Laing O’Rourke’s European business recorded a £53m loss in 2014/15, with the company blaming “cost inflation and delays” on three UK contracts won during the recession for the financial hit.
Group-wide profit after tax more than halved, shrinking from £41.9m in 2013/14 to £20.1m, with the firm remaining in profit thanks to improved trading from the Australian side of the business.
The contractor, ranked the UK’s third biggest in the CN100 revealed this week, said its European division had been “particularly affected by three first-generation DfMA (Design for Manufacture and Assembly) UK construction contracts, adversely impacted by input cost inflation and delays in delivery using new construction methods”.
It added: “Significant lessons have been learned from these projects, all of which were secured during the recession.”
Executive chairman Ray O’Rourke said the firm would “be highly selective in pursuing opportunities” in the future.
Factoring out exceptional items, Laing O’Rourke’s earnings before interest and tax actually increased on the year, growing from £60.1m to £73.2m, following two consecutive years of declining profit.
Revenue was down 13 per cent in 2014/15, dropping from £4.41bn to £3.85bn.
Chief executive Anna Stewart said she expected the construction industry as a whole to “emerge from recession later than most other sectors”.
She 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.
“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.”
Group finance director Stewart McIntyre 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, 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.”