke’s payment data was revealed as the group also announced it would fail to file its accounts on time due to delays in securing its UK refinancing deal.
Mr O’Rourke told CN that lenders were avoiding the construction sector.
“We’re not seen as an attractive sector, which I find 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].”
Recent data from the Bank of England showed that 2018 had seen the longest sustained drop in lending to construction companies since 2011.
Laing O’Rourke said it expected to finalise its refinancing in the next few weeks, which will allow its auditors to review and sign off the company’s accounts for the year to 31 March 2018.
Mr O’Rourke confirmed that the firm had been profitable in 2018 and not just on an underlying basis, as it had reported in its previous financial year.
The company has invested heavily in its offsite design for manufacture and assembly (DfMA) operations, and finance director Stewart McIntyre previously told CN he expected this to contribute to profit and cashflow in the 2018 results.
Mr O’Rourke would not confirm that this had been the case, but said demand for its DfMA approach had grown and its factory in Steetley was operating at full capacity.
Expansion at the site has been proposed for some time, and Mr O’Rourke told CN an announcement on the next stage of the site was expected to be made early in the new year.
The company was not put off such a move by uncertainties around Brexit, and its chief executive said it was somewhat insulated from any adverse effects thanks to a limited European supply chain and having a clear pipeline of work for the next two years.
Mr O’Rourke said: “We’re 100 per cent for this year [financial year 2019] and 70 per cent secured contracts for next year [FY 2020].”
One of those projects will be the completion of the new Royal Liverpool Hospital, for which Carillion had been the principal contractor.
Mr O’Rourke said it made “a lot of sense” for Laing O’Rourke to finish the job, as its subsidiary Crown House had already carried out the M&E work on the hospital.
He dismissed suggestions that it was a risky job and added that the company had not taken advantage of the NHS trust as a client with a project it needed to get finished.
“I want to emphasise it’s not a question of us going in and gouging or doing anything inappropriate; this is trading as usual for us,” he said.
Sir John Parker was brought in as chairman in April last year and Mr O’Rourke said he had brought renewed focus to the board and developed the group’s governance and succession planning, among other areas.
Asked whether the succession planning meant Mr O’Rourke would be stepping back in the near future, he said: “No. That’s the very short answer: no, I’m not.”