Builder Laing O’Rourke aims for margin boost
IRISH-OWNED construction and engineering giant Laing O’Rourke plans to cut down on competitive tendering and aim for higher gross profit margins of between 5pc and 10pc.
The move comes as it seeks to recover from its third year of losses, potentially higher labour and material costs due to Brexit, and a £206m loss on a problematic Canadian hospital project.
The UK-headquartered firm, owned by brothers Ray and Des O’Rourke who grew up in Mayo and Leitrim, employs 12,800 people around the world. It reported a £46.5m loss for last year — down from £67m in 2017 and £246m in 2016. However, last year’s revenues of £2.9bn were down from £3.2bn in 2017.
It also said it had completed a £177m refinancing of its UK business, consisting of a revolving credit facility that will be in place until 2021. The firm spent £19.8m on refinancing costs over the past two years, largely in fees to advisers, it is understood.
The figures emerged after majority stakeholder Ray O’Rourke said last year that the company was on track to get back to profit.
The firm has an order book of £8.1bn which could generate gross profits of between £400m and £800m, if it achieves its new profit target.
Doing so will mean a move to negotiated contracts, with the aim of making a profit next year, financial director Stewart McIntyre said. Margins in the industry have been under 2pc in recent years, chairman John Parker said.
The company took in £90m from asset disposals including an equipment business, a pre-cast concrete business and a project stake last year, followed by a further £40m from selling another project stake and an interest in an Australian business. In the past two years it has invested £70m in R&D.
Laing O’Rourke has operations in Dubai and Abu Dhabi, as well as Hong Kong, Australia and Canada. About £2bn of its revenues come from the UK, Canada and the UAE.
In recent years it has worked on hospital projects, Manchester airport’s new terminal and London’s Crossrail, new tube stations and other infrastructure such as London’s £4bn ‘super sewer’, and a nuclear power station.
It employs hundreds of Irish people in the UK, and at one stage laid on a charter flight with the help of CityJet and the British and Irish Trading Alliance so that workers based here could commute to one of its projects.
Commenting on the results last week, Ray O’Rourke said: “Getting to this point has not been easy, and we have no doubt that the road ahead will be no less challenging.”