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Profits dive at Laing O'Rourke contracting

FINANCE Margins from contracting drop to 0.3 per cent as O'Rourke hikes turnover

PROFITS have collapsed at Laing O'Rourke's core contracting operation as the industry titan returned to direct employment and undercut rivals to boost turnover.

In the year to March 2005, operating profits at Laing O'Rourke Plc from the group's own construction operations collapsed to just £5.6 million, despite turning over just short of £1.9 billion.

Laing O'Rourke declined to comment on the results but an insider at the firm said: 'It has been the company's policy to switch all workers to direct employment and it has cost us an extra £6 million in increased costs to do that.' The source also added that Laing O'Rourke put in lower bids to lift workload towards the £5 billion that owner Ray O'Rourke wants to reach by 2008 but this hammered margins down to 0.3 per cent.

The firm's contracting divisions in the Midlands and the North both lost money.

Contracting turnover did rise £380 million on the previous year but operating profits generated solely by Laing O'Rourke's own construction activities dived £36.2 million from the £41.8 million posted in 2004.

The firm's joint venture contracting activities proved far more profitable, with operating profits surging £5.5 million to £7.9 million on turnover of £44 million ? a rise of £12.5 million.

Laing O'Rourke continues to push a large slice of money through its in-house plant hire arm, Select.

Turnover at Select ro se healthily last year but £146.9 million of the overall total came from hiring kit to the group's own businesses ? up from £110.3 million in 2004.

Laing O'Rourke's overall workload was also boosted by £121.7 million-worth of turn over from the acquisition of specialist contracting outfit Crown House from Carillion for £17.3 million in June 2004.

Crown House contributed £1.7 million in operating profits and £1.9 million in pre-tax profits in 2005 accounts.

The group's expansion has swelled the workforce to 19,500 people from under 12,000 in 2004 but this also sent the wage bill hurtling up to £447.3 million from £312.2 million.